Franchising is a risk sharing game, with the balance tilted in a certain way. Purportedly, the franchisor enlists the help of franchisees to help expand the business, seemingly a win-win arrangement. What many people fail to see is that the franchisor is also passing the cost of expansion to the franchisee. In fact, the risk of failure is also passed to the latter.

Imagine a franchise outlet fails, who bears the brunt?

One may argue that it's not in the interest for a franchisor to have an outlet closed down as this will affect the reputation. Is this true? I'm of the opinion that the franchisor benefits immensely from the additional outlet, gaining eyeballs and building its brand, with the costs passed to the franchisee. Having an outlet closed down usually does not affect its image - the general public usually don't care much about a shop closing down.