Are all franchisors good? Are all franchisors bad? These are questions I hear often. The answer…there are good, bad, great and ugly franchisors. Here are 3 ways to tell if you CAN’T trust a franchisor:
- Expedited Sales Processes – Watch out for franchisors that rapidly push you through their sales process. Great franchisors interview potential franchisees will even turn someone down if they don’t fit the profile of their most successful franchisees. This should feel like an interview for both sides.
- The Oversell – Avoid franchisors that are trying to “sell” their franchises. If they seem pushy, needy, or over “salesy” then this could be a sign of trouble to come. These are often signs of franchisors trying to grow too quickly or franchisors that are in desperate need of cash flow. Either way, buyer beware.
- Short-Term Gain – Don’t sign on the dotted line with franchisors that are only focused on the immediate future. A great franchisor is focused on long-term relationships with their franchisees. This will benefit both parties in a strong royalty stream which allows for stability and success for the entire system.
One of the biggest secrets of franchising, that I didn’t learn until I worked for the management team of a franchisor, is that most franchisors break-even or lose money after a new franchisee signs on.
Franchise sales is typically not a profitable area for franchisors as they need to make an investment in their new franchisees with training, travel. and more. Since many don’t make a strong profit upfront, they need to make sure they are accepting high quality franchisees to ensure long-term success.
Ready for some suggestions for some outstanding franchisors? Let’s chat!
