I'm going to play devils advocate here for a minute. I'm not a franchisee. I'm actually a guy who is pursuing starting my own franchise for a fast food concept I have been operating the past 3 years. I am soaking up as much knowledge as my brain can take in about the world of franchising. Trying to avoid the pitfalls - as a potential future franchisor that is. So I have been extensively researching online for the past year. Have read tons of horror stories across the net about disgruntled franchisees and their complaints. Mainly in the fast food realm, recently Quiznos in particular. There's layer of complaints but here's what always seems to come up:
1) Can't make any profit, it's all the franchisor's fault. They don't market with the ad fund in the right way.
2)They force me to buy my ingredients from them, and charge me way too much - I can't make any money, it's all going to them.
3) They're forcing me to sell stuff for $1, and it's costing me money.
Yet, if you read stuff about starting/operating up a franchise system, the rule of thumb is if you want your franchise system to survive, don't make money on the franchise fee, make it on the royalty.
So my point is here, why on earth would these terrible franchisors be doing all these terrible things that cut away franchisees profits if it obviously indirectly cuts away their own primary revenue source as well?
IMO, in regards to #1, the corporate people probably know way more about how to get to most bang for the buck out of advertising than the franchisees. They should trust their judgement. If they truly aren't spending the ad fund on ads, and instead buying new cars, well thats another story.
Regarding #2, if everyone across the system were allowed to buy burgers from wherever they wanted, the consistency and quality reputation would take a nose dive, wouldn't it? I could see franchisees buying their burgers as cheaply as possible to maximize their profit - and the entire systems quality reputation probably would be secondary to them. So who is supposed to police that if not the corporate mgmt? And if the complaint is about how much the corporate supplier charges vs how much Costco might charge - well given a huge chain's volume and buying power compared to a franchisor's that's not exactly apples to apples.
Regarding #3, If BK for example is making all their franchisors sell a double cheeseburger for $1, do you think that's with the goal of chipping away at the franchisees profits (and their own royalty), or is it with the goal of bringing more people in the franchisees doors systemwide? Especially given the economy.
Just wondering, and trying to learn......
Franchising is a huge step
Franchising is a huge step for any business. If you're looking to make sure that your profits are secured and that you're not stepping into a corporate money-sapping machine, enlisting the help of a professional franchising group would make sure that your business benefits in the long run.
To see if a professional franchising company is right for you, check out Upside Group - they're at http://upsidegroup.biz.
Hope that helps.