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Franchise dangers
Almost every week we receive calls from disgruntled franchisees who claim they were robbed by greedy/unscrupulous franchisors who fleeced them.
They tell us of broken promises and of glossy marketing brochures that do not live up to the reality.
Typical complaints are:
poor/non-existent marketing support
substandard admin support
frequent invoicing problems
weak internal lead generation tools
expensive "must buy" franchisor products at way above market rate prices and
a lack of care or response.
One franchisee told us that the franchise agreement which referred to BFA(British Franchise Association) dispute resolution terms could not apply since the franchisor was not even a member!
Due diligence should have taken care of many of these problems.
Our advice is simple:never ever buy a franchise before thorough due diligence-cutting the corners will only leave you exposed.
True-there are good franchises and bad and the same applies with franchisors and ees of course.People are people. The system of franchising itself is not "bad" per se simply that for some businesses it is not a suitable mechanism for expansion plus some franchises have yet to prove that their business model works in fact.
Think of the franchise model-what competitive edge does it have over a stand alone business?Ask to see the accounts.Examine these with a fine toothcomb and then decide if remortgaging the house/cashing in your policy or using your early redundancy money makes economic sense.
Plus of course a second/third or fourth opinion from your banker,business adviser,accountant and solicitor always helps.
Being cautious with your hard earned money for good franchises should only earn their respect.
They tell us of broken promises and of glossy marketing brochures that do not live up to the reality.
Typical complaints are:
poor/non-existent marketing support
substandard admin support
frequent invoicing problems
weak internal lead generation tools
expensive "must buy" franchisor products at way above market rate prices and
a lack of care or response.
One franchisee told us that the franchise agreement which referred to BFA(British Franchise Association) dispute resolution terms could not apply since the franchisor was not even a member!
Due diligence should have taken care of many of these problems.
Our advice is simple:never ever buy a franchise before thorough due diligence-cutting the corners will only leave you exposed.
True-there are good franchises and bad and the same applies with franchisors and ees of course.People are people. The system of franchising itself is not "bad" per se simply that for some businesses it is not a suitable mechanism for expansion plus some franchises have yet to prove that their business model works in fact.
Think of the franchise model-what competitive edge does it have over a stand alone business?Ask to see the accounts.Examine these with a fine toothcomb and then decide if remortgaging the house/cashing in your policy or using your early redundancy money makes economic sense.
Plus of course a second/third or fourth opinion from your banker,business adviser,accountant and solicitor always helps.
Being cautious with your hard earned money for good franchises should only earn their respect.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.