what risks come with owning a franchise
General Business

What Risks Come with Owning a Franchise?

Often, when potential investors are considering which franchise opportunity is best for them, they only think about the unlimited earning potential that comes with owning a franchise. However, there is no reward without risk. Franchisees must weigh the potential challenges they may face and be prepared to meet them head-on.

One way to prepare is by meeting with a knowledgeable franchise consultant who is well versed in the different benefits and risks of particular franchises. With their expertise, you can make an informed decision before investing.

You can also examine the different risks yourself and consider how they might impact the long-term health of your business. To start, the following qualities can pose significant risks to running a profitable franchise.


Loss of Brand Equity

Although you may be eager to run a franchise of your own, something to consider before diving in is the possible loss of brand equity. When you are part of a franchise network, your reputation doesn’t exist in a vacuum. This can easily be a risky proposition since your business becomes tied to other franchises and management teams elsewhere. Generally, franchisors do their best to ensure that their franchisees are well-trained, but mistakes happen.

As such, there’s a chance your franchise’s reputation could take a hit due to an incident that didn’t even occur at your store. Even when brand management clarifies the situation and reassures the public, people can be slow to restore trust. The potential for loss of equity can be a huge problem for franchisees, so take this under consideration before you invest — and prioritize opportunities that come with a spotless public image.


Beware of Fads

Although many tried-and-true franchisors have a steady track record, it can be tempting to invest in trendy franchise opportunities that are new to the scene. While following a trend isn’t always a wrong choice to make, consumer preferences can change much more quickly than you might expect. Consider that we live in a fast-paced, digital world. A product or service can quickly lose value or be eclipsed by the next big thing, so always evaluate a franchise’s longevity before investing.

If you’re not sure whether to invest in a familiar brand or take a chance on something new, a franchise consultant can help you read the situation. With years in the industry, consultants know which established brands have stood the test of time and which new startups show all the hallmarks of continued success.


Regionality and Seasonality

You must also consider the region where you intend to open your franchise and how this might affect your investment. Although it can be a competitive advantage to open the first franchise in a particular region, there might also be a reason why that franchise doesn’t already operate in the area. For example, suppose potential customers aren’t familiar with your brand in the region that you choose. In that case, you will need to spend more on advertising and marketing to build brand awareness. Or, if the local market is already saturated with direct competitors, your franchise may struggle to get to its feet.

It’s also essential to take the seasonality of a franchise under consideration. Certain franchises peak during a specific time of year, and then revenue significantly decreases during the off-season. If you’re considering a franchise that is sensitive to changing seasons, like a lawn care or pool cleaning company, it’s in your best interest to save as much of your income as possible for the slow seasons — or pivot to a franchise that has better year-round potential in your area.


Hundred Acre Consulting

Although owning a franchise can have many benefits, there are always risks involved when you invest. That’s why it’s crucial to choose your perfect franchise match thoughtfully.

If you’re interested in garnering the highest return on investment possible, Hundred Acre Consulting can help. With years of experience, we can help you choose the best franchise for your skillset and guide you through the process of building a lucrative business.

Ready to find the franchise for you? Contact Hundred Acre today, and let’s get started!



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