Posts Tagged ‘franchise agreement’

You have prepared everything you need to do to buy your dream franchise: Location, check. Market research, check. Financing, check. The due diligence, check, check and check. Now it’s time to move a step forward: Let your franchisor know that you are ready for reviewing and signing a franchise agreement.

Franchise agreement is where things are put at stake – Misinterpret it, and you’ll face the consequences for at least 5 to 10 years.

Franchise agreement can be 50 pages long, even more, and can be overwhelming to read word-by-word, especially if you are not familiar with the jargons and clauses normally used in commercial …

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I heard too many stories of franchisees who “feel” that they were being cheated by their franchises, resulting in an under-performing, if not dying, franchise units.

The general rule of thumb in any business agreement is: read every word, and don’t forget the fine print.

Not to discredit franchisors, but some seem to have a subtle intention to “trick” franchisees into signing for franchise agreement. Alas, we can’t ask for franchisors to guarantee anything – they can’t, and even if they do, they are considered as both unethical and illegal.

The truth is, you and I can’t put all the blame to the franchisors …

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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…

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We are always ‘reminded’ by various publications on franchising, online and off line, that franchising is expensive, and bailing out from the franchise agreement is costly for the franchisee.

Unfortunately, not many realise that not only franchisees, franchisors are also financially affected by the franchisee-franchisor partnership break-up – And that is just the tip of the iceberg.

Break-up costs to the franchisee

It is obvious that the franchisee will be severely hit by huge monetary loss due to ‘the-usuals’ in the franchise agreement – The non-competing agreement and the right for the franchisor to terminate the franchise agreement almost at will.

The non-competing agreement …

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There are always pros and cons in franchising. The pros always believe that strong brand name and proven systems are the main benefits of franchising. The cons always believe that franchising is expensive and unfair (benefit franchisors more than their franchisees.)

I am always pro-franchising. However, I can not deny that there are some legitimate reasons why you should not buy a franchise, if you do not have the proper mindset and knowledge for franchising.

10 reasons not to buy a franchise

According to Nolo.com, there are 10 good reasons not to buy a franchise:

1. Questionable profitability
   Most franchise owners don’t show potential franchisee

…

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You are ready with the resources on your side. You revved-up and ready to invest your money in a good franchise. Your next step is to find which franchise to partner with and to invest in, and after that you are ready to start making money.

We are ready to go, right? Well, not quite.

Let us go back a step or two in your plan. There is one more thing you need to heed before buying a franchise unit. Unlike other type of businesses, franchising, in my own experience, requires more commitment on your side. That being said, you need to seriously think about …

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