7 Signs of a Bad Franchisor
Investing in a franchise is a huge life changing decision. When going into this huge of an investment you should take every precaution. Here are some warning signs.
If the sales person is pushing you to sign, back off. If you feel a ton of pressure to sign when you’re not ready then don’t do it. A good franchisor makes sure the fit is right first and doesn’t force someone into it.
If the salesperson’s information is different from what the UFOC says, get what they say in writing. For example, if the franchise agreement states you’re going have to pay $1,000 a month for advertising but the salesperson is telling you $500, get it in writing. They are only responsible for what is in writing.
If the franchisor isn’t following through, this is a bad sign. Some franchisors put franchisees through little tests to see how they’ll respond. The same goes for franchisors. If they do not get back to you in a timely manner and doesn’t keep their word during the application process, how is it going to be when you are legally binded to them?
A history of litigation is something to look out for. Litigation isn’t always a bad thing in a franchise system. A good franchisor will use litigation to protect the brand when needed. Also, some franchisees are just looking at the shortcomings of the franchisor and take them to court. Excessive litigation can be bad, you just need to dig a little deeper to understand what is going on.
You will want to check out the amount of training and support provided. Will you feel prepared to carry out the duties of the franchise with the amount of training and support provided? If you are not confident you will learn everything you need to know, dig deeper. Ask franchisees if they felt it was an adequate amount. The support a long the way is important as well. Do you feel like you will have a good support system? If these things are weak you may want to rethink whether or not you want to be in that franchise.
Another thing you will want to check out is if the franchisor is financially stable. If you are not experienced in reviewing financial statements, I would get a professional to help you look over the UFOC to understand their financial stance. If the company does not have enough money to provide you with the support you need, I would rethink if you want to be apart of that franchise. In the end you will probably be the loser of the deal.
One or two of these warnings signs may not be too big of a deal if the franchisor has an explanation, however, if there are three or more I would definitely rethink where you invest your money.
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