For example, you might identify a promising new revenue stream, but you likely won’t be able to implement a new product line or discontinue a service that isn’t working for your particular franchise without direction or prior approval from the franchise company.
That’s not to say you have no power, since you’ll likely be the one determining, for example, where to advertise. You might even be able to negotiate some aspects of the franchise contract, such as the territory your business covers or even the franchise fee.
5. Exiting a Franchise is Easy
If you were to compare business ownership to owning your own home, “Buying a franchise is more akin to renting an apartment,†says Kezios. The franchisor often owns your customer list and equipment–both of which have tremendous monetary value. If you’re looking to sell, a franchise corporation may limit the sale of your franchise to someone within the franchise system, which could lower the amount you’re able to get for your business.
Furthermore, when you exit the system, a franchisor may enforce the terms of a non-compete clause, which prevents you from working in that same industry within a geographic area for years.
“They’re protecting the marketplace for the franchise corporation,†says Kezios. “When you decide not to renew, it’s difficult to leave with any equity.â€
Before buying a franchise, contact current and former franchisees and ask them if they’re satisfied with their franchisor’s support. Purvin suggests looking for franchises with an independent owners association.
“So, as issues come up there is a cohesive voice of franchise owners who can address them on a level playing field.â€Â