There are generally three reasons why you should never buy into a franchise. What I’m gonna do over the next couple of minutes is take you through my top three reasons never to buy a franchise. (See video below).
The first reason never to buy into a franchise is the restrictions that the franchisor puts in place. You’re talking location, products and fees. So the franchisor is always gonna tell you where your location is. They will give you a set territory. In this territory, you will be limited to who you can advertise to, where you can go and what work you can take on. Generally, these territories have been worked out, using a particular set of metrics that the franchisor’s already looked at. So they know exactly how many businesses, how many people and the sort of revenue you’d expect. However, if you wanna move outside of that, you’re gonna have to buy another territory. They’re also gonna tell you what products you can use. So you’re not gonna be able to go out and buy your own cleaning equipment or pizza trays or whatever franchise you buy into. Generally, you’re gonna have to buy these products directly through the franchisor. What this does mean though, is that there’s more regulation on what you can get and generally, you can get it cheaper, than if you went to buy it off the shelf. They’re also gonna restrict you on your fees. They’re gonna tell you how much you need to pay and when you need to pay. Unfortunately, there’s never really much negotiation in this.
What are the other franchisees like?
The second reason to never buy into a franchise is because of the other people. Now, same as all businesses, you are gonna get those franchisees who don’t quite perform correctly. What this means is they could bring down the reputation of your franchise territory. What you need to do before you buy in is look at the sort of training the franchisees are gonna receive. How good is it, how often is it updated? Do they throw a manual at you and let you crack on with it? Or do they put you through an in-depth training system? It’s not gonna solve all the issues that come up with your other franchisees but it can help you.
The third and final reason never to buy a franchise is that the franchisor doesn’t have to renew. You could be on a five-year lease, put in your blood, sweat and tears but at the end of the day, if the franchisor decides that they don’t wanna renew for you, they can take that off you. They can take it back in-house, they can sell it on, they will have lots of different options.
They’re my three top reasons never to buy into a franchise. Be sure you have thought through buying a franchise and speak to us directly if you want an honest perspective on franchise life.
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