If you are considering a particular franchise opportunity and have been through the franchise sales process, you probably have lots of expectations of your potential franchisor. On-site support, system-wide marketing, big-time promotional campaigns to get customers through the door – these are just a few of the benefits many franchisors tell prospective franchisees they will receive once they sign on the dotted line.
But, in reality, new franchisees’ expectations are often overblown. If you thinking about buying a franchise, here are five things not to expect from your franchisor:
1. Marketing Dollars Directed to Your Territory
While you may be required to make weekly or monthly contributions to a system-wide marketing fund, you are not guaranteed to see any benefit from your contributions. Take a look at your franchise agreement. What does it say about what the franchisor is actually required to do with marketing fund contributions? If you don’t see anything, it’s probably because it isn’t there.
Franchisors typically retain broad control over how they choose to conduct system-wide marketing, and as a result, franchisees generally should not rely on their franchisor’s marketing efforts to promote their products or services.
Franchisees need to get used to inconsistency. Not all franchisees are subject to the same obligations (franchisors regularly modify their franchise agreements, and some franchisees may negotiate more favorable terms than others), and not all franchisors treat all franchisees alike. In addition, your franchise agreement may require you to make updates and adapt to system changes over time, and when it comes time to renew you can expect to sign a completely new franchise agreement.
3. Territorial Exclusivity
In the world of franchising, the concept of an “exclusive” territory can mean different things to different people. While many franchisees believe they are truly receiving exclusive territories, in many cases they are only receiving limited protections. For example, it is a common exception to “exclusive” territory rights for the franchisor to retain the right to sell over the Internet and through other “alternative channels of distribution.”
4. An Up-Front Approach to Negotiations
During the sales process, you will generally be dealing with…salespeople. They get paid to get you to sign, and they aren’t interested in making sure that you have a full and fair opportunity to negotiate the terms of your agreement. In order to have any hope of negotiating some reasonable protections into your franchise agreement, you will need to hire an attorney who can get the franchisor’s attention.
5. A Vested Interest in Your Success
Unless you are one of the first franchisees in a new franchise system (in which case you need to carefully weigh the costs and benefits of the opportunity), as a franchisee, you are expendable. If you aren’t successful, is it better for the franchisor to spend time and money to try to help you? Or, would the franchisor be better off collecting another five-figure initial franchise fee from a new prospect who might have better luck on their own?
Considering a Franchise? Contact National Franchise Lawyer Jeffrey M. Goldstein
Before purchasing a franchise, it is critical to perform your due diligence and make sure you have a clear understanding of the terms of your franchise agreement. Attorney Jeffrey M. Goldstein provides flat-fee franchise reviews, and he has over 30 years of experience representing franchisees nationwide. To get started with a free consultation, call (202) 293-3947 or inquire online today.