Buying a Franchise
If you are thinking of BUYING A FRANCHISE then STOP
Don’t do it, or at least NOT YET, you have a lot of work to do first.
Now apologies if this seems to be a lot to read: there is a lot that first time franchisees are never told – so make a coffee, and please listen.
First to say.
All is NOT AT ALL what it seems in franchising.
FACT – Did you know for example, a massive fast food franchise, a household name and an icon of franchising has bankrupted a lot of franchisees in just the last couple of years.
Can you name it?
Would you even know where to look for such information? Would you have found the trap? On the face of it this looks a very good business on paper. Only (some) franchisees are suffering. Do you understand the contractual issue that turns this from being a very good business into a nightmare that has destroyed many lives?
The point is – the customers love this company. The company is VERY successful. Media comment is positive. So don’t assume that any of that will give you a clue to which franchises are successful or not from a franchisee point of view.
My advice is a serial ex franchisee. I have owned a number of franchises. Some good. Some less so. BE EXTREMELY CAREFUL!
There is gold out there for some, but even MORE cleverly disguised fool’s gold than you would ever imagine, and a conspiracy of silence designed to conceal the truth..
Above all what this industry is extremely good at, is hiding its dirty washing from view
First of all and most important -
The FAILURE rates are NOT what the industry wants you to believe.
People buy franchises because they think it is a “safer” and “proven” route into business, and has on average a lower failure rate than starting out on your own. THIS IS A MYTH
The industry promotes low failure rates, and for sure, a well established franchisee buying one additional branch from a long established high end franchise is (almost) it is in business terms almost a sure fire thing. And that accounts for a lot of franchise sales which skews the statistics for everyone else.
But that’s NOT what you need to know as a newcomer:
What you really need to know:
For first time franchisees across the spectrum of franchising the failure rate is actually HIGHER than starting out on your own. That is the verdict of a big raft of well qualified and thorough EXPERT analysis on behalf of government agencies in regulated countries.
The TRUTH is shocking. Yes you heard it right. You are more likely to fail as a new franchisee than those starting out alone. How does that square with the marketing stuff you collect at a local exhibition?
If you doubt this at all, then you need only confirm that US official figures report almost 10% more franchise based failures as government small business program agency loans defaulted, when compared to other types of business.We will also present a lot more evidence here. Read it. Make up your own mind.
These reports are given further credence by the fact they are linked without comment from the main US and international FRANCHISOR website. Clearly one significant franchisor industry voice agrees!.
I hope this is a wake up call to all those reading this site.
Franchising is not nearly as safe for newcomers as they want you to believe.
In addtion – Entire franchises are going bankrupt without causing even a ripple in media, others are shut down in the public interest by public authorities in the UK at least whose proceedings are hidden from the public view. Franchises also phoenix into other companies, or disappear without trace. Half of franchises fail in the first five years or so, leaving thousands of franchisees with their life’s savings gone and nothing but bills to show for it. How old is your franchise?
One of the most preeminent researchers in the US said he would never accept a commission to update his figures because he found the endless stream of tragic stories from ex franchisees far too disturbing!
For one thing – Failure is MUCH bigger than they say – that is – than loan defaults only.
Statistics tend to view failure as only defaulted loans, bankrupt companies, or those who fail to live out the term of the franchise. Contracts are so rigid that the act of trying to leave early, can easily bankrupt a franchisee in the process, and most people would always prefer to pay off loans, than default them, either subsidized by savings or earning partners.
So there is a raft of living dead franchisees, who have no choice but to live out to the end of the term. At which point they are classed as a success by the industry, despite the fact they are near destitute. Does your franchise lock you in , and charge you to get out, even if you cant make a penny or cent?
What really matters – is you, your franchise, your location.
In the end what matters is not the statistical averages but how YOUR specific franchise works for YOU in the location you choose.. A six foot man can easily drown in a river that averages five feet deep. A good success rate is necessary – It is not sufficient and it doesn’t guarantee it will work for you.
Don’t be lulled into a false sense of security! – The truth is WELL hidden.
I have met a lot of victims of this industry. One thing they keep asking – why were there no warnings, why did nobody tell us?
They have a point.
If you look around the web, you may have noticed, a total silence of criticism of individual franchises which seems UNNATURAL in this consumer power age – that’s because it IS COMPLETELY unnatural!
It is a ruthlessly enforced legal silence. Franchises are generally legally trigger happy, and any criticism is met with immediate defamation take down threats to website owners, who cannot afford the trouble.
The worse the franchise, the more likely they are to legally supress information this way so it is ironical perhaps, but the worse the franchise the LESS likely you are to find criticism about it.
Moreover franchisee contracts (and threats) prevent franchisees from making any criticism at all: so even ex franchisees remain silent.
Why NONE of websites rock the boat…
Almost ALL websites you find, publications and associations profit from franchise sales or advertising, or in the case of advisers, profit from the act of people buying franchises, so are funded directly or indirectly by franchisors . That means they are not at all impartial at all, and none will rock the boat or bite the hand that feeds them.
A few forums sometimes allow posting, but very soon after take down the forum, because it causes them too much work, and too many threats from franchises.
On another tack…
Be warned – In addition – Many Franchise Contracts are outrageous:
A single clause for example renders all that sales literature, and optimistic projections worthless, and makes sure the franchisor has breached no contract when you fail to make a single penny!
Do you know what this clause is?
Also be careful of lock in clauses. Many contracts prevent you from escaping doing anything else. You are in and you can’t get out, even if you never make a penny.
It can be even worse. FAR worse. Succeeding in the business, is no guarantee of becoming a successful franchisee!
Weasel clauses in franchise terms allow them to sell the SAME franchise to several successive franchisees with almost no recompense to you!.
They can and they do. It is called franchise churning. This problem has been so big in Canada, that even recently it distorted the entire lending success profile of the government loan guarantee scheme. An eminent canadian judge condemned the contracts out of hand.
The frightening thing… These time bomb clauses are there even in some of the USAs best and MOST respected franchises. Do you know what such a clause looks like? the clause that sets you up to fail?
You clearly need to…
My site has a particular focus on the UK. You can reasonably assume in the UK it is worse because it is totally unregulated. Almost anything can call itself a franchise, and almost anything does. Cnsumer regulations here, deem a franchise a “Business purchase” and so lie outside any consumer protection.
So what to do? Give up on franchising – NO!
Not necessarily. If you can avoid the traps it can be still a great way into business. It just is not NEARLY as rosy as the industry would have you believe.
Let US help you to navigate the minefield instead, and point out some of the mines.
No promises. We cannot guarantee your success either, and all advice is given on an information only basis. But we can give you a lot of pointers, born of hard experience.
So – Here is a site for would be franchisees dedicated to presenting TRUTH about buying good franchises , the real statistics – NOT just the industry rose tinted view.
We give pointers on what to look for in good franchises.– critical questions to ask franchisors. We explain how to analyze a business.
Also – we would like to refocus franchisee thinking.
A common misconception – What is a franchise REALLY about? Ask most people what they are buying when they buy a franchise – they answer “a system” “proven” or even “support”. The reality is something else entirely.
At a business analysis level – there is only ONE good reason to buy a franchise over starting out on your own. This reason is vital. You need to identify whether your franchise has it or not.
We can show you some examples and tests to see whether it is so.
That’s the point. A franchise is a business pure and simple. It needs to be analyzed as a business, a business with a lot of restrictions.We explain how to do that!
This website is one of the few places on the web where we aim to present the truth, as we know it, no whiter or blacker than it really is – which is a lot blacker than the industry would like you to believe.
We Present the good the bad and the ugly of franchising – a warts and all view , so that you can take an objective decision.
The thing is – there is no such thing as a “good” franchise. They are on a sliding scale from grey to black. A good business can make a bad investment if the price is too high for the scale of return. So no franchise is “good” absolutely. There are a lot which are bad absolutely!
So on almost the ONLY site on the internet funded by and for franchisee – we will reveal the truth about franchises – the facts the industry would rather you did not know.
What you should know before buying – the questions you should ask, and evaluation you should do, the traps laid for the unwary. All sorts of questions – here just a sample.
• How to evaluate franchises – the most comprehensive test you are likely to see.
• The REAL survival rates of franchises – government statistics from regulated countries – this will shock you.
• What you are really buying when you buy a franchise – and it is not a training or business system, it is far more fundamental than that.
• How to read franchise advertisements – what they DON’T say is almost as revealing as what they do say.
• The Parts of franchise agreements to look out for – the ones that are seriously bad for franchisee health.
• The extensive business analysis that you must do on any franchise – for example – how do you evaluate markets? – We tell you the aspects that really matter.
• Simple questions you can ask franchisors which will tell you how good the franchise REALLY is.
And since there is far too much to put on to the website
We ALSO present the FRANCHISE BALANCE. ™
A multi part and COMPREHENSIVE guide and franchise test of a hundred pages Containing literally HUNDREDS of factors and tests that go together to make comprehensive test. How to balance the factors in the franchisors favour and yours, to see if the vital balance is there.
For the first time- A proper business analysis of franchises.
EVERY prospective franchisee should read this.
More than that – here we also campaign for a MUCH better franchise charter.
We demand a truly ethical franchise standard based on
Disclosure, Transparency, Dialogue. Criticism. And a recognition that the ultimate purpose of a franchise is to make money for franchisees. It is time that that is stated openly in the contracts and/ or marketing documents.
For franchisors that meet our charter we will allow a link….. Watch this space..
We would like you join us – and discover the truth about franchises.
So join our buying a franchise site NOW!
• The truth about franchise statistics.
• Extensive tests you can conduct on a franchise as a business.
• The right questions to ask franchisors, and when to walk away.
• Weasel clauses in franchise agreements
• News about the good bad and ugly of franchising.
• What to look for in franchise accounts: tell tale signs.
• The definitive franchise buying guide the FRANCHISE BALANCE tm
We present it all – from Markets to Contracts, the keys AND the pitfalls
All those other franchise sites that play up the virtues of franchises? They are VERY WELL PAID for promoting them. Small wonder the never mention the problems.
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IT COULD SAVE YOU FIVE YEARS OF MISERY AND $$ THOUSANDS!!
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