Franchise disadvantages

As a franchisee, you buy the right to trade under an established name, but the arrangement has significant drawbacks. Many of them reduce how much money you keep and how much freedom you have.

Payments reduce your income

You must pay an initial franchise fee before you open. This is a large upfront cost, and you do not get it back if you leave or the business closes. You also make ongoing payments to the franchisor, usually a share of your sales (called a royalty), and some franchises also take a share of your profits. These payments continue while you trade, so the training, advertising and support you receive are not free: they are paid for through your fees.

You follow the franchisor's rules

You have little control over the business because the franchisor sets rules on the products you sell, the prices you charge, the suppliers you use and how your premises or vehicle looks. This keeps every branch consistent, but it means you cannot swap to a cheaper supplier or try your own product without permission. There are also restrictions on selling the business: the franchisor usually has to approve the buyer, so you cannot simply sell to the highest bidder.

The agreement and the brand

The agreement lasts a fixed term and can be ended, for example if you break the franchise rules, so you do not have a permanent right to trade under the name. Your reputation is also tied to other franchisees: if one gives poor service, the whole brand's reputation can be damaged, and customers may lose trust in your branch too.

For example, you pay £18,000 to join a mobile bike-servicing franchise and then 8% of monthly sales. The franchisor insists that you use approved parts, charge set prices and keep the van in brand colours. If you want to sell, the buyer must be approved; the agreement runs for five years and can be ended early for breaking rules. A franchisee in another town repeatedly misses bookings, and customers start doubting every van in the brand.