What are the Most Challenging Franchising Problems?

solutions franchising problems

For both companies selling franchises and the people buying them, franchising has proven to be an excellent business model for a lot of people. Quite a few franchisees have become millionaires since opening their franchises, while others fail miserably, leaving franchisees broke and in bankruptcy. Franchising, as it is applied in the United States, has several challenging problems, both in the sale and the operation of the franchise. To learn more about the biggest franchising problems, please continue reading, then contact one of our experienced franchise acquisition attorneys today.

How terrible is the sale process?

Franchises in their early stages will sell to almost anyone. Selling unproven businesses to inexperienced operators is bound to end in disaster. Franchisees need to push back against the beguiling sales talk and treat franchises like the investment they are, not as some get-rich-quick scheme. With the right mindset, you better prepare your franchise for success.

Do franchise rules have any power?

The federal government requires that all franchises compile a massive prospectus on their business, called a franchise disclosure document. A handful of states have their own rules for these documents and will take steps to enforce them. However, most states do not have specific franchise regulations. Furthermore, the federal government rarely makes the effort to enforce its own rules. Prospective franchisees need to do their homework and research the franchisor they plan to work with. Remember, a franchise is an investment, so you should know where you are putting your money.

Do rules favor franchisors?

With few rules, the franchisor gets a lot of leeway through the franchise agreement. Over the years, franchisors have learned to tilt their franchise agreements in their favor, such as non-refundable franchise fees. If prospective franchisees do not find locations, they will lose the franchise and the fee. Before you invest any money, you and a legal professional should pore over the franchise agreement and determine if a) you can find a location within the specified period of time and b) if franchising with this company is a wise use of your money. Once you sign the franchise agreement, it is legally binding and you will not be able to alter or negotiate the terms.

Do franchisors take a lot of money from franchisees?

Too many franchisors use their franchisees as a continuous source of income without ever considering the long-term consequences their actions have on the system. Short-term greediness can drive scores of franchisees out of business due to exploitative practices, like abuse of the rebate system. Again, doing a little research now can prevent a huge headache later on.

If you have faced or expect to face any of these challenges, you should strongly consider reaching out to one of our skilled franchise law attorneys immediately.

Contact Our Experienced Franchise Lawyer Today

If you have any franchising issues, contact Fortman Spann, LLC online today to schedule your initial consultation.

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