5 Things A Good Franchisor Will Never Say

23/01/2018 18:00 | Start a business

Things franchisors wont say

If it looks too good to be true, it probably is. And this is certainty the case when you’re researching opportunities to become a franchisee.

Be cautious of franchisors that guarantee you success for very little effort. Of course, there are many benefits to franchising, but to become one of the successful franchises you need to have dedication, determination and be willing to work hard.

Thankfully, the franchise industry is full of honest and ethical franchisors, but there are also a few that choose to bend the truth to get a prospective franchisee to sign the franchise agreement.

Here’s 5 things that a good franchisor will never say:

“If you don’t sign today you’ll lose out on the opportunity.”

Probably the most important activity you can complete during the whole franchising process is the due diligence right at the start. The research into the franchise opportunity and the validation of projected financials provided by the franchisor is crucial to your ultimate success – but it takes time to do properly.

It can take weeks, even months, from your first conversation with the franchisor to the time you sign the franchise agreement. If you feel pressured to speed up the process or decide faster than you’d like, this should serve as a warning.

Don’t allow yourself to sign up to an investment because you’re panicked by pushy sales techniques. If the opportunity is right, then the franchisor will support you on your journey to become a franchisee, rather than making you feel forced into a decision.

“OK, I’ll reduce the franchise fee if you’ll sign today.”

So, if you’ve resisted the pressure being applied by the franchisor initially, what happens if they offer to reduce the franchise fee?

Although this isn’t always a bad sign, as discounts have their place in times of economic uncertainty, it isn’t always a good sign either.

Slashing the franchise fee ignores the fact that this payment goes towards the training and support system that’s in place for the franchisee. Less investment in this area may lead to fewer support staff, reduced training, and less money for research and development. Ultimately, it deprives the franchise of the investment capital it needs to recruit quality franchisees and remain competitive.

So, a reduced fee may seem like a good idea, but your chances of success may also be lowered at the same time.

“You don’t need to speak to any of our other franchisees; they love it…. honest.”

A good franchisor should have nothing to hide and will welcome you to meet with existing franchisees. For those that don’t support your willingness to do this, you should ask yourself why.

When you do meet with franchisees, ask them questions about the training and support received versus expectations. How long was it before they started to break even? What’s it like to be a franchisee in the business? And most importantly, if they had the chance, would they do it all again?

Existing franchisees should give you an open and honest account of what the franchise is really like, but a warning sign to look out for is the turnover of franchisees. Although it’s not realistic to assume that all franchisees are suitable for every franchise, if lots of franchisees have left then you need to find out the reasons.

Is there a problem with the recruitment of franchisees? Is the training provided of a poor standard? If you’re having to ask these questions, then the chances are this is not a very successful franchise.

“The business works. We didn’t need a pilot to prove the concept.”

If a franchise has been operating profitably for many years, then this point is not as prevalent as it is for less established franchises.

A pilot enables the franchisor of a newer franchise to evidence that the franchise can be successful and lucrative, not just on paper, but in reality too. The pilot also allows the franchisor to provide financials and performance figures that are accurate and real, as opposed to being projections and forecasts.

Too often an entrepreneur will presume that because they run a profitable business, that they can turn it in to one of the successful franchises too. Unfortunately, this isn’t always the case and unless you have proof that the concept works well as a franchise, then you may want to think twice before you become a franchisee.

Of course, someone must be the first franchisee in a franchise business, but if this is you, make sure that you’re given financial concessions to compensate for the additional risks that you’re taking.

“The franchise agreement is watertight. You’ll be wasting your money hiring a solicitor.”

Before you sign a franchise contract that is legally binding, and which is going to be in place for five to ten years, it’s not just good practise to consult a solicitor, it’s essential.

Investing a few hundred pounds on a specialist franchise solicitor is nothing compared to the size of the franchise investment you’re signing up to. Don’t pay attention to a franchisor telling you that you’re wasting your money, as nothing is negotiable. It’s true that often the terms of the franchise agreement will not be amended, but that’s not the purpose of the review. The point is for you to protect yourself by having a clear understanding your obligations and restrictions as a franchisee. This applies both during the franchise contract and, more importantly, once the agreement has come to an end.

Trust your instinct

If you hear any of the above statements, it’s strongly recommended that you seriously consider walking away from the business opportunity. This can be tough. Particularly if you’ve invested a lot of time and effort into researching the franchise. But if you do decide to go ahead and buy the franchise, be prepared to pay for ignoring your instinct further down the line.

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