Final answer:
The disadvantages of franchising include higher risk for the franchiser, limits on income for the successful concept, slower growth than through financing, and profits being shifted to the franchiser.
Step-by-step explanation:
Franchising offers many advantages, but there are also some disadvantages to consider. The disadvantages of franchising include:
Higher risk for the franchiser: The franchiser bears the risk of the business not performing well or failing, as they have invested in establishing the brand and supporting the franchisee. If the franchisee fails, it can negatively impact the franchiser's reputation and financial stability.
Limits income of successful concept: The franchiser may have limited control over the pricing and profitability of the franchisee's operations. This can result in the franchiser not fully benefiting from the success and profitability of the concept.
Slower growth than through financing: Franchising may result in slower growth compared to other methods of financing, as the franchiser relies on individual franchisees to expand the business.
Shifts profits to franchiser: The franchisee needs to pay ongoing royalty fees and franchise fees to the franchiser, which reduces the franchisee's profits.