Almost every week we receive calls from disgruntled franchisees who claim they were robbed by greedy or unscrupulous franchisors who fleeced them.
They tell us of broken promises and glossy marketing brochures that reality does not live up to.
Typical complaints include:
- poor/non-existent marketing support
- substandard admin support
- frequent invoicing problems
- weak internal lead generation tools
- expensive ‘must buy’ franchisor products at way above market rate prices
- a lack of customer care – unresponsive to franchisees’ requests for help
One franchisee told us that his franchise agreement, which referred to BFA (British Franchise Association) dispute resolution terms, could not apply since the franchisor was not even a member!
Due diligence should have taken care of many of these problems.
Our advice is simple: never, ever buy a franchise before thorough due diligence has been carried out – cutting corners will only leave you exposed.
True, there are good franchises and bad, and the same applies with franchisors – of course, people are people. The system of franchising itself is not bad per se, it’s just that for some businesses it‘s not a suitable mechanism for expansion, and some franchises have yet to prove that their business model works in fact.
Think of the franchise model – What competitive edge does it have over a standalone business?
Ask to see the accounts of any franchise you are interested in. Examine these with a fine toothcomb and then decide if remortgaging the house, cashing in your policy or using your early redundancy money makes economic sense.
Plus of course a second, third or fourth opinion from your banker, business advisor, accountant and solicitor always helps.
Being cautious with your hard-earned money for good franchises should only earn their respect.
By Brian McLelland, MA Hons(StA),CELTA, Solicitor, LLM(Company Commercial), ACIS, Associate Lecturer(Contract and Tort), Director.
Brian can be emailed at brian.mclelland@business-lawyers.org.
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