Advantages for the Franchisee

• Less Risk. In certain industries, when compared with starting one’s own business from scratch, buying a franchise enables the franchisee to own a business with a proven track record and an established market presence, thereby reducing the risk of failure. However, purchasing a franchise still doesn’t guarantee success, and many franchisees go out of business, losing their initial investment and start-up capital. 
• Name/Brand Recognition. The franchise has an established image and identity already, which can reduce or simplify marketing efforts. Many franchises are nationally advertised brands, shortening the time it takes for the franchisee to establish a market presence. 
• Access to Expertise, Ongoing Support. Franchisee often receives help with site selection, training materials, product supply, and marketing plans. The franchisee gets to take advantage of a business model whose strategies and processes have already been tested and streamlined.
• Relative Autonomy. Franchisee must comply with the terms and standards of the franchisor, but otherwise has a fair amount of control over the day-to-day operations of the franchise.

Disadvantages for the Franchisee

• Cost. Buying and running a franchise can be very expensive as you saw on the previous page. Franchise fees generally run in the $20,000 to $30,000 range, though they can top $100,000 for higher-end, more established brands. Once you open the franchise, there are ongoing royalties to pay, which typically range from 4 percent to 8 percent of gross revenues. In addition, you may also be responsible for ongoing payments for marketing and advertising that the franchisor does on behalf of the brand.
• Unequal Partnership. The franchisor sets the rules, and the franchisee must follow them. The franchisee doesn’t have much leverage if the franchisor falls short on promises or makes unreasonable demands.
• Rules and Enforcement. Franchisor rules imposed by the franchising authority are becoming increasingly strict. Some franchisors are using minor rule violations to terminate contracts and seize the franchise without any reimbursement. Often this happens when a franchise location becomes very profitable or the franchisor sees an opportunity to profit by seizing and liquidating the location.