Verbal Promises During Franchise Sales Process Pondered
One of the big no-no’s of franchising is allowing a franchise sales person to make verbal promises or give earnings claims of potential profitability that are not verifiable or in the franchisor’s disclosure documents. This is very serious and more than one franchisor has had their pants sued off for allowing this practice. Indeed, franchisees should be very leery of a franchise salesperson that makes such statements, if they cannot be found in the official disclosure documents.
In fact, the prospective franchise might even wish to consider skipping that franchise business opportunity all together and moving onto the next best franchise they might consider. Not long ago a franchise arbitrator awarded a franchisee 5 times the franchisor’s net worth and 3 times its earnings during its 5-year history. Needless to say this mistake by a franchisor’s sales man cost the company everything, and it will pay off part of the judgment and then file for bankruptcy.
Worst, there is no possible way in this present economy to make up the difference, so the franchisor is history along with the entire franchise chain, all because the sales guy made a verbal like promise, this one on the last line at the bottom of an email during the sales process.
The extremely business savvy franchise buyers that invested in the franchise business opportunity may or may not have known at the time that this two line sentence at the bottom of the email would later sink the franchisor and make them a good chunk of change for their original investment. So, this ought to be a lesson to all franchisors and franchisees, beware of verbal or email promises that cannot be substantiated during the sales process. Think on this.
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