Monday, May 14, 2007

Franchising - some things to consider

Thoughts for franchisees.

Reading Blue MauMau on Saturday evening focused some ideas I have had on franchisees. Who does not dream of easy riches with a franchise? If not riches, then a comfortable living?

Franchisees need to remember they are going into a business relationship. The franchise circular (the UFOC) are designed to protect consumers from outright fraud but the UFOC can avoid fraud and still trap the unsophisticated franchisee. Some points came out sharply when reading about Quiznos (see my post here on Quiznos). Start with Reflections on the Franchise Relationship on Blue MauMau and read through the comments. Then consider this passage from Franchisee Associations Are Not Social Clubs:

Franchising is not about democracy. Franchising is not about fairness. Here’s the deal – the deal is very one sided – the risks are high – we tell you that it’s a cinch if you believe and want to succeed – that’s our cheerleaders’ favorite cheer. Well, my friends, if you believe that cheerleading is reality, and you sign the contract and then are unable or unwilling to play the game that is going on out on the playing field (the real game), no one is going to change the rules to make tough people play nice. THAT’S WHY YOU HAVE TO BUCK UP AND LEARN TO PLAY THE REAL GAME OF DEFENDING YOUR SIDE OF THE FIELD.
Sometimes litigation remains the only means for the franchisee to defend their side of the field. United Parcel Service is being sued by its franchisee, the gist of their complaint is found in this news release from May 2:
According to the complaint filed by the law firm of Hagens Berman Sobol
Shapiro, franchise owners measure packages in the store, charge the
customer and ship the package to UPS where the company re-measures the
package using what the suit claims is inaccurate techniques and
back-charges the franchisee for the difference.
(Thanks to Wiggins and Dana's Franchise Law Blog for the post tipping me off to this. That post links to the Franchise Law Blog's other posts on UPS). Now where in the UFOC might have this information have been disclosed? I suspect that it was not.

Then read the post, Franchisee Failure, on Blue MauMau. You might also want to check out what else I have written on franchising here.

If you still are interested in franchising, start researching the company. Franchisees need no longer start with the UFOC. I suggest if a franchisee sees a UFOC without knowing any detail about the franchise system than the name of the company, the franchisee is already in trouble. I suggest looking at the stores, and seeing them in operation. See how the public reacts to the product. Talk to the franchisee. Check out the franchisor on the Internet - use Google or Yahoo and their respective news search engines.

Then check out the UFOC. While not wanting to pick on Quiznos, I did catch this paragraph on Blue MauMau:

And starting from electronic page 342 to 362 is a list of Quiznos owners and Area Developers who left the system. It contains their contact information. A prospective franchise owner will want to speak with a number of these Quiznos ex-franchisees.
My reaction was - no kidding, ex-franchisees should always be checked out. Especially those ex-franchisees who are being sued by or are suing the franchisor. Then I would suggest going back over the information from the beginning before going any further. After all that, have an accountant check the numbers and an attorney check the operation. Then think hard for this will be a major commitment in your life.