The Good and Bad of Franchise Businesses - Business | Careers & Business Special Section

The Good and Bad of Franchise Businesses - Business | Careers & Business Special Section:

'via Blog this'Disadvantages

Some of the advantages to franchises can also be disadvantages, depending on one's perspective. For example, working under the auspices of a larger entity restricts some of the creative freedom a small business owner might want. In general, franchisees must discuss ideas and decisions for the business with the franchisors before execution.

Franchisees are expected to pay dues to the franchisor. While money may be saved on other aspects of franchise ownership, the average royalty fees paid by franchisees range from 3 to 6 percent of monthly gross sales.

Any business venture will require an initial investment. However, franchise investment could be considerable. The average initial franchise start-up investment is $250,000, excluding real estate. Some franchisors will also want to ensure that a potential franchisee has a considerable savings account for other expenses. Many times franchises are started by partners simply for the start-up costs involved.

While some franchises have a proven track record, not every franchise will work in a particular geographic area. Researching franchises takes time. And after all of that effort and application, a potential franchisee may still be rejected by the parent company.

The franchise business accounts for at least 40 percent of all retail sales in the United States. Explore whether this type of business model is right for you if you're considering self-employment.