Watch out for Nepotism and Family Run Franchisors

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.