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Before You Sign a Franchise Agreement: Learn What Were Complained by Franchisees

Franchise opportunity analysis

Franchise opportunity analysis

Before you sign any agreements with a franchisor, you should know the potential risks entering franchising. You should not expect your franchisor would want to reveal anything more than what is inside the UFOC (the franchise offering.)

You will almost certain to hear good words and upsides of the franchise opportunities you are interested in. However, I believe that things that are not revealed in any information regarding a certain franchise opportunity are the best guide before you do anything involving money and investment.

One of the best sources to know what you could potentially face as a franchisee is franchisees’ complaints.

Franchisees’ complaints

Have you ever wondered what were complained by franchisees?

I just read an article written by Manny Drukier, who has been in business for the past 60 years (now that’s what I call experience and maturity!) about buying a business and franchising.

From the article, I found some of the common complaints made by franchisees to be particularly interesting. Here is the list of franchisee complaints, in order of gravity:

  1. Inaccurate pro forma financial statements.
  2. Contract length too short to recover investment.
  3. Poorly defined franchise agreement.
  4. Lack of startup assistance.
  5. Inadequate marketing or operations manuals.
  6. Insufficient training.
  7. Poor communication.
  8. Poor dispute resolution.
  9. Creative accounting.
  10. Broken pre-contractual promises.
  11. Uncompetitive pricing of supplies.
  12. Breach of territory.
  13. Unnecessary renovations at unreasonable cost.
  14. Unreasonable payments to franchiser.
  15. Ineffective advertising.
  16. Impediments to selling the business.

From the list, some complaints are obviously evadable, if just franchisees knew more about franchising and take a long look into the agreement before they sign it.

#2 Contract length too short to recover investment – It’s every franchisee candidate’s due diligence to analyse the profitability of the franchise opportunity he/she is interested in. Blaming the contract length because it is too short to recover investment is ridiculous.

#3 Poorly defined franchise agreement should not happen, and I don’t understand why the franchisees complain about this (sorry, franchisees – I’m with the franchisors on this one.) I mean, franchisees are the one who sign the agreement – If they say that it is poorly defined, why did they sign it? (Of course, the case would be that the franchisee signs the agreement without proper analysis and then figure it out after they realised they were not being careful with their money.)

Again, it is our due diligence to check and analyse everything before proceeding with the franchise agreement signing. We simply can’t point fingers to the franchisors for being ‘unfair’ and ‘complacent.’

Ivan Widjaya
Franchisees’ complaints
Image by wax115.

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