Which statement is a disadvantage for franchisers?

• A. The franchiser receives all profits from each franchise automatically.
• B. The franchisee is always guaranteed success.
• C. The franchise has no limit on growth.
• D. The reputation of the whole franchise can be tarnished by one poor franchise.

Answer: (D)

The main idea here is that a franchiser’s brand risk is tied to every franchise in the network. In a franchise system, the franchiser licenses the business model and brand to independent operators, so the overall reputation depends on how well each franchise performs. If one franchise delivers poor service or a bad experience, customers may blame the entire brand, reducing trust, sales, and the attractiveness of future franchise opportunities. That potential for reputational damage from just one location is a real disadvantage for the franchiser.

Think about the other statements in that light: profits aren’t automatic for the franchiser just because a franchise exists—royalties and fees come from many locations and their performance, not from one automatically generating all profits. Success can’t be guaranteed to franchisees; no business can promise that. And growth isn’t inherently a disadvantage; the challenge—or risk—often lies in maintaining quality and consistency as the network expands. The key point is that reputation linked to each franchise makes the system vulnerable to a negative outlier, which is why this option is the correct one.