#2 of 10 Reasons NOT to Buy a Franchise: High Start-Up Costs
Nolo.com features an article titled: Ten Good Reasons Not to Buy a Franchise.
According to the author, there are ten compelling reasons NOT to buy a franchise. We’re looking at them one-by-one.
2. High start-up costs. Before opening your franchise, you may be required to pay a non-refundable initial franchise fee, which can cost from several thousand to several hundred thousand dollars. In addition to the initial fee, there are also usually high start-up costs associated with furnishing your franchise with the necessary inventory and equipment. It can easily take several years to recoup the expenses connected with getting your franchise off the ground.
Beware of non-refundable fees paid up-front. For that matter, refundable fees up front.
In some cases, this can be a good point. Some franchisors require the purchase of brand new, top-of-the-line equipment. If you are opening a pizza place in a small, rural town, you can save a bundle purchasing used equipment and be more profitable at a lower volume. You’d be better purchasing a franchise that would allow you that flexibility, or even going it alone as an independent.
But keep in mind, the mistakes you might make going it alone and having to figure it all out without a franchisor’s experience can be costly as well.
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