Five Franchise Myths
Maybe you've thought about buying a franchise but you never seriously considered it because someone told you it's too risky, it's not a good idea, it's for rich people, or it's for people other than you. Unfortunately, there's a lot of information about franchising and much of it is wrong. Perhaps the information below will help you think differently about investing in your own franchise.
Myth 1."The franchisor will make you do everything their way. They'll take away all your freedom."
What does that mean, exactly? It would be interesting to call a successful franchisee and ask him or her, "Does your franchisor ever allow you to make a decision on your own?" If you think franchisors make all the decisions for franchisees then you will be surprised by this answer.
Yes, it's true, the franchisor will force franchisees to conform to standard operating procedures. The franchisor may control what you sell, what you say, what you wear, how, when and where you operate the business. It's all part of branding, which is part of marketing, which is what makes money! But franchisors do not take away their franchisees' rights to make all decisions. There are plenty of decisions every day to be made at the franchisee level. Just ask franchisees. Many wish it weren't so--it's often easier to rely on someone else to make the decisions!
Myth 2. "The franchisor charges huge fee so you're just making them rich and not yourself."
Really? Are there no wealthy franchisees anywhere? Yes, you will be required to pay franchise fees. If they're not fair, why do people agree to pay them?
Myth 3. "You can't sell a franchise. You don't own it. Once you buy it, you're stuck with it."
Who comes up with this nonsense? Of course you own it. No, you don't own the brand and you don't own the operating system but you do control certain rights relative to the existence of that franchise, including transfer rights. You will sign a contract that gives you ownership to a license to operate a specific business. Unless your contract says you can't sell it, assign it, or transfer it, you certainly can. And you most likely can make a profit, too! In fact, tens of thousands of franchisees have done so in the last 50 years.
Myth 4. "If you're successful the franchisor will take the business away from you, or they will compete with you."
And franchisors will do that because . . . it makes sense for them to shoot themselves in the foot? Or they like to go to court and defend themselves against lawsuits?
Franchisors and franchisees sign contracts that spell out their legal relationships. Sometimes the relationships are violated. But franchisors that consistently violate franchise contracts don't remain in business very long. You can find them out and avoid them!
Myth 5. "The franchisor will just take your money and run. They won't teach you anything or help you set up a successful business."
Then why would you give them your money in the first place? There's homework to be done before you invest in a franchise. Disclosure laws require franchisors to share information with you before you invest. If you do your homework you can find the right franchise opportunity. If you're in a hurry and you buy a "hot" franchise opportunity, that's the quickest way to get burned. Don't rush your investment decision.
Franchising is not perfect. It is not always successful. Some franchise companies fail. However, when a franchise goes bad, it's usually the fault of the people involved and not the fault of the concept. Franchising works. It's the safest way for people to start a business. It may not be right for you, but don't be fooled by these myths. If you're not going to invest in a franchise, make sure you don't invest for the right reasons.
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By John P. Hayes, Ph.D. John P. Hayes, Ph.D., author and speaker, has written the Franchise Pre-Investment Checklist to help you thoroughly research franchise opportunities. The FPIC makes it easy to understand how to search for and evaluate franchises. Read about this new e-Book, and purchase a downloadable copy now at profitablefranchiseowner.com .
Dr. John P. Hayes, has written more than 20 books, including numerous Amazon.com best sellers: Buy "Hot" Franchises Without Getting Burned, 101 Questions to Ask Before You Invest in a Franchise, 7 Dirty Little Secrets of Franchising, FASTSIGNS Business Opportunity, and many more. Hayes wrote Franchising: The Inside Story, one of the first books to teach people how to buy a franchise. He is a faculty member at Gulf University for Science & Technology in Kuwait where he teaches in Business and Mass Communications. Formerly he was the CEO of a major US-based franchisor and he has served as Director of several franchise companies. Dr. Hayes has been a franchisee of several concepts and for more than 35 years has served as an advisor to franchisors and franchisees. His most popular seminars include The A To Zs of Buying A Franchise and How To Capture & Keep Customers. Dr. Hayes teaches seminars at franchise expos and speaks to franchisor, supplier and franchisee groups worldwide. He coaches prospective franchisors and franchisees and edits Franchising Abroad, an e-newsletter for international franchisors.
Comments
Why move the comment?
Don't know why my comment was moved since it was specifically on the subject of the blog where it was posted...What say you Mr. BlueMauMau?
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Comment's Relevance
Actually, I agree with guest. The comment was on topic and should not have been consigned to ranter's desert.
Michael Webster PhD LLBFranchise News
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Re: Five Franchise Myths
"when a franchise goes bad, it's usually the fault of the people involved and not the fault of the concept..."
Couldn't agree more, but I would wager that the people at fault in the vast majority of failures are the FRANCHISORS who choose to wield the power granted by one-sided unfair contracts like hammers solely for their own benefit and often at the expense of their FRANCHISEES.
All five "myths" you list were born out of facts, real lives that were ruined by the not always scrupulous practitioners of the "safest way for people to start a business".
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Myth 4
The argument that a franchisor will not compete with you because it would be analagous to shooting themselves in the foot lacks credibility. If a franchisee is successful, very often franchisors will sell locations just outside of contract encroachment provisions (if there are any), collect a second franchise fee, and the result will be two mediocre facilities instead of one superior profitable outlet.
The franchisor will win both ways because after collecting the second franchise fee, the royalties from the two mediocre stores will normally be greater than those generated by the single successful location. The original location will see a reduction in sales and profits, both locations will struggle to achieve sales levels that ensure their individual profitability, but the franchisor collects more money and has also created "system growth" by increasing the number of open locations.
Obviously, none of this violates any law, so the argument about lawsuits does not apply, either.
Doesn't sound like shooting themselves in the foot to me.......
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Encroachment Myth
Mufflerman writes: "If a franchisee is successful, very often franchisors will sell locations just outside of contract encroachment provisions (if there are any), collect a second franchise fee, and the result will be two mediocre facilities instead of one superior profitable outlet."
Once your operation looks successful, then there will be competition - from either another company or from legal encroachment.
Doesn't the franchise operator just want or need a reasonable amount of time or a heads up that it is time to open another operation to keep the competition out?
Or do you think rather that there wouldn't be any outside competition, the franchisor knowing your operational details is in effect trading on inside information?
Michael Webster PhD LLBFranchise News
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Encroachment myth
Michael,
If the franchisee has generated a following for a brand in a specific market, it would be significantly harder to penetrate his/her market share without being able to capitalize or piggyback on the goodwill that is now associated with that franchise name. Furthermore, the franchisee IS often the victim of "inside information" because unaffiliated potential investors do not have immediate access to his sales figures as does the franchisor. When recruiting a new investor, franchisors are well served by citing their most successful locations as examples of the potential of their business model, which effectively makes the territories around these successful locations obvious targets for expansion.
Certainly, having some encroachment protection in a contract is essential, and the right of first refusal helps, but in my opinion, to question how there could be any motive for a franchisor to "compete" with its own franchisees shows a lack of acknowledgement of the major differences in the goals of the franchisee and franchisor and ignores the events that have taken place in many franchise systems over the years.
I don't believe Myth 4 is a myth, I believe it is a reality, a reality of great importance that all prospective and existing franchise owners need to understand.
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The more I get to know about franchising
the more complicated it is.
I agree with you Mufflerman that Myth 4 is a huge reality in the world of franchising.
I believe most zors are in the business of selling franchises and not caring if their zees are successful Once they reach a leval of success many will put another zee within a short distance of the other. (Curves, Quiznos and many other franchises.)
Our UFOC clearly states there is no territories. Yet verbally they will tell you they will not put another zee within 3-5 miles. This is misrepresentation during the sales pitch.This is misleading. Since they put in writing in the UFOC there are no territories. What would stop them from putting the same brand 2 miles from your location or even a mile?
I believe most zors are more interested in selling their concept than seeing people become successful. So the statement our zor says, "When you are a success, than we are a success," is just words. There is no substance behind those words.
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Encroachment
Mufflerman wrote: "Certainly, having some encroachment protection in a contract is essential, and the right of first refusal helps."
As you know, I agree with you about the important of encroachment - it is certainly no myth.
But, I have doubts about the right of first refusal - you may have no money to exercise your right when the opportunity is presented.
What do you think about an encroachment early warning system? A set of objective numbers which gives both the franchisee and franchisor sufficient lead time or notice that a location ought to be split?
I don't think that a franchisee can rigorously insist upon earning above market returns forever. At one point, a return to normal market returns is reasonable.
So do I understand your point to be that the use of inside information has the possibility for the most unfairness?
Michael Webster PhD LLBFranchise News
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Michael writes: "So do I
Michael writes: "So do I understand your point to be that the use of inside information has the possibility for the most unfairness? "
Yes
I don't see any practicality in an "early warning system". It seems to me it would function as a mere substitute for a first right of refusal. While I agree that one may not have the capital to exercise that right when presented, by definition the warning has thus been issued.
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Early Warning
Mufflerman writes: "It seems to me it would function as a mere substitute for a first right of refusal.
While I agree that one may not have the capital to exercise that right when presented, by definition the warning has thus been issued. "
My idea is that the franchisee should know and be able to plan for when a split in the territory is going to take place, in order for his/her right of first refusal to be meaningful. I didn't mean to eliminate it.
But I would replace it with a shotgun clause. By this I mean, when the territory is going to be split, a franchisee can propose a price X, and the franchisor can decide whether it is a buyer or seller.
The other way of doing it is to have impact studies, which I don't find to be that practical.
Addendum;
I should have been more clear.
Most franchise agreements tend to minimal territory, with encroachments on the boundary or near boundary.
I would like to see robust territories, but with shot gun clauses for when the large territory has to be split.
I think think that this is a better solution to the encroachment problem than small territories with boundary problems.
Michael Webster PhD LLBFranchise News
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Why should a franchisor give FROR to a franchisee?
Giving a franchisee first right of refusal on location near him is impratical. Why would a franchisor go to the trouble of finding a franchisee, then helping the franchisee find a location and before letting them develop ask a nearby franchisee if they want the location first? And what pray tell does the franchisor do if there are multiple franchisees in close proximity to the proposed location?
If a franchisee wants another location they should be actively developing one and if they want a development agreement for a given territory they should sign one.
I think you presume that the opportunity is borne out of the site when typically it is driven by a new or another existing franchisee.
The Truth Shall Set You Free!
TIF
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Why should a franchisor give FROR to a franchisee?
Giving a franchisee first right of refusal on location near him is impratical. Why would a franchisor go to the trouble of finding a franchisee, then helping the franchisee find a location and before letting them develop ask a nearby franchisee if they want the location first? And what pray tell does the franchisor do if there are multiple franchisees in close proximity to the proposed location?
If a franchisee wants another location they should be actively developing one and if they want a development agreement for a given territory they should sign one.
I think you presume that the opportunity is borne out of the site when typically it is driven by a new or another existing franchisee.
The Truth Shall Set You Free!
TIF
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Impractical?
Then why do franchisors force a franchisee to give them a FROR when the franchisee has a willing qualified buyer. And they want an extended time to decide on whether to exercise that FROR when the time comes, making it very possibly a deal killer. The new prospect wants a deal now, not make me an offer and we'll see if the franchisor wants to match it!
In a perfect world, the franchisor would seek out territory that has enough potential to support an additional franchise with minimal impact to existing locations - then the FROR could be offered before the franchisor spends and further time or expense recruiting a buyer.
Granted it is not a perfect world, but too often the new location is picked by the new buyer and after a cursory review the ZOR approves it without any real determination if the location is viable. The buyer has money and can fog a mirror, thus the ZOR is all to willing to approve the deal and tell the prospect that the keys to the mint are his!
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Re: Impractical?
Guest says - Then why do franchisors force a franchisee to give them a FROR when the franchisee has a willing qualified buyer. And they want an extended time to decide on whether to exercise that FROR when the time comes, making it very possibly a deal killer. The new prospect wants a deal now, not make me an offer and we'll see if the franchisor wants to match it!
Reply - Tranfer/sale provisions are a separate matter have nothing to do with this subject.
Guest says - In a perfect world, the franchisor would seek out territory that has enough potential to support an additional franchise with minimal impact to existing locations - then the FROR could be offered before the franchisor spends and further time or expense recruiting a buyer.
Reply - We don't live in perfect world and franchisors want to develop more franchised locations to build more market share. Again why would a franchisor spend its energy to find a new franchisee and then give an existing franchisee FROR? And what if the franchisor doesn't want that franchisee to develop more units?
Guest says - Granted it is not a perfect world, but too often the new location is picked by the new buyer and after a cursory review the ZOR approves it without any real determination if the location is viable. The buyer has money and can fog a mirror, thus the ZOR is all to willing to approve the deal and tell the prospect that the keys to the mint are his!
Reply - Yeah thats what always happens! Are you out of your mind? You have no idea what ALL franchisors do let alone what some franchisors do.
The Truth Shall Set You Free!
TIF
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Re: Impractical?
Guest says - Then why do franchisors force a franchisee to give them a FROR when the franchisee has a willing qualified buyer. And they want an extended time to decide on whether to exercise that FROR when the time comes, making it very possibly a deal killer. The new prospect wants a deal now, not make me an offer and we'll see if the franchisor wants to match it!
Reply - Tranfer/sale provisions are a separate matter have nothing to do with this subject.
Guest says - In a perfect world, the franchisor would seek out territory that has enough potential to support an additional franchise with minimal impact to existing locations - then the FROR could be offered before the franchisor spends and further time or expense recruiting a buyer.
Reply - We don't live in perfect world and franchisors want to develop more franchised locations to build more market share. Again why would a franchisor spend its energy to find a new franchisee and then give an existing franchisee FROR? And what if the franchisor doesn't want that franchisee to develop more units?
Guest says - Granted it is not a perfect world, but too often the new location is picked by the new buyer and after a cursory review the ZOR approves it without any real determination if the location is viable. The buyer has money and can fog a mirror, thus the ZOR is all to willing to approve the deal and tell the prospect that the keys to the mint are his!
Reply - Yeah thats what always happens! Are you out of your mind? You have no idea what ALL franchisors do let alone what some franchisors do.
The Truth Shall Set You Free!
TIF
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Your mind is made up!
Don't let me confuse you with facts. Go ahead and try to shout down every opinion that does not agree with your narrow biased view.
Transfer and sale provisions have ever thing to do with this issue.
Are you saying that the Zor's aren't making a sale when they open a new location? What is good for the goose is good for the gander. I know a hell of a lot more about how this works than you do, so get off your hypocritical soap box.
You are such a phoney baloney, TIF, you spout platitudes about truth while doing your damndest to suppress those who tell the real truth!
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Re: Your mind is made up!
Guest says - "Transfer and sale provisions have ever thing to do with this issue. Are you saying that the Zor's aren't making a sale when they open a new location? What is good for the goose is good for the gander. I know a hell of a lot more about how this works than you do, so get off your hypocritical soap box."
Reply - FROR has nothing to do with Transfer Provisions because a FROR would have no relation to the sale or transfer of that franchisee's franchise. It is obvious you don't know much about how Transfer Provisions work and even less about the practicality of FRORs.
The Truth Shall Set You Free!
TIF
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Re: Your mind is made up!
Guest says - "Transfer and sale provisions have ever thing to do with this issue. Are you saying that the Zor's aren't making a sale when they open a new location? What is good for the goose is good for the gander. I know a hell of a lot more about how this works than you do, so get off your hypocritical soap box."
Reply - FROR has nothing to do with Transfer Provisions because a FROR would have no relation to the sale or transfer of that franchisee's franchise. It is obvious you don't know much about how Transfer Provisions work and even less about the practicality of FRORs.
The Truth Shall Set You Free!
TIF
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TIF on FROR
TIF, here is how I understand the franchisor's legitimate interest in expansion as against the franchisee's risk adversity.
The franchisor has a legitimate interest in extend the brand as far as possible, from a geographical point of view. Though as we see from the recent Starbucks drawback, even non franchised but public companies can go overboard with expansion.
As I understand it, the typical counsel advice will be: give the franchisee an address territory and we can therefore reserve the legal right to expand.
I don't think this is good strategic advice. Because it cuts across why the franchise system works: local expertise with centralized experience.
My advice to a franchisor would be this. It is your interest to find good operators who can expand. It is in your interest to give an operator both a large territory, an early warning system and a shotgun buy-out clause. If the operator doesn't expand, then he or she will face a shot-gun buy out for some of the territory. One party names the price and the other party decides whether they are buyers or sellers.
I think that is contractually a better solution than what I have seen drafted. Either the franchisee grows the territory, or sells part of it at fair price to the franchisor - who resells it at a higher price to someone the franchisor believes is more aggressive.
The franchisee should not believe that they are entitled to the benefit of above market returns forever. Nor should the franchisor signal that to the franchisee that it is not worthwhile to develop the local market as far as possible.
Michael Webster PhD LLBFranchise News
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Re: TIF on FROR
Aside from the encroachment issue being overblown especially in the minds of franchisees.
The encroachment issue is more apparent in systems like Quizno's where inividual unit economics are poor. There used to be a great controversy back in the days of Sheck v. Burger King and with Subway than there is today.
In large mature sytems you simply do not hear about encroachment anymore.
The Truth Shall Set You Free!
TIF
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Re: TIF on FROR
Aside from the encroachment issue being overblown especially in the minds of franchisees.
The encroachment issue is more apparent in systems like Quizno's where inividual unit economics are poor. There used to be a great controversy back in the days of Sheck v. Burger King and with Subway than there is today.
In large mature sytems you simply do not hear about encroachment anymore.
The Truth Shall Set You Free!
TIF
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TIF on Encroachment
I am not sure that this is true in the hotel industry, nor for cases in which a new brand is acquired.
Sheck certainly set up a roadblock for franchisees.
Michael Webster PhD LLBFranchise News
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from my own firsthand experience.
i couldn't agree more with this statement. well said.
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from my own firsthand experience.
i couldn't agree more with this statement. well said.
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Encroachment is No Myth
Encroachment is a reality in franchising. Territorial protection will be a thing of the past, according to experts like Michael Seid, who wrote an article about encroachment in the April Franchise Times.
In this article, he suggests that some franchisors will agree to perform impact studies when they realize that their encroachment may negatively affect a standing franchisee, but, of course, will not be required to do impact studies under the terms of the franchise agreement, and will not have to offer any reduction in royalties for the encroachment.
Mufferman has it exactly right. The goals of the franchisor to maximize his gross sales means often that he thins out the gross sales and profits of the franchisees to maximize his profits ----and franchisees just have to live with it, or fail. If one of the two franchisees impacted by the encroachment fails, the surviving franchisee can get the business for just pennies. Kind of like "musical chairs, it is!
I don't know where John Hayes has been. I thought people bought franchises because the risks were hidden in the sales process and in the government disclosure document and franchise agreement where franchisees have to acknowledge that they are buying the franchise at 100% of risk in order to protect the franchisors for their hype outside of contract.
Been waiting a long time for Blue Mau Mau to invite some of those wealthy owners of one franchise to get out here and brag about their success and profits. Must be agaiinst the law just like it is in the UFOC/FDD.
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Myth 5 is a reality
We felt rushed to the max. If you feel like a zor is rushing you just STOP. There must be a reason for them rushing you. They rushed us to sign the lease. "You have to get down there and sign the lease RIGHT NOW!!! Right? Wrong! Take your time, take all contracts to a franchise lawyer. If they rush you, you are dealing with a RAT!
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Although I agree with many
things you say. I believe some of your statements are too general. Although many zees stories have some consistancy. There are some differences. We would have to do a thorough investigation.
Yes there are successful zees out there. I believe in the turning and churning of zees. You also have to take in consideration the differences in rent and overhead. This may vary from the location. An example is zee's rent may be $1200 in one area and $4000 in a more progressive area. There are numberous reasons to take in consideration. Even the consideration a person may be in with the CEO and have many benefits over someone that isn't in with the CEO. There is politics in every business.
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Myth 3
Myth 3 is also a reality, if you simply insert the word "struggling" into the first sentence.
One of the biggest problems with many franchise agreements is that if things go south, the franchisee is "stuck with it". He/she can't close because of a long term contract which will find them liable for future lost royalties, and if they are losing money, a sale that recoups anything more than asset value is extremely unlikely. Add to the equation that in many cases the franchisee is also on the hook for the full term for any leased premises and may have also been required to give personal guarantees to vendors and the trap is complete.
The franchisee is truly stuck--if they continue, they lose money on a monthly basis until the well runs dry, if they attempt to get out, they lose potentially more money between contractual liabilities and impending legal fees. It is a story that has played out since the beginning of franchising.
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Don't straw man me, man
Without commenting on the accuracy of Dr. Hayes' ascertains, I find his straw man argument style disquietening.
Dr. Hayes forward some perhaps overly simplistic misrepresentations and then goes on to bayonet them up. I imagine there is some attempt at persuasion here but this seems a little too much like primary school; not like BMM.
Technically, this rhetorical device (straw man) is defined as follows:
...an informal fallacy based on misrepresentation of an opponent's position. To "set up a straw man" or "set up a straw man argument" is to describe a position that superficially resembles an opponent's actual view but is easier to refute, then attribute that position to the opponent (for example, deliberately overstating the opponent's position).
Further:
A straw man argument can be a successful rhetorical technique (that is, it may succeed in persuading people) but it carries little or no real evidential weight, because the opponent's actual argument has not been refuted. [my emphasis]
Quantifiably-based arguments do not need to resort to fallacies and misrepresentations.
And don't get me started on using reductio ad absurdum and the law of noncontradiction devices.
As in most things, how an argument is framed speaks volumes about the intent of the proposed argument.
Les Stewart MBAUnderstanding Franchising
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Don't straw man me, man
Without commenting on the accuracy of Dr. Hayes' ascertains, I find his straw man argument style disquietening.
Dr. Hayes forward some perhaps overly simplistic misrepresentations and then goes on to bayonet them up. I imagine there is some attempt at persuasion here but this seems a little too much like primary school; not like BMM.
Technically, this rhetorical device (straw man) is defined as follows:
...an informal fallacy based on misrepresentation of an opponent's position. To "set up a straw man" or "set up a straw man argument" is to describe a position that superficially resembles an opponent's actual view but is easier to refute, then attribute that position to the opponent (for example, deliberately overstating the opponent's position).
Further:
A straw man argument can be a successful rhetorical technique (that is, it may succeed in persuading people) but it carries little or no real evidential weight, because the opponent's actual argument has not been refuted. [my emphasis]
Quantifiably-based arguments do not need to resort to fallacies and misrepresentations.
And don't get me started on using reductio ad absurdum and the law of noncontradiction devices.
As in most things, how an argument is framed speaks volumes about the intent of the proposed argument.
Les Stewart MBAUnderstanding Franchising
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Hey Les if you disagree with Hayes why don't you just say so!
Or better yet put up an argument of your own otherwise you are doing worse than what you purport Hayes has done.
The Truth Shall Set You Free!
TIF
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Hey Les if you disagree with Hayes why don't you just say so!
Or better yet put up an argument of your own otherwise you are doing worse than what you purport Hayes has done.
The Truth Shall Set You Free!
TIF
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Les and Straw Men
TIF, I agree with Les on this. Hayes' 5 myths are not arguments I hear constantly about the negative in franchising.
I haven't reviewed Hayes' book yet so perhaps the 5 myths are more puffery than serious.
Michael Webster PhD LLBFranchise News
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Re: Straw Men, I agree.
I sent a private email to Les on this one as I agree with him as well, but I am waiting for the balance of the facts in a specific case that shows it to be a 'front' for quality franchising.
Nick Bibby is a franchise consultant and principal of the Bibby Group.
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Re: Straw Men, I agree.
I sent a private email to Les on this one as I agree with him as well, but I am waiting for the balance of the facts in a specific case that shows it to be a 'front' for quality franchising.
Nick Bibby is a franchise consultant and principal of the Bibby Group.
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re: Les and Straw Men
Count me in Les's column too. These so-called "5 Myths" are at best trivialized versions of arguments I hear about franchising. Les's strawman comment is right on the money.
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People passing up Good Opportunities
Let me be a bit contrarian here.
We are always talking about "the dd" problem here. Why do good people take up crappy franchisees?
There is another dd problem.
Why do good people pass on really good franchises?
John is talking about the latter case, while we focus on the former question.
I haven't read his book, but when I do I will have some more detailed observations.
Michael Webster PhD LLBFranchise News
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Why do good people buy crappy franchisees?
Most of the people I have conversed in my crappy franchise are really nice people. A good majority didn't know what killer due diligence was or what a franchise lawyer was. I had asked everyone that question. Did anyone explain or mention what due diligence was in the franchise world? 98% did not know.
There are people who have never been in the business world. This is one reason they buy a franchise. They really believe they will get guidance and buy a business system that works. From my observation many of the zees never even thought someone could think the way a bad franchise would think. Most are baby boomers and still believe business and ethics go together.
One man whom I thought did an exceptional job selling memberships for his club still insist there are good businesses that do not hurt people. We all want to believe there is good people out there. I told him there must be good people out there but very few in the franchise world. The one sided UFOC/FDD gives many sharks a legal way to lie, steal and take advantage of good decent people.
I still believe if you are a trusting person it is easier to trust. In business today you have taught me to verify everything anyone says.
Good people are the ultimate positive thinking, set your mind on the goal (Dream) people. Which can definitely get you in trouble. In business there is a time you must get out, or you are doomed. They will stay in because if they quit they will think of themselves as losers.
I am still trying to become more of a realist with a good attitude. I can't walk around thinking everyone is bad. I would walk around with a frown and hate everyone.
Vigilant, cautious, verifying what people say. Listen to what they say.
There has to be an area of reality where you can be positive, upbeat and still protect yourselves from sharks. What is scary is some sharks are charming and very handsome.
I wish a good zor could tell their story and how they run their business. That would be interesting.
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Stop Do Diligence
What you say may be true, and I tend to agree with much of it.
But this thread was started by John who wants to talk about a different problem. Let's turn our minds to his problem or not comment on this thread.
Michael Webster PhD LLBFranchise News
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Sorry
Okay I will stay on the thread.
Myth l. "The franchisor will make you do everything their way. They'll take away all your freedom."
I believe the franchisor will make you do everything their way. Yes they made us wear what they wanted us to wear. They will control what you sell and the time you are to operate your business.
The first wave of our franchise did not have a clause where we had to pay $1500 for advertising.
I talked with many of the zees and many of them chose not to pay that much. It was too expensive and we found other ways to market. Yes we made that decision. Financially it made sense and I thought their marketing wasn't personel enough. I got more people to sign by mailing out personel notes and giving them a free week pass. We saved over $1100 a month. Since we lost on the build out we sought less expensive ways of marketing. I personally do not believe the most expensive marketing material will bring in business. This was the only decision we made on our own.
Today there is a clause for the new zees that they have to sign and do their advertising.
Myth 2. The franchisor charges huge fee so you're just making them rich and not yourself.
Of course there are wealthy franchisees out there. You have to investigate why they are successful. What is their overhead? Were they first, second generation zee? Did they have help from family to pay for their business? There may be numerous reasons why a franchise is sucessful. Every story is different.
As far as a fee. Many people believe a fee is a small price to pay for sound business advice to help you develop a successful business. I believe that is why many people buy a franchise in the first place.
Myth 3. You can't sell a franchise. You don't own it. Once you buy it , you're stuck with it.
Mr. Hayes says of course you own it. You have a lisence. But you do not own the brand and you don't own the operating system, but you do control certain rights relative to the exxistence of that franchise, including transfer rights.
I ask Mr Hayes what if the business doesn't work. Your less than a year into the 10 year contract. The build out was more than you imagines because they disclosed it would be alot less. Having a business or a franchise is like running a household. It cost more than you plan.
This is a big problem with new zee owners. What they tell you before you sign is totally not exactly the price they quoted to you. To have them tell you they had no idea exactly how much it would end up costing. Yet they disclose this when selling the brand.
What we own Mr. Hayes is the risk. The company has no risk. The business goes south and your working capital is eaten up so fast.
To add salt to injury they try to take the business for pennies on the dollar with no risk. Legally you still own the business but you transfer it over to the zor and we become silent. Not even partners. Yes we own it even when the business goes south.
Even though we have been closed since Jan. 12,2008, we are still responsible for the space. This is not a win, win situation.
Our only other decision was not to take a managerial contract. Too many people got screwed over more.
Myth 4. If you're successful the franchisor will take the business away from you, or they will compete with you."
I agree with you Mr. Hayes. Franchisors that consistently violate franchise contracts don't remain in business very long. People need to avoid them.
We all have heard the horror stories of encroachment. This is a reality not a myth.
Myth 5. The franchisor will just take your money and run. They won't teach you anything or help you set up a successful business.
You talk about homework. None of us knew or dreamt there was so much involved.
Yes they will take your money. Like in a case of one our victims I know they hadn't even opened and they were told they can walk away anytime. After they are into it over $100,000.
One week of training will not teach anyone to run a successful business.
This is my experiences and observations from our franchise.
I have to believe there are a few good zors out there.
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Do Diligence, Please Stop
Do Diligence,
Must you have an opinion about everything?
You say, "I believe the franchisor will make you do everything their way." As an ex-franchisee under one franchise system, you just don't have the breadth to make blanket statements about franchisors.
Might I suggest you keep your comments infrequent and 3 sentences or less? And add weblinks to supporting documents.
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Do Diligence, Please Stop
Do Diligence,
Must you have an opinion about everything?
You say, "I believe the franchisor will make you do everything their way." As an ex-franchisee under one franchise system, you just don't have the breadth to make blanket statements about franchisors.
Might I suggest you keep your comments infrequent and 3 sentences or less? And add weblinks to supporting documents.
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Darnelle
Everyone has an opinion when they have experienced the franchising world. I am not talking about all franchisors. I can only speak of one. I am very clear about this.
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no, you're not clear about that.
You may not realize it but you constantly talk in generalities. You speak of 'zors' and 'zees' and make blanket statements regarding their actions and/or plight constantly.
Just my opinion but one that i'm guessing others may share. You seem like a perfectly nice person but you need to tone down all the rhetoric. It hurts your cause.
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no, you're not clear about that.
You may not realize it but you constantly talk in generalities. You speak of 'zors' and 'zees' and make blanket statements regarding their actions and/or plight constantly.
Just my opinion but one that i'm guessing others may share. You seem like a perfectly nice person but you need to tone down all the rhetoric. It hurts your cause.
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Sleep Tight
Until everything is said and done I cannot give names of people. I can only speak in generalities.
Sometimes my rhetoric may be high in volume because I am in the mist of a storm of the aftermath of dealing with a bad zor.
The blanket statements is my very real life experience of a bad zor. There will be a time where I will not be able to talk at all.
I know my reason for writing is because I cannot stand people getting hurt in any way.
My intentions are good.
If in the future everything is settled I hope to be able to continue writing and helping people not get in the mess we are in.
I have talked to troubled zees in Canada and all over the country. Our stories are consistant but there are some differences. There is real suffering among people who have worked hard, sacraficed for the good of their families. My heart and soul goes out to those people. They do not deserve what they are going through. They have worked a life time to provide for their families. Sleep Tight please understand the pain people are going through.
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You're missing the point entirely...
It's reasonable to speak in general terms regarding your franchisor if you have the personal anecdotes to back it up via conversations with those in the system that constitute a representative sampling of that system. It's unreasonable to speak in general terms of all franchisees and all francisors in all systems based upon the experience in your one system.
You do just that on a regular basis. Go back and look at your posts.
Remember, I'm speaking from a position of anti-franchising given my personal experience and subsequent research since selling my business.
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You're missing the point entirely...
It's reasonable to speak in general terms regarding your franchisor if you have the personal anecdotes to back it up via conversations with those in the system that constitute a representative sampling of that system. It's unreasonable to speak in general terms of all franchisees and all francisors in all systems based upon the experience in your one system.
You do just that on a regular basis. Go back and look at your posts.
Remember, I'm speaking from a position of anti-franchising given my personal experience and subsequent research since selling my business.
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Post Pulled Back from Forum
I was working on getting out the Wendy's article when I saw this remark come up. It's pulled out of the forum and back where it belongs, right below this post.