Monday, September 15, 2008

Beware of Rogue Franchises

New franchises enter the market on a monthly basis and whilst the majority of them have a sound business and legal framework, there will always be a select few whose business practices are somewhat questionable if not illegal. These franchisors may not be “out to get you” as such but they may not have necessarily invested the time or money into setting up their franchise system properly (consulting lawyers, investors etc) to ensure the longevity of the concept. With no structure for growth, support or development, franchises are bound to fail. In other situations, franchisors may knowingly make false claims and promises about earning potential and various other aspects of the franchise. When considering purchasing a franchise, remember to get everything in writing. If the franchisor makes a claim, then ask for the information that it was based on and check whether it is verifiable. Get your lawyer or accountant to verify the claims, don’t just automatically trust the person because of the way they look or sound as this can be deceiving. If in doubt about a franchise, a great way of getting an honest opinion is to get testimonials from the franchisees themselves. Ask for names and contacts of existing franchisees and get their personal opinion of the franchise. If the franchisor refuses for whatever reason then consider that a red flag and run!! Lastly don’t pay any money over to a franchise without reading and completing an agreement that your lawyer has approved.

Purchasing a franchise is an investment in your future so make sure that you take the time and the necessary steps to ensure that your money is well spent. Don’t be rushed into making a decision, ask questions, speak to franchisees and always get everything in ink!