Join our franchise-industry-wide discussion: What should every prospective franchise owner understand about the franchise relationship that many don’t? On this post, America’s top franchise attorneys share their thoughts. See related pages for input we’ve received from others. Share a comment below or email us a UnhappyFranchisee[at]gmail.com.
(UnhappyFranchisee.Com) America’s top franchisee attorneys are sharing their invaluable experience, opinions and insights by answering the question: What should every prospective franchise owner and franchisee understand – but that many don’t?
Below, we have posted responses that we have received thus far and will continue adding to them as they are received… so check back often.
We want to hear your opinion. Please post a comment below or email us at UnhappyFranchisee[at]Gmail.com.
You don’t need to give your name or the franchise organization you are (or were) part of, but please use your real email address (its not visible) and state your role and years in the industry.
We will compile all responses and share them by type of commenter (franchisees, franchisors, attorneys, etc.)
COMMENTS COMING SOON:
I wish more franchisees understood that using franchising to start a business limits their exit options.
If the business succeeds and the franchisee wants to sell it, they need to understand that it can be challenging to the best price because
1) the franchisor has to approve it and
2) the franchisor typically owns the goodwill, customer lists and things that the franchisee developed.
If the business fails (and at least half of all small businesses do) the franchisee can’t just close up shop and move on because most franchisors require a personal guarantee and many franchisors will demand lost future royalties.
I’ve had clients who lost their entire investment in a franchise and close their franchise but they still needed to liquidate personal assets to pay off the franchisor.
Franchisee Attorneys: WHAT SHOULD EVERY FRANCHISEE KNOW (But Many Don’t)? How are franchise misconceptions detrimental to franchise success? SHARE A COMMENT BELOW.
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Cover image borrowed, revised and adapted from “That is Success” by Jessica Lyonford is licensed under CC BY-NC 4.0
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You will be hard pressed to find a lawyer that truly understands the motivation(s) of a franchisor. That is to build his brand and extract as much cash from the franchisees as humanly possible through the supplies and materials one uses, fees, fees and more fees. If you buy into the concept and open multiple locations and invest a lot of capital to do it, you will become an indentured servant. The franchisor is the only one that reaps the rewards of the equity all franchisees have built in each location.