Tips for prospective franchisees
Historically, the balance of power in franchising has been on the franchiser's side. While that has not changed to any great extent, many valuable resources have emerged in recent years that can improve a franchisee's standing in dealing with a larger, more powerful organization.
The following are tips for prospective franchisees from some of those sources.
Robert L. Purvin, chair, board of trustees, American Association of Franchisees & Dealers (AAFD): "The AAFD has identified eight criteria for selecting a franchise business. The most important to me are choosing a franchise with a strong owners (franchisee) association and 'negotiated' franchise agreement (one with the input of a franchisee coalition); available data that confirms the profit potential of the business; and reasonable provisions to renew or terminate the agreement."
Susan Kezios, president, American Franchisee Association: "Buying a franchise is more like renting an apartment than owning your own home. You have a contract to operate ... for a set period of time, usually 10 years.
"At the end of that period, the franchiser can present you with a new contract changing any or all of the terms of your original contract. You have to be aware that no matter what kind of franchise you are looking at, there is potential for abuse of power in the contract. And with the exception of Iowa and Washington, no states have laws against that kind of abuse."
Geoffrey Stebbins, president, World Franchise Consultants: "Franchisers tend to approach potential franchisees from the perspective of, 'Do you qualify for my program?' That is immaterial. The prospective franchisee should be asking, 'Does your program meet my needs?'
"Franchisees should start out with specific goals in mind. The definition of success is achieving your goals. For some people, that might be return on investment. For others it might be flexibility or power. Whatever your objective, if you achieve it, you are successful."
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