Tales from the Dark Side

Well in time for Halloween, here is a list from Crain's Chicago Business on the the ghouls and goblins of running a franchise business. In Tales from the Dark Side, the president of FranCorp, a franchise brokerage that helps match franchise buyers with franchisers, helped give out ideas of what can go wrong in owning and running a franchise. Out of seven listed, here are the top four problems new franchisees face.

1. Too little money, too much work! Lack of capital is the No. 1 reason a franchise unit fails. Potential franchisees should take a realistic look at how much capital they have to spend. And the amount of work in the first year tends to burn out new owners.

2. Keeping workers! Keeping good employees is one of the biggest challenges franchisees face. Some owners pay above market wages, or they add benefits and bonus packages to entice good workers to stay. Employee parties, awards and opportunities for promotion also help.

3. Encroachment! Few major retailers offer franchisees protected territories, meaning an identical store can open near you any time the corporation chooses. Compounding the problem, it's not unusual for a franchisor to compete with its own franchisees by setting up kiosks in malls, selling the product over the Internet or building company-owned stores.

4. Churning! Under most franchise contracts, a franchisor can force an owner to sell his unit if it does not meet company standards. And a franchisor who wants to can always find something wrong with a business

Further reading:

• Crain's Chicago Business September 11, 2006 special series on franchises

• Read all 7 points from the original article