Having represented both franchisees and franchisors, I’ve come to the conclusion that franchising is rarely a good idea for anyone these days.
Here’s why.
First, let’s discuss buying a franchise. If you have an ounce of creativity and the money to buy a franchise, it probably isn’t the right vehicle for your new business. Franchises are systems, that is, you have very little flexibility to stray from the system without permission from the franchisor to do so. It doesn’t take imagination to run a franchise. It takes alot of hard work and the willingness to do what you’re told instead of what’s best.
For a decent franchise, the start-up costs are prohibitive. You’ll spend years trying to recoup them. Many don’t. Bad franchisors front load the fees in order to make a quick buck knowing that you’ll likely fail.
If you want to expand your business by becoming a franchisor, there are even more headaches. The U.S. Federal Trade Commission (FTC) , state franchising laws, your franchising offering circular, disgruntled franchisees who sue, etc. And what about those entrepreneurial franchisees who want to do something different? How are you going to accommodate their ideas without diluting the franchise?
Here’s a link to a typical case study in what can go wrong with franchises. Disgruntled franchisees, closed businesses, and lawsuits against the franchisor. And the franchise involved (UPS Stores), is actually considered a reputable franchise. Bad franchises involve worse monetary and legal issues.
There are less expensive and more business-friendly alternatives to franchises.
A good business lawyer can help you map out a game plan whether you’re looking to buy a business or expand yours…and you can do it without the trouble of franchising. Talk to your lawyer before taking a leap into franchising.
