Protect yourself! Every year more people lose money to bad franchises. Most could have been prevented by being aware of the deceptions that shady companies use. There are great franchises out there, but it can be difficult to tell them apart for an inexperienced buyer. We’ll cover the main deceptions to watch for today on Franchise City
One of the biggest lies that has been told for years is that franchises succeed at a rate of 95%. We did a video on this back in 2017 warning people of the scheme. Basically, the department of commerce did a small, *optional “survey” IN THE 1980’S where they sent a questionnaire to a small sampling of franchise owners asking if they were happy. If you were a bankrupt owner would filing out a survey be top of your list? Anyway as legend has it 95% of those who responded were fine, and based on this silly survey over the last 40 years franchise sellers, franchise companies, brokers, agents have twisted this into the iron-clad proof that franchising succeeds at a 95% rate. It doesn’t, in fact a few really bad franchises fail at almost a 100% rate. If the company you are speaking with tells you the “statistic” as it’s referred to – show them the letter that the International Franchise Association sent YEARS ago telling franchise sellers to stop using it because its a lie.
“You’ll make 6 figures easily” or any other type of earnings claim relating to how much money you could make. This is important, every franchise is prohibited by law from making any earnings claim other than what is found in item 19 of their franchise disclosure document. Every franchise has to provide you, the buyer with the FDD before you buy. Look at the item 19. If there are no financials included, and the franchise is making any reference to how much money you could potentially earn, they are literally breaking the law. If they are willing to lie to make a sale, is this a company you want to work with? That includes even vague suggestions like “You could afford a new Mercedes every year” or “some of our franchise owners are making millions” If there is no item 19 data, they cant say anything. If there is item 19, you can only be advised of exactly what is included in the item 19.
Owning a franchise is “Easy” . If the franchise seller is hard selling you on how easy the franchise is to run – run the other way. Now some franchises, which are semi-passive, like hair salons, do take less time to operate, yes, but there are always challenges and obstacles in every single business. You need to determine what those challenges are, speak candidly with existing owners about these challenges, and determine if you are comfortable overcoming them. This also requires you to completely understand the operational model and day to day requirements. Here at Franchise City we have a free skills assessment for our clients that helps determine what franchise environments are best suited for their skills and business goals. Ill post a link to our psychometric assessment in the description box.
You dont need any experience. If you have no business experience, no life experience, grade 1 education, show up in flip-flops to your franchise interview, and they tell you what a great candidate you are, run the other way. There is a caveat to this, in most cases you dont need the *actual service* experience as you are hiring those roles, so painting franchise doesn’t need painter owners, cleaning franchise doesnt need cleaner owners, and McDonalds doesn’t need you to be a cook, but you should bring either business experience, management experience, or some sort of life experience that will help you build a business. The better the franchise, the more selective they will be in bringing on new franchisees. Again, depending on your skills, certain franchises will be better than others and the key is to joining the best franchise system that your skills are a good match for.
“We are ranked #1 on this or that top list”. This isnt really a lie per se, however in most cases these rankings and industry awards are at best highly inaccurate, and at worst just paid promotion. We did a video critiquing one of the biggest lists not long ago and how really bad franchises often get ranked highly in these lists.
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DO 95% OF FRANCHISES SUCCEED? https://youtu.be/t3hu2G90jl0
CAN YOU TRUST INDUSTRY AWARDS AND TOPLISTS?
SKILLS ASSESSMENT https://www.franchise.city/ZORAKLE