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Question
State two disadvantages of franchising?
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Solution
- Franchising fees: The initial franchising fee and the subsequent renewal fee can be very high in the case of successful businesses. From the franchisee’s point of view, this may be a deterrent.
- Fixed royalty payment: The franchisee has to make payment of royalty to the franchiser on a regular basis. This considerably reduces the income of the franchisee.
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