5 reasons why you shouldn’t buy a franchise
By Mike Pugh
29th Nov '18
Interested in buying a franchise?
We hate to break it to you, but it may not be right for you. Here are five reasons why going down the franchising road could be a wrong turn.
1. You’re conservative by nature
Some people like to know where they are in life and there’s nothing wrong with that – we’re all different. There’s a lot to be said for having a stable job with a stable income. If you run a franchise business, it’s exactly that – a business. There are risks and rewards, the same as there would be running any other kind of company. The risks are mitigated somewhat by the fact that you’re buying an existing, proven business model. Hard work is one of the few obstacles that stands between you and success. But there are no guarantees so risk-avoiders need not apply.
2. You want to work in a regulated profession
Regulatory bodies, like the Advertising Standards Agency and the Pensions Regulator, are established by legal mandate. Regulators don’t exist for every profession, and the franchise industry doesn’t have one. It’s true that legal rights are enshrined in the contract between the franchising company and the franchisee, setting out the terms of your agreement. But there’s no body with legal powers to impose requirements, set standards and restrictions, and enforce compliance across the franchise profession.
3. You have no experience in business
As we said, a franchise business is just another name for a business. That’s what you’ll be involved in, which could put off people who’ve never done it before. It’s definitely useful to have had some exposure to selling products and services, even if it’s just working freelance or selling off unwanted items on eBay. Franchises have already worked out how their businesses operate, so they provide training and a tried-and-tested process for franchisees to follow. But if you’ve never interacted with a customer before, you might find it tough.
4. You want freedom
Many independent business owners like having their name above the door and the freedom that goes with it. They’ll succeed on their own terms, although it’s statistically more likely that they’ll fail, as 80% of new businesses do within three years. Independent business owners don’t want to be part of a wider network, even though fellow franchisees can be a useful sounding board if you hit difficulties. As an independent business, you won’t have to pay the setup fee or ongoing fees that you’d pay a franchise in return for a proven business model.
5. You want a business forever
Franchises have a life cycle. When you sign the paperwork that gives you the right to operate a franchise, you sign up for a fixed period of time, eg 10 years. As a franchise holder, you may get the option of renewing at the end of the cycle. As long as you’ve obeyed all the rules, and provided the option of renewal is mentioned somewhere in the contract, you should be able to carry on providing the same service. Alternatively, you may be able to sell your franchise. If you need a cast-iron guarantee that the business you start will be yours forever, you’d be better off running an independent business and taking all of the risk on your own shoulders.