Beware Of Industry Pitfalls

Black Enterprise:

While the benefits of a franchise, seen as a shortcut to success, have been much talked about, aspiring franchisees should also be mindful of the potential pitfalls in the business.

Business consultant Susan Ward said buying a little-known or inexpensive franchise can be a real gamble.

She said in some cases, all the franchisor is interested in is selling more franchises.

“Whether or not the individual franchises are successful is irrelevant to them.

“This is not to say that no little-known, inexpensive franchises are worthwhile, but just a reminder that any franchise you’re thinking of buying needs to be investigated carefully,” she said in a website dedicated to franchising.

Ward, who is an author of About.com Small Business: Canada, said buying into well-known franchises is very expensive.

“If this is your choice, you will have to have extremely deep pockets or the ability to arrange the necessary financing,” she said.

She also said besides the original franchise fee, the royalties and a percentage of the franchise’s revenue will need to be paid to the franchisor every month. Continue reading.