Oct 10, 2019 - Blog, Franchise Articles by |

Buying a franchise and starting an independent business from scratch are two very different propositions. While franchisors and many online “franchise guides” tout the benefits of franchise ownership, there are a number of downsides as well. Here is a list of eight ways – good and bad – that owning a franchise is different from starting an independent business:

The Good:

1. A Recognizable Brand

For most people, one of the primary motivators for buying a franchise is immediate access to a recognizable brand. It can take several years and many thousands of dollars to build a brand that is on par with what some franchisors can offer, and immediate brand recognition can allow you to hit the ground running.

2. A Tested Business System

The second hallmark of a strong franchise is a tested business system. When you buy a franchise, not only are you buying brand recognition, but you are also buying the ability to take advantage of a business system that has proven successful in the past.

3. Training and Operational Support

Access to training and support can be benefits of buying a franchise as well. If your franchise will be your first business venture, having access to these types of resources can add significant value to a franchise acquisition.

4. A Network of Like-Minded Franchisees

As a franchisee, you will likely have access to other franchisees in the franchisor’s system. You can share ideas and gripes, get your questions answered, and benefit from other franchisees’ collective experience.

Of course, the major caveat here is that these are all potential benefits of buying a franchise. All franchise opportunities are different, and some are far better than others.

The Bad:

5. Lack of Control

As a franchisee, you do not have control over all aspects of your business. While you can benefit from having access to the franchisor’s system, you will also have to follow it even if you would prefer otherwise. Additionally, if your franchisor modifies its system standards, you will likely have to comply with the modifications at your expense.

6. Additional Initial and Monthly Costs

When you buy a franchise, you pay an initial franchise fee, and you pay ongoing (typically monthly or weekly) royalty and advertising fees. Initial franchise fees are usually in the tens of thousands of dollars, and royalties and advertising fees generally average out to somewhere around seven percent of gross revenue.

7. Limited Ways Out

If your franchise is unsuccessful, you will only have limited ways out; and, if you terminate early, you may have to pay your franchisor “lost future royalties” for the unexpired portion of your franchise term.

8. Limited Scalability

As a franchisee, the only way to grow beyond your territory is to buy another franchise. If the territory you want is unavailable, you are out of luck. Buying another franchise also means paying another initial franchise fee and signing a new franchise agreement, both of which may be even more franchisor-friendly than they were when you bought your first franchise.

We Provide Legal Representation for Franchisees in All 50 States

Our firm provides legal representation for prospective franchisees in all 50 states nationwide. If you are thinking about buying a franchise and would like more information about the legal risks involved, we encourage you to call 202-293-3947 or contact us online to learn about our fixed-fee franchise business reviews.

Lawyer International

Lawyer International
Legal 100
2018

Lawyer International

Lawyer International
Legal 100
2019

ACQ5 LAW AWARDS 2019

US (New York)
Franchise Lawyer
of the Year
ACQ5 GLOBAL AWARDS 2019, JEFF GOLDSTEIN, GOLDSTEIN LAW FIRM, PLLC

ACQ5 LAW AWARDS 2019

US (New York)
Franchise Law Firm
of the Year
ACQ5 GLOBAL AWARDS 2019, GOLDSTEIN LAW FIRM, PLLC

Lawyers of Distinction logo

2019 Power Lawyers

Esteemed Lawyers of America Logo

Esteemed Law Firm Complex Litigation

Global Law Experts Logo

Recommended Firm in Franchise Litigation

Who's Who Attorney Logo

Top Attorney USA – Litigation

Avvo Franchise Lawyer Symbol

Superior Attorney in Franchising

Avvo Franchise Lawyer Symbol

Superior Attorney in Antitrust

Finance Monthly Global Award Winner Logo

Franchise Law Firm of the Year

Lead Counsel logo

Chosen Law Firm for Commercial Litigation

BBB of Washington DC

A+ Rated

Washington DC Chamber of Commerce

Verified Member

Lawyers of Distinction logo

Franchise Law Firm of the Year

ISSUU

Best Law Firm for Franchise Disputes in 2017

Law Awards Finanace Monthly

Franchise Law Firm of the Year - 2017

Top Franchise Litigator for Franchisees and Dealers

Top Franchise Litigator for Franchisees and Dealers

2017 Finance Monthly Award

2017 Finance Monthly Award

ACQ5 LAW AWARDS 2018

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2018

ACQ5 LAW AWARDS 2019

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2019

Franchise Law Firm of the Year

Franchise Law Firm of the Year

Franchise Law Firm of the Year
Global Awards 2017

Global Law Experts

Franchise Law Firm
of the Year
in New York – 2019

Finance Monthly Law Awards - 2018

Finance Monthly Law Awards - 2018

Franchise Law Firm of the Year

Franchise Law Firm
of the Year
Global Awards 2018

Contact Us

Goldstein Law Firm, PLLC

1629 K St. NW, Suite 300,
Washington, DC 20006

Phone: 202-293-3947
Fax: 202-315-2514

Free Consultation

Free Consultation