Franchise Business 101: 5 Risk Factors You Need to Consider

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Have you ever considered purchasing a franchise business and start your entrepreneurial journey? If it is yes, then you are in the right place.

Franchising has some specific advantages over other models which makes it relatively appealing. Firstly, the business model is examined and proven to be accessible under most circumstances. Furthermore, competitive franchisors provide supports from hardware like offering an advanced logistics centre and management systems, to soft skills training such as customer services and communication. Some firms will even go beyond that. For instance, XIMIVOGUE provides on-site assistant manager to guide and mentor new franchisees. Last but not least, you have a franchisee community where you can share your ideas as well as learning from others, which enables you to grow more efficiently.


However, purchasing a franchise is not without any risks. The better you prepare, the more returns you will yield from the business. Below are some factors you should think about when you are selecting a brand.


Regionality has the potential to stop your entire franchise business from working in that particular area. It can be related to the way people live, religion, and basic infrastructures. For instance, fast food restaurants and coffee shops have never been succeeded in Vietnam. The citizens enjoy their local street foods and Vietnamese iced coffee much more than any other international franchise. The better taste and the lower costs allow the Vietnamese to choose any foods except western franchising brands.

Therefore, before you enter into a contract with any franchisors, make sure you understand the regionality of your targeted market. Your prospective consumers’ lifestyle will have a considerable impact on business operation.


Besides regionality, another external factor you need to consider is seasonality. Some business works better in warm climates while others in cold. Once again, let’s use the food industry as our example.

Hotpot is extremely popular in China, and there are various franchise brands for your selection. However, the Chinese people do not go to a hotpot restaurant in summer as often as in winter. The primary reason for hotpot is that it prevents the food from being cold when you eat it. Therefore, a franchisee of a hotpot restaurant must be prepared for decreased revenue, or even making losses during summer.

Two solutions can be useful to compensate for the situation. First of all Marketing activities to boost sales can be an essential part to reduce the influence of seasonality. Secondly, consider adding another service that can counter seasonality; in this way, you can have a steady income in any season.

Capital risk

Being short in finance resources means that it is possible the franchisor cannot follow its growth plan and meet their goals. When you are visiting a franchisor, make sure you obtain their franchise disclosure document (FDD). Furthermore, you should also perform due diligence to research their financial performance via their annual reports and third-party analysis.

You can also research any financial support or additional assistant programme to franchisees. A company such as XIMIVOGUE offers support such as logistics and software acquisition. If firms have activities for such a purpose, it usually reflects that the company has sufficient capital resources for their expansion in the future.


Government regulation can pose certain threats to the business. Taxes, employment law, environmental regulation can all have direct influences on your franchise plan. For example, the allowable CO2 emission amount is different from country to country. If franchisees are opening a restaurant which has a high possibility to exceed the amount, they should be paying close attention to the regulation. A substantial amount of fines may be applied which can affect the store’s cash flow and its operation.

Recession resistance

The last risk factor, which many people may not be thinking of, is the franchise ability to hold up in any economic circumstances. Some business can perform much better than others in terms of resistance.

This factor is related to people’s discretionary income, and only spending on what is necessary during the recession time. For instance, if a person is worried about his salary being cut or losing the job, it is less likely for him to spend money on entertainment. Industries such as healthcare and education are highly resistant to recession because it is essential for anyone during any period, although spending on each service may be reduced. Thus, recession resistance is another crucial factor if you want your business to be stable under all situations.


A good example is XIMIVOGUE

It is not easy to start a business even if you are purchasing a franchise. However, by considering these five risk factors and pay close attention to them, you are already a step ahead of others. Another safer method is to purchase a franchise that is growing fast with positive feedbacks from its franchisees. A good example is XIMIVOGUE. Being supportive and creative has earned a reputation among its followers. Overall, we hope you can find the franchise brand that fits you the best.

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