In a recent article “Do Franchise Owners Really Own a Business?” Keith Miller addresses franchise ownership head-on:
“Do franchise owners really own a business? That is a very important question. The franchise industry talks about franchise owners as independent business people, working for yourself, but not by yourself. But, what does ownership mean?”
Miller goes on to answer:
“Usually, if you own something, you have value, or equity, that you can sell. Historically, most franchise agreements contained a “first right of refusal” clause. In most cases, if a franchise owner found a buyer for their franchise, they would first have to offer that to the franchisor under the same terms and conditions. Unfortunately, for franchise owners, that has taken on a whole new life of its own, with new clauses that eliminate most, if not all, of the equity they have worked to gain in the franchise.”
Miller’s insightful observations highlight how franchisor opportunism now blatantly expresses itself directly and explicitly in many current franchise agreements. So long as franchisees and potential franchisees continue to misinterpret (sometimes intentionally) this counterintuitive reality, they will perpetuate the very myth that systematically destroys franchisees on an ongoing basis.
It can’t be emphasized enough that franchisees nowadays buy little more than a limited right to receive a token revenue stream for a restricted period of time. These minimal revenue streams frequently are insufficient to allow franchisees to pay all of the aggregate costs associated with their franchises. Under these circumstances it is incorrect to associate the traditional concept of ownership with running a franchise.