Franchise Scams?
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Check out opportunities via the British Franchise Association or whichfranchise.com for some useful advice on deciding upon a suitable opportunity. You will also be able to find details for approved franchise consultants.
Have you an idea on the sector you want to go into? We have a large number gym of franchises using our payment services - a lot of them will also have something like a Domino's Pizza or SubWay or Petrol Station before they start with the gyms but then some go on to have several gyms when they have made it a success.
Have you an idea on the sector you want to go into? We have a large number gym of franchises using our payment services - a lot of them will also have something like a Domino's Pizza or SubWay or Petrol Station before they start with the gyms but then some go on to have several gyms when they have made it a success.
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As said, look for membership of professional bodies
One of the hallmarks of a good/strong franchisor is that they won't sell you the franchisor, they will interview to represent their brand.
If they are too keen for you to sign - run away. Ask to speak with several existing franchisees (or simply approach them). If they are reluctant, run away.
Look at their accounts. If they are reluctant to hand them over, run away
One of the hallmarks of a good/strong franchisor is that they won't sell you the franchisor, they will interview to represent their brand.
If they are too keen for you to sign - run away. Ask to speak with several existing franchisees (or simply approach them). If they are reluctant, run away.
Look at their accounts. If they are reluctant to hand them over, run away
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Ask yourself what the franchise fee would give you over investing that money and starting on your own. If its a well known brand then all well and good. If it isn't then are they going to protect your territory and/or provide leads?
Also look to see what SOPs (standard operating procedures) the franchisor has. A franchise should be 'turnkey', i.e. be able to be ran by someone with no prior experience in that industry. There are too many franchisors that take an existing (and unproven) business model with little or no SOPs and franchise it.
Also bear in mind that the franchising world (and the BFA) is self regulating so you won't hear as many horror stories as you should.
Also look to see what SOPs (standard operating procedures) the franchisor has. A franchise should be 'turnkey', i.e. be able to be ran by someone with no prior experience in that industry. There are too many franchisors that take an existing (and unproven) business model with little or no SOPs and franchise it.
Also bear in mind that the franchising world (and the BFA) is self regulating so you won't hear as many horror stories as you should.
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A good franchisor should let you do all the running and chasing to get the answers, they should also give you their present list of franchisees and contact details without to much trouble. A good franchise will probably be quite expensive, as with most things in life, you generally get what you pay for. If they are established they should have access to national contracts etc etc.
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I would say track record. See if they have a good track record. Of course the big ones are proven, so there's no need to even looking into them. The smaller ones you might need to do some more research on. Yes, all business would seem like some kind of a scam, since no business would say they are failing or having a hard time--that's a sure way of driving people away! But then if you wold research these businesses, then it would be much easier to choose which of them would be good investment.
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The BFA is the biggest scam - a self serving body with no teeth that is only interested advertising revenue from the franchisors.
It is irrelevant if a franchise is a member of a professional body as most are similar to the BFA - self serving!
When looking to buy a franchise treat it as if you are buying a stand alone business.
Get their accounts.
Check out the directors.
Get a copy of the franchise agreement.
Get a copy of the operating manual.
Check to see if the franchise fee is paid to one company but the day-to-day operations are contracted to a separate but connected company.
Speak to franchisees that have made the business work and those that have failed.
Once you get the agreements and operating manual invest a few hundred quid with a solicitor and get them checked out.
Shadow an existing franchisee for a month to get a true picture.
If you get resistance from the franchisor to request for any of the above - walk away.
But headlining your thread 'Franchise Scams?' says to me that you do not have confidence in the franchise system.
It is irrelevant if a franchise is a member of a professional body as most are similar to the BFA - self serving!
When looking to buy a franchise treat it as if you are buying a stand alone business.
Get their accounts.
Check out the directors.
Get a copy of the franchise agreement.
Get a copy of the operating manual.
Check to see if the franchise fee is paid to one company but the day-to-day operations are contracted to a separate but connected company.
Speak to franchisees that have made the business work and those that have failed.
Once you get the agreements and operating manual invest a few hundred quid with a solicitor and get them checked out.
Shadow an existing franchisee for a month to get a true picture.
If you get resistance from the franchisor to request for any of the above - walk away.
But headlining your thread 'Franchise Scams?' says to me that you do not have confidence in the franchise system.
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I would avoid franchising at all costs. You are normally locked in for 5 years and when you sign up given an example of one person who has made lots of money but not told about the other 20 who have given up. Don't do it. I would particularly avoid cleaning franchises the market is saturated.
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That's why you have to do your homework first and foremost. I've been involved in franchising for a good many years and have seen the failures, I've helped a few get back on track but most of those would have failed whatever. A bit of a blanket statement there.
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The majority of people do not know the pitfalls until it is too late or want to pay for professional advice facing other start up costs so that is why I would now say avoid franchising. I did my homework and checks but did not anticipate the franchisors behaviour after signing up.
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I was in a blinds franchise for many years, be very careful when looking into them, look beyond the advertising the franchisor wants you to see. Over 30 franchisees have left this dying franchise and have started up on their own now, I would advise contacting businesses in the same sector particularly looking at their history, if they were previously part of a franchise give them a call.
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I am not a big fan of franchises, too. Still, the big players should be safe. Check their history in/or near your region so you can have a clue what is going on. Do your research well before making a decision.
The market of cleaning services is overloaded, you have to be really unique to boost your business. Think of other back-up options.
The market of cleaning services is overloaded, you have to be really unique to boost your business. Think of other back-up options.
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Our nieghbour has an extremely successful Snap On franchise / Master Franchise and I started out in business buying a car valeting franchise over 25 or so years ago, I sold it to one of my staff 7 years later and he's still going
So based on one person failing at a subway franchise, franchising has had its day. What about the other 1700 Subway successes in the UK alone then. Clearly franchising hasn't had its day
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That was just one example. In addition to Subway, know Prontaprint, Cartridge World and many others who have had to take legal action against the franchisors and come out of the franchise. You have been lucky many have not. Franchising has just become a get rich scheme for the franchise company.
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I would look more at the franchisee than the franchise; many Subways are doing very well.
It's nonsense to suggest that franchising has had its day - look around you; you are literally surrounded by thriving franchise businesses. From a lending POV a QUALITY franchisor (particularly in the food sector) is more than 4 times as likely to succeed than independents.
That said, the onus is on the franchisee to do their research, not just to rush into signing in the hope they will make money
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The franchise model is not the problem. The interpretation, implementation, operation and ongoing associated support, of a business run as a franchise, by both the franchisor and franchisee, is the problem.
Both parties need to clearly understand the model, and, each parties expectations going forward. If this is clearly not agreed before any contracts are signed, and monies exchanged, then there will be problems in the future.
Some franchisors do it right, others do it wrong. But even those that do it right will experience issues within the franchised business model. It is how these issues are addressed and subsequently dealt with which will determine if it is a well run franchise, or not.
Potential franchisees should always undertake in depth due diligence on the franchise operation, the franchisor, and any associated company(s). They should also seek legal advice on any and all associated contracts and/or legal obligations associated with the franchise; it's better to spend circa £500-£800 on legal advice first, and always remember - 'caveat emptor'.
Potential franchisees should also seek 'general business' advice if they have never been in business, or bought a franchise before. This advice could be sought from people who already run a business, beit a successful business or one simply 'ticking over', it is all advice. But it is just as important to listen to people that have failed in business as well, and learn from their mistakes.
Professional business service providers such accountants, solicitors and members of The Chambers of Commerce are also good sources of advice.
But potential franchisees should take with a pinch of salt the advice from the 'guy in pub' who knows a mate of a mate, who has a mate that bought a franchise and got robbed. Or anyone that has never put their own money into a business they have operated but 'reads' all the 'business press' and watches all the 'business associated' TV shows! And they should avoid at all costs any management consultant that has never run their own business, and even worse, bought a management consultancy franchise!
A business mentor is something quite different, and can be an excellent source of advice and ongoing support.
Anyone thinking of buying a franchise should ask questions, then ask more, and then ask a few more, and if you don't like the answers and something 'doesn't quite fit', then walk away.
Both parties need to clearly understand the model, and, each parties expectations going forward. If this is clearly not agreed before any contracts are signed, and monies exchanged, then there will be problems in the future.
Some franchisors do it right, others do it wrong. But even those that do it right will experience issues within the franchised business model. It is how these issues are addressed and subsequently dealt with which will determine if it is a well run franchise, or not.
Potential franchisees should always undertake in depth due diligence on the franchise operation, the franchisor, and any associated company(s). They should also seek legal advice on any and all associated contracts and/or legal obligations associated with the franchise; it's better to spend circa £500-£800 on legal advice first, and always remember - 'caveat emptor'.
Potential franchisees should also seek 'general business' advice if they have never been in business, or bought a franchise before. This advice could be sought from people who already run a business, beit a successful business or one simply 'ticking over', it is all advice. But it is just as important to listen to people that have failed in business as well, and learn from their mistakes.
Professional business service providers such accountants, solicitors and members of The Chambers of Commerce are also good sources of advice.
But potential franchisees should take with a pinch of salt the advice from the 'guy in pub' who knows a mate of a mate, who has a mate that bought a franchise and got robbed. Or anyone that has never put their own money into a business they have operated but 'reads' all the 'business press' and watches all the 'business associated' TV shows! And they should avoid at all costs any management consultant that has never run their own business, and even worse, bought a management consultancy franchise!
A business mentor is something quite different, and can be an excellent source of advice and ongoing support.
Anyone thinking of buying a franchise should ask questions, then ask more, and then ask a few more, and if you don't like the answers and something 'doesn't quite fit', then walk away.
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In my last partnership, I ended up evaluating quite a few franchises. It is surprising how many don't want to provide you with the gross and net profit of current franchises but want you to pay thousands of pounds/hundreds of thousands to find out. They even want to know your personal financial details (even if it is a PLC buying it!) but won't show you theirs. My advice is dig, dig, dig. If they stop answering questions and just want your money, they have something to hide and they are unlikely to support you when you are operational. They should have this kind of information to hand if they sell a lot of successful franchises and support their franchisees properly. Due diligence is definitely needed as the devil is in the detail with these types of arrangements.
Also, yes some businesses swear by franchise model and have build highly lucrative companies using them, so I woudn't discount the model entirely. It has many benefits too.
Also, yes some businesses swear by franchise model and have build highly lucrative companies using them, so I woudn't discount the model entirely. It has many benefits too.
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Thats something I always wonder with these 'oven cleaning' franchises. £7K? Nah I'll buy some gloves and cleaning material from poundland and spend the remaining £6990 on advertising!!!
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Thats something I always wonder with these 'oven cleaning' franchises. £7K? Nah I'll buy some gloves and cleaning material from poundland and spend the remaining £6990 on advertising!!!
Oven cleaning franchises nowadays are ten a penny and even the professional equipment is available on line. Every man and his dog's at it.
Different story 20 years ago when it was an embryonic service. Some good money to made then.
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T
The Cleaning Business Guy
I would avoid cleaning franchises, the market is not saturated, it is still a very easy business to do, however two of the main ones are not what they first appear, a couple of the others model serves the franchisor not the franchisee.
Many are actually operating illegally without knowing or caring.
Many are actually operating illegally without knowing or caring.
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Have met a guy who is on his 4th McDonalds and looking to start his 5th in a year or two.
Works for him.
Saying that about 3 miles from one of his another opened up about 15 years back, shut down after just a couple of years - for whatever reason that one did not work out for the owner.
Have met franchise people who have been burned - not always clueless about business, a lot does depend on other factors. Even with the best location if buying patterns change, if local demand changes....
Have looked into franchises many years ago, luckily did not go through with what initial idea had been. Nothing wrong with idea, location would have become a problem in hindsight.
Works for him.
Saying that about 3 miles from one of his another opened up about 15 years back, shut down after just a couple of years - for whatever reason that one did not work out for the owner.
Have met franchise people who have been burned - not always clueless about business, a lot does depend on other factors. Even with the best location if buying patterns change, if local demand changes....
Have looked into franchises many years ago, luckily did not go through with what initial idea had been. Nothing wrong with idea, location would have become a problem in hindsight.
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We bought a Likisma franchise donkeys years ago (who I hear you ask!), within 12 months we were in the top 5 revenue generators in the Country and had 35 party planners on our books. We decided to take our own brand online and sold the franchise back to the parent company.
Turned out to be a good move, within a few years this 25 million pound turnover franchising business had gone out of business.
The Internet made a mockery of geographical franchises, who cares where your customer lives if they buy online and have a postbox. It turned their business model on its head and they did not react quickly enough.
Turned out to be a good move, within a few years this 25 million pound turnover franchising business had gone out of business.
The Internet made a mockery of geographical franchises, who cares where your customer lives if they buy online and have a postbox. It turned their business model on its head and they did not react quickly enough.
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I am a franchisor. I am upfront with prospective franchisees that operation as one of my franchisees is not get rich but can provide a very valid secondary income for little time input from the franchisee. My franchisees seem happy and 6 years down the line I have had franchisees drop out but that has come about primarily from domestic issues.
However, as a franchisor, I was invited to attend a seminar organized by a bank and one of the largest franchising consultants. I walked out of there feeling like I needed a thorough wash. The way the conversation went was pretty much centered on screwing the franchisee as much as possible:
For evaluating a franchisor I would:
However, as a franchisor, I was invited to attend a seminar organized by a bank and one of the largest franchising consultants. I walked out of there feeling like I needed a thorough wash. The way the conversation went was pretty much centered on screwing the franchisee as much as possible:
- Where the franchise was a success the aim was to force the franchisee to relinquish part of their territory to allow a new franchise to be sold.
- If a franchisee was failing to hurry the demise by tightening up credit terms so the area could be resold.
- Recruiting franchisees who were under capitalised so that when the business failed the franchisor could take possession of the franchise and sell it as a going concern.
For evaluating a franchisor I would:
- Obviously speak to existing franchisees
- Look at what the franchisor's profile is in the geographical area you are interested in. If they are invisible and no one has heard of them or they cannot be found easily online. Steer clear.
- How many resales are there at any one time in proportion to the number of franchisees
- When a resale is happening what price is being asked for the franchise. Frequently you will see franchisees trying to sell out at less than the initial franchise fee.
- Does the franchisor operate it's own operation. This to me is the acid test. If it does not can it really keep in touch with what new challenges are cropping up for franchisees?
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P
Page
Interestingly I knew someone that had nonce and business experince that bought a cleaning franchise from the parent firm - wish I could remember the name for you -it was american sounding
I asked them why on earth they would pay for something like that - and they said it had been well worth it for what they had given them - I pushed on this but they were serious
And they were doing very nicely out of it thanks
You do need to have an area with some money and some nearby staff kicking around
I asked them why on earth they would pay for something like that - and they said it had been well worth it for what they had given them - I pushed on this but they were serious
And they were doing very nicely out of it thanks
You do need to have an area with some money and some nearby staff kicking around
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T
The Byre
You only have to ask one question - "Have I heard of them?"
If the answer is 'Yes!' then it's a viable franchise.
If the answer is 'No!' then stay away! If you haven't heard of them, then neither has anybody else and the whole thing is an exercise in futility.
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Good question. My answer to your question is 'caveat emptor', buyers beware. Most of these franchises are scams designed to make you subservient to them. There is nothing special about them after all, especially those in the leaflet distribution business. There are always hidden costs that you were not aware of. You are never independent in operating the franchise. Hence, you really have to be very careful before buying a franchise. This is from a recent personal experience.
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Reminds me of a relative who was asked by an American tourist if there was a subway nearby. The answer, totally honest and straight faced, was "no, but there is a zebra crossing". Now, there seems to be one in every corner.
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