Are people waiving money at you? Love your business and want one of their own? Ready to pay a nice big piece of change up front as an initial franchise fee? And keep on paying in royalties?
Pretty hard to resist. You’ve created a successful business that others want, and they want to pay you for the privilege.
Why say no? Should you say no? There could be numerous reasons depending on the circumstances. However, there are certain considerations that are universal to all types and kinds of franchise opportunities. For one thing, getting out of a franchise relationship is harder and often more painful both emotionally and financially than a divorce. For another, if you don’t do it right, the legal consequences can be extreme.
Here’s typical example (composite of many events and franchises) of good intentions gone wrong:
Taylor and Mark started a little bakery and coffee shop in Austin Texas ( a suburb of Dallas 🙂 with a unique retro beatnik theme, including open mike poetry readings and ad lib performances in the evening. In the present “staycation” economy with people looking for fun inexpensive entertainment, it rapidly became a multi-generational gathering place to see, be seen and show off. Taylor came up the name “ The Happening, a bakery, bistro and entertainment shop.” She registered it as a trade name and even filed for a state trademark. In six months, a second Happening shop opened in Plano, Texas and a third in Frisco, Texas.
Within 18 months of opening their first shop, 5 different groups approached them asking to opening a shop in another location. One group offered $50,000 for the exclusive right to develop shops in Fort Worth! 45 days later, Taylor and Mark sold their first Happening shop franchise. In a year, they had fifty in 15 states with and Taylor and Mark were trying to train and help 15 different shops open in a single month. The stress was great, support staff limited and inexperienced, and operating capital stretched beyond the max, but the newbie franchisors were determined to make every franchisee a success story.
Unfortunately, the ball got dropped a few times as far as promises to work with the new franchisees’ landlords on plans and finish out. Since all orders for equipment went through the franchisor, it was a big problem when deliveries were delayed and defective equipment. Bottom line: only 7 opened on time and the rest dragged on with various problems. After that rocky start, relationships were never good, and 5 closed within the first 12 months. 2/3rds of those in operation were failing or barely breaking even………. People who lose money, sue, and so the story inevitably and typically plays out.
If you franchise, think it through, prepare, be patient, do it right.
