Franchisee - Franchiser Relationship

Posted by admin on February 2, 2008 under Articles | Be the First to Comment

Many franchisees begin looking for a franchise with the attitude and ambition to startup your own business. Are you really starting your own business though?

No, you really aren’t. You are beginning a relationship with a franchiser where you get to use and extend the business model that they own and control. In reality, it really comes closer to resembling the relationship between a branch manager and corporate. Meaning that many major decisions will be forced on you and may or may not involve any input from you at all. Your local market can be helped or hurt by those decisions, however corporate the franchisor is looking nationwide and has more care about the brand as a whole rather than your own local profits. The biggest difference is that you are paying to get that job.

Do you, as the person wanting to start your own business want that relationship? The answer to this could very well be… yes! Many people desire guidance, desire major decisions to be handled by someone else, want structure and more dictated to them.

A true entrepreneur though may find this system way too controlling. If you have the ambition to start your own business, but maybe you lack the idea or you think a franchise will keep you from failing… ( If you think a franchise will keep you from failing read this : http://www.franchisespeak.com/top-ten-reasons-for-franchising ) … or maybe you even think that you really are starting your own business by franchising.

Well, read that UFOC, and examine it well. You’ll see that there is probably wording that also allows the franchiser to terminate your agreement for very vague reasonings. Showing that you can be fired as well. Does that sound like your idea of owning your own business? When you truly own your own business the only people that could fire you are the customers… by not showing up.

Also beware: the franchise broker you talk to may even play into those feelings and the emotion that goes into a major purchase like that. There was excellent article on fool.com today regarding the brains behind investing. Check it out here.

The summary though is that the “anticipation” of making money, is actually more rewarding than the “act” of making money. Meaning that when you’re in the market to purchase a franchise, you’re high on emotion and the ambition to make big money. Please do yourself a big favor and examine your personality and emotions to see if you’re even the kind of person who can handle someone else controlling what you thought was “your business“.

Watch out for Nepotism and Family Run Franchisors

Posted by admin on January 16, 2008 under Articles | Be the First to Comment

Nepotism is one of the worst things that can happen to a business. Particularly in a franchise system, because there is no accountability on the part of the franchisor once you’ve paid your franchise fee. They now have full control over who the vendors and suppliers are, and closest friend or relative can get the nod over the most qualified.

If you run your own business and use unqualified help, its your own fault, and you succeed or fail because of your decisions. In a franchise system you lose that control and failure can be the fault of bad decisions out of your control. After signing that UFOC you can be forced to buy from over priced, under qualified companies formed just to supply a particular franchise. The kickbacks and inflated pricing amounts to hidden fees that weren’t mentioned in the UFOC going directly to friends and family of the franchisor. If that hurts your local operation and cuts into your profits, you will have absolutely no recourse.

This is a gross abuse of power that is hard to pick out in the UFOC. It is one of those questions you might never think to ask, but when you find out about it, it’s way to late to do anything. The lack of accountability for a franchisor is why some franchises are doomed to fail eventually. If there was some type of system where you could force a franchisor to drop a bad vendor. it would help immensly. No known franchisor will give up that power because of the lack of foresight that democractic system actually works and the utter ignorance that they think they know what is best for everyone and everything. In the end they’ll do what is best for them, and you’ll be left writing the check for it.

It goes back to, research… research… research. Then wait, take a break and research again. You cannot know enough about someone (and apparently their family either) when you’re going to give control of financial decisions over to them.