Beware when buying a franchise! Some franchisors seem to act in like highway robbers. They mistreat their franchisees and want to take the largest slice of profits. So how can you ensure that you do not end up buying the wrong franchise business?

A franchise business should be like a partnership where both parties gain. But some operators seem to treat their franchisees as cash cows and continuously milk them for all they are worth. They promise everything at the start but fail to deliver.

The first step in determining the franchise is by examining the franchise agreement very carefully. A decent franchise lawyer can help here. If it is too much in the favour of the franchisor then stay way from this opportunity!

Bear in mind that often the franchiser can agree a letter of variation to the standard franchise agreement. If after reading the agreement there are only a few points that disturb you now is the time to bring to the table. Make sure that you negotiate hard to remove these clauses or agree a more favourable compromise.

The second check you should do is look at how many lawsuits the franchisor has fought with existing or previous franchisees. This will give you a fair idea of how many disputes have happened or are currently active.

The best people to contact are existing franchises. They are most likely to know about previous and existing clashes. Most franchisees have minor grievances with their franchisor but if they seem happy and relaxed in their business then this is a good sign.

Ask the franchisor how many franchisees have failed recently. If they hesitate to answer or do not know then this should set alarm bells ringing. If they seem wary of answering any of your questions then walk away.

Larger more established brands tend to demand the highest franchise fees and ongoing licence fees. They tend to negotiate less and demand more from their franchisees. They are usually more set in their ways and less likely to allow you to run the business your way.

With smaller less established brands, the buyer often has more room for negotiation and can demand greater protection right at the outset. They can help to shape the future innovations and improvements to the franchise business.

Many people make the mistake of assuming that running and managing a franchise business is easier than being in paid employment. This is a big mistake to make as many existing business owners have found out.

Running a franchise (or any other business) often eats into all of your free time and demands discipline, motivation and a desire for hard work. The rewards can be much greater for those who are willing to put the effort in at the start.

Buying into a (franchise) business is a costly (but often safer) way to get started in business. Not only do you have to pay a large sum of money at the start but you have ongoing royalty payments for the lifespan of the business. If you make a mistake by choosing the wrong franchisor to go into partnership with, you could end up regretting it for the rest of your life.
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Naz

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