Having spent a huge amount of time recently looking into Franchises, one question that always intrigues me is who records franchise failure rates?

One of the common myths about franchises is that they are a ‘proven business model’ and therefore have statistically higher succes rates.

After doing considerable research I would tend to disagree. There are many reasons why this is a myth and some of the main ones are:

• Most franchise businesses operate under a seperate legal entity i.e corporation, sole trader and trade as the franchise. If there is a failure then it is the legal entity that closes down. This just gets recorded, if at all, as a standard business failure.

• Unsuccesful franchises are generally financially tied into the contract for the term of the agreement i.e 5 years. If they wish to leave prior to that then they can be liable for the full fees they would have paid over the franchise terms. Many franchisees are happy to sign non disclosure agreements with the Franchise to just be released from their ongoing commitments and walk away.

•  Mnay franchisees just get to the stage where they ‘close the doors’ and walk away and want no more part of it.

What I really want to know is what statistical evidence is there to prove that franchises have a higher success rate?  In an industry that is strongly focused on threatening lawsuits for saying anything negative about a franchise who would ever get to know the truth?

www.businessfranchiseinformation.com

If you read about or study any highly succcesful businesss then probably the single most important element for success that comes up time and time again is passion. Succesful businesses have a burning passion to make something work and to create something special.

One of the big things I think makes anyone consider a franchise is the promise of a better future. Franchising is seen as a holy grail, a better life and a way to control what, how, and when you do things. It is a shortcut to the capitalist dream of owning your own business and being  a successful business man.

I hate to say it but it doesn’t  always work like that.

If you don’t enjoy late nights, paperwork and socialising with strange people in your job then why is it going to be any different in your own business? Ok, You can argue that the money is going your way, but is that really enough to make you happy, eager and excited to get to the office/shop/desk/van in the morning?

What really counts is……..PASSION.

I have read hundreds of books on business, sales and biographies of highly successful people and the one thing that is a common thread between all of them is passion. They may have different points of view on marketing, competition, business ethics, but all of them have passion.

What are you passionate about?                            Do you know?

Lets take e a step back here. I can already here you saying -

 ”Well what’s this got to do with choosing a franchise?”

Well - it’s nearly everything!!

I have spoken to many people looking for Franchises and one minute they are considering a fast food business, the next a lawn cutting service, the next an oven cleaning business and everything in between. The product or service being supplied is not really that important to some people.

If you buy a Franchise then you are investing a considerable amount of money. If all you can see at the end of the tunnel is a monetary return then your chances of success may not be as high as you think. If you have no passion for what you are offering then it will shine through in every element of your business. Not only that, when times get tough and your only motivator is the cash at the end of the tunnel than sometimes that just won’t cut it.

If you can’t find something you have or can get passionate about — Save you money!!

www.businessfranchiseinformation.com

I have been reading a lot of different articles recently in preparation for a book on Franchising that I am writing —-  www.businessfranchiseinformation.com/course . What strikes me on nearly every single one is that early on the term franchising is described as something like ‘ a way of buying into a proven, tried and tested business’.

Sometimes this is true but in many cases this just perpetuates an industry myth.

Did you realise that it is possible to get a franchise up and running without ever really proving any success of the model?

Even under the guidance of many of the stringent Franchise regulatory bodies it is possible to launch a Franchise and be accredited after a limited ‘pilot test’. That pilot test can be as little as a few short months. There are very few checks on the level of success of the pilot or to assess if the ’system’ is replicable. It doesn’t even need to be profitable.

If you are considering a Franchise then don’t just assume that the model works. Question everything!!

www.businessfranchiseinformation.com

Thinking of buying a franchise? Have you really sat down and worked out what it is you actually want. Some honest time in reflection can save you some serious problems later on. Sit down, grab a cup of coffee and work through the following questions — honestly!!
Personal

? Do you understand franchising and what is concerned?

? Are you prepared to work long hours, possibly under stress to make your business work?

? Are you choosing a franchise to spend more time with the family and kids? If so what would your life be like if you ended up working longer hours than you did before?

? Does the idea of the business (the product/service) excite you enough to get you out of bed in the darkest moments?

? Do you think you can work under the rules and procedures of the Franchisor and may not have any chance to change/influence them?

? Do you mix well with people? Do you enjoy it?

? Can you accept the discipline of a franchise system?

? What do I want to achieve in Life?

? Can the Franchise honestly provide this??

Business

? Do you have the relevant skills necessary to run a business? If not does the franchisor offer them?

? If you don’t have the skills, what makes you think the franchisor can teach you them in a week or two’s worth of training?

Financial

? Do you have the money to invest in the Franchise?

? If not, where are you going to get it?

? If borrowing money is it secured or unsecured?

? Have you determined your ‘survival income’ - that is the level of money you will need to live on each month?. If you have, just how many months can you survive before you have to take money from the business?

? Can you afford to lose the money you invest?

 Brian Tracy once said that someone who is prepared to lose a little usually ends up losing a lot!
 

 Ok, here we go. If you are even contemplating buying a franchise then you absolutely must know this next piece of information.

It could literally save you $50,000

So I had told the franchise that I wanted to leave as I was broke and it just was not working.  The franchise responded by telling me I owed them $50,000 and would fight me all the way to get it.

I thought my world could not get any worse before and now it just shattered. How could that be? I hadn’t earnt any money from the Franchise in 6 months so how did I owe them money.

They took great delight in telling me that I had signed a legally binding contract that meant I owed them that money. When I looked into it further, I realised they were right.

 You see, this Is how it works -

I had signed a five year Franhise Agreement that had a % of turnover paid to the Franchise for Management Fees and Marketing. After 1 Year there was a minimum payment set at $500 per month.

Can you see where this is going?

By their logic, and by the Franchise Agreement, if I left I was still liable to pay them 4 Years worth of $500 Dollars per month or $48,000.

Did I pay them?   Well that will be the subject of a later Blog Post..

You need to know this Information…..