– High entry and operating costs: it can be more expensive to create a franchise than an independent business. You can open your own burger bar for the fraction of the cost of buying the rights to a McDonald`s franchise. As a result, franchising is often an option that is only open to wealthy businessmen. From 2001 to 2005, the franchising sector grew faster than many other sectors of the U.S. economy. Direct economic performance increased by more than 41% from $625 billion to $881 billion, while the economic performance of other businesses increased by 26%, from $16 trillion to $20.1 trillion. Franchise employment increased by 12.6%, from 9.79 million to 11 million, compared with 3.5% for all companies, from 132 to 136.7 million euros. The wage bill generated by deductibles increased by 21.6% compared to 15.4% for all companies. – The new owner of the franchise benefits from the association with the main company of the franchise.
The franchisor offers a lot of business experience that would take years before the average businessman acquired. Selling a business can be a challenge. The sale of a franchise transaction can potentially have more pitfalls, as each buyer is bound to the terms negotiated with the franchisor when a franchise has been granted. The original franchise agreement will likely have been negotiated for a specified period of time, so that even if the transaction has been successful, the terms of the franchise must be renegotiated upon renewal and any potential purchaser may be deterred by the uncertainty of the conditions that the franchisor wishes to introduce at the time of renewal. That is a big disadvantage for most franchises — the cost. A franchisee is often expected to pay for the first entry fee into the franchise agreement. Under the current franchise agreement, they will then pay an operating fee for the assistance and training of the franchisor. In the long run, this means limiting the amount of profits (and money in your pocket) that you can make as a franchisee. Finishing a business start-up to start your own joint stock company is often the best choice, as there are fewer restrictions on how you run your business and more potential means of profit without overhead.