If franchise business sounds too good to be true, it probably is

When I bought my franchise, it was located in Florida. Little did I know the success ratio of this particular concept in Florida was zero. Today, out of at least seven or eight franchise sales, none remained in business. In every case like this, the story is the same … it's your fault, the franchisee. You either didn't follow the system, didn't make enough sales calls or (this one is my personal favorite) you need to invest or borrow more money to make the business work, expand, buy more locations, etc.

http://www.coloradoan.com
April 6, 2009

If franchise business sounds too good to be true, it probably is
Jim Clark

I've been waiting for a downturn in the economy to address this topic.

When people get laid off, downsized or receive early retirement packages, for many, it's not time to retire. These folks might love where they live (like all of us) and begin looking for small-business opportunities. While many great companies and businesses are born in recessions, I'm here to give you a warning: Beware the franchise salesperson.

I say this from personal experience, as I lost the family inheritance on one of these deals. It sounds so easy: Place a fee with this firm (mine was a floor and window-covering franchise), and they'll train you and give you the tools to start a successful business.

You can have the freedom of working for yourself. You will be able to set your own hours and be in control of your own destiny. Many of these franchise schemes, especially the new ones, don't require a large capital investment in plant or real estate; you can do them from your home. And they'll be there to support you!

Sounds great, doesn't it? Be careful. Before you put down your hard-earned money on one of these, think it through. Is the franchise a proven success in markets like this, or is it still relatively unproven?

I and some of my close associates have bit on concepts like this and then rapidly learned the reality of the business was nothing like the sales pitch. When I bought my franchise, it was located in Florida. Little did I know the success ratio of this particular concept in Florida was zero. Today, out of at least seven or eight franchise sales, none remained in business.

In every case like this, the story is the same … it's your fault, the franchisee. You either didn't follow the system, didn't make enough sales calls or (this one is my personal favorite) you need to invest or borrow more money to make the business work, expand, buy more locations, etc.

Don't get me wrong. - there are a number of great franchises out there. Most of the good ones require a large investment. You're not going to magically make a living by starting a dog-wash business when there are already several in town. In my case, the franchisor was trying to sell me products for more than the market price.

Use your head, be cautious. In this economy there are plenty of folks out there willing to take your money. If it sounds too good to be true, it probably is.

Another thing that you need to consider is how much the total franchise costs are going to be. With a lot of potential franchisees only looking at the initial franchise fee -they often get caught out, finding their new business is going to cost them a lot more than expected.

Jim Clark is executive director of the Fort Collins Convention & Visitors Bureau. Send e-mail to moc.snilloctf|kralcj#moc.snilloctf|kralcj.

http://www.coloradoan.com/apps/pbcs.dll/article?AID=/200904060505/COLUMNISTS50/904060301


Brought to you by WikidFranchise.org

Risks: 1,001 ways to make your life miserable, Bankrupt is bankrupt whether you put $1 or $1 million in at first, Blame the franchisee, Business model had never created adequate investor returns, Death of a franchise by a 1,000 cuts, Fear of poverty, Franchises sold hard directly to those who have just lost their job, Fraud, In business for yourself, not by yourself, Life savings gone, Misrepresentations, Persuasion, Siren song, Sold during time of psychological vulnerability, especially unemployment, Success or failure is within the direct control of the individual franchisee, Success rate, we don’t know, Sunk costs: franchisee's trapped capital keeps them chained to treadmill, The burned hand teaches best, The game is rigged, Who selected these allegedly moron franchisees in the first place?, United States, 20090406 If franchise

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License