14Jan

Franchisees Biggest Complaints with Their Franchisers

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It is inevitable that starting and successfully operating any small business today is always going to generate an ever evolving list of complaints and disappointments for most owners. Entrepreneurs that choose franchising as the means to open a small business will have many of the same complaints as independent owners do along with a few unique ones because they are ultimately bound to a long term relationship with their franchiser. Here are a few of the most common complaints I hear from franchise owners regarding their relationship and experiences with their franchiser.
My Franchiser Is My Competitor:
This is one the most common, and in my opinion most valid complaints I hear from some franchise owners. It is the nature of small business that you are going to have competitors, but when your franchiser is creating the competition and diluting your market share by opening multiple locations uncomfortably close to yours that’s a tough pill to swallow. Before signing any franchise agreement make sure you thoroughly investigate and understand the rights and restrictions for your specific franchise territory. This would include speaking to other current franchisees in your target territory and asking them to share their experiences with competition from other franchisees.
Those Monthly Royalty Fees:
I have found that many new franchisees are so excited about getting there location open that they often defer any concerns about paying monthly royalty fees. However, once the initial excitement wears off, and they are involved full time in the hard work it takes to become successful those royalty fees become a much more tangible reality and commitment. The biggest complaint I hear from some franchisees regarding paying royalty fees is that they feel the franchiser does very little or nothing in return for them. Whether that’s true are not (I have no doubt that it is in some cases) unfortunately at the end of the day it is ultimately the responsibility of the franchisee to adhere to the terms of the franchise agreement they signed. Before signing any franchise agreement make sure during the disclosure process you speak to as many current franchisees possible and ask them if they feel they are getting real value from the royalty fees they pay.
Too Many Restrictions:
I often hear complaints from some franchise owners regarding the number of operating restrictions placed on them by their franchiser. Many complain that the franchiser exerts onerous control on how the business can be operated and are often frustrated that they are unable to react independently to local market realities and demands. I am sure a lot of these complaints are valid, but I guess I’m a little less sympathetic to these types of complaints for the simple fact that the franchisee chose to buy into a franchise system with known controls and restrictions. Many of which have been proven to given the franchisee a greater chance of success- which is the essence of the franchising. That being said, I would advise before buying any franchise business you honestly ask yourself if you have the right personality to follow a pre-determined franchise business system and all its inherent operating rules and restrictions.
Oversold Potential:
As a Business Broker I have heard a number of new and established franchise owners complain that they felt they were oversold on the potential earning power of their franchise business. This is a tough complaint to validate because it is generally a known fact that most franchisers do not disclose their earnings and are generally very careful about discussing earnings potential for a typical franchise location. That being said in my experience sometimes the franchiser (or their sales people) along with existing franchisees can sometimes paint an overly optimistic picture about how soon and well a typical franchise location will perform. Your best bet to mitigate this potential disappointment is to speak candidly with current and former franchise owners and ask them if your expectations are overly ambitious.
Summary: Please keep in mind that all prospective business buyers should thoroughly investigate any franchise or business, obtain all appropriate disclosure documents available, and seek expert consultation prior to making any investment decisions.
About the Author:
Ray Haiber has 10 years experience as a professional Arizona Business Broker and franchise sales consultant. You can view and research many different types of franchises for sale across the USA here.