What Are the Disadvantages of Franchising?

So it’s not all wine and roses. In some respects there are what some people perceive as disadvantages.

Loss of Autonomy

You know, you have to lose some of your autonomy. No longer can you just chop and change and make decisions at the drop of a hat and change the rules. You’ve got a group of franchisees you’re in partnership with, so you have to understand that. You’re going to be scrutinized. They’re going to be asking if you are you meeting your terms and conditions in the Franchise Agreement or giving what was promised. It’s important to understand that.

I think that’s actually good because we do tend to ignore things. We know at the back of our mind “I should be doing this,” but then we don’t. But if there’s someone you’re accountable to, you just make sure you do put in an extra hour and finish it and do it properly. So that’s important.

Systemizing and Documenting

And then systemizing and documenting your business. Very few businesses are fully documented. Most businesses are systemized but often it’s up in your brain. It’s not difficult, you know. You can use a tape recorder or you can use videos. You can do it in a whole variety of ways and we’re touching base on that later on in the Workshop. There are lots of ways of making manuals. There doesn’t have to be reams of paperwork. That’s boring and people don’t read them anyway.

Time Needed to Do the Work to Systemize

And then the time it’s going to take to systemize the business. No doubt about it, it’s going to take you some time.

But if you work effectively and efficiently with a plan and a system, and you do it chunk at a time and you follow a routine that’s proven, it’s not such a demanding thing. I find that on average, for people to franchise, it does vary between about 50 and 130 hours. This is the range of time people feedback to me that takes them. And, depending on the amount of time you allocate each week, you could do that in a month or you could do it in three months or six months.

But There Are Advantages

When we look at some of the advantages from the point of view of selling the business, it’s interesting to look at Retail Food Group, I mentioned earlier. Pizza Capers is a pizza group that was launched 1996. They sold it in 2012 to Retail Food Group with about 100 pizza outlets.

They negotiated selling the franchise group at over $24 million. Not bad. That’s a pretty good return. What happened though, is their salesman or accountant was very shrewd. Because they put a clause into the contract saying that “12 months after the settlement, they would review the selling price depending on the turnover and profitability.”

And the business did so well under the Retail Food Group, they actually ended up getting 41 million.

The same thing happened with Crust Pizza. Interestingly both pizza franchises were bought by Retail Food Group. You’d think there’d be a conflict of interest but Retail Food Group don’t see it that way.

Leave a Reply

Our quest is to continue to help business owners who want to grow their business into a more valuable asset through franchising. The team of expert advisors at Franchise Simply does this this through our simple four step Franchise Success Path which can be delivered in many different ways to suit you. We work closely with our team of leading franchise experts to provide the full range of services to the franchise industry, from carefully crafted legal agreements and operations and procedure manuals, to expert advice on corporate structures, fee structures, territory planning, franchisee support, recruitment and much more…

The result - our members implement fast and get everything they need to succeed all in one place. Click here to join our inspiring community of entrepreneurs and you can be our next success story.

We believe in giving back and so a percentage of every program is given to MicroLoan Foundation Australia to help women in Southern Saharan Africa to build businesses and take their families out of poverty. Money raised to date is …….