Should you buy a franchise? Nope. Nadda. Not at all. Here are 10 very good reasons why you should invest your hard-earned money somewhere else:
1. The Franchise Industry is in Crisis
Now is not the right time to buy. FranchiSEES have formed owners’ associations and associations of owners’ associations to stand up to franchiSORS in Congress. Many franchiSEES claim they were defrauded into investing in an industry that appears to be regulated but really isn’t. In reality, franchiSORS are illegitimately expanding their businesses with no risk using franchiSEE money. FranchiSEES are fed up and are working together to defend themselves.
WHY THE FDD ISN’T WORTH MUCH:
2. The FTC only Appears to Regulate the Industry
All the talk prospective franchiSEES hear about the importance of the FDD and the importance of doing their research is bunk. The industry runs on franchise sales. The idea is to get franchiSEES to take the risk for franchiSORS’ businesses. The long FDD makes it appear as if the franchiSEE is protected, but the FTC hasn’t gotten involved in a franchise fraud case in decades. Decades. Offices of the Attorneys General aren’t lining up to step in to help. In franchising, it’s franchiSEE vs. franchiSOR.
EXAMPLES OF FDD FRAUD PROBLEMS:
3. Franchise Agreements give franchiSORS all the power
If you’re thinking of signing a franchise agreement, stop. right. now. That agreement is written so far in the franchiSOR’S favor that as soon as you sign it, you’re in the franchiSORS’ power. At present, franchiSORS are using highly aggressive litigation and the unjust contracts franchiSEES sign to take everything franchSEES own: your home, your car, your life savings… anything they can get their hands on.. They work hard to get you to sign a dangerous contract. Once that contract is signed, there is little you can do to defend yourself.
EVERYTHING CHANGES AFTER YOU SIGN THAT DANGEROUS CONTRACT:
4. The Numbers tell the Truth…. You’re likely to Lose A LOT of Money.
Numbers recently released by Franchise Grade bolster franchiSEES’ mass fraud allegations. Between 2010 and 2018, franchiSEES collectively invested $5,900,000 per every net franchise outlet net growth. This means that many many franchiSEES gave their hard-earned savings and homes to many many franchiSORS who used that money to open many many outlets. Only 22% of those outlets survived over time. 78% of the money franchiSEES invested was lost… gone.
5. You don’t Want to Experience Being Party to a Major Lawsuit.
You Can Lose More than Your Initial Investment
You may feel like all you’re risking is your initial franchise fee, but you’re not. The franchise agreement you sign may have liquidated damages clauses and commitments that you pay future royalties due. If the franchiSOR doesn’t do as the promised before you sign the agreement and you aren’t getting the service you deserve, they can still sue you for money the contract says you own them in the future. They intentionally use highly aggressive litigation strategies because they know they can out spend you and they’re incentivized to make an example out of anyone who stands up for themselves so that other franchiSEES won’t try.
You’ll be paying that with the equity in your home and your life savings because they required you to sign a personal guarantee.
WHY FRANCHISORS WIN IN COURT:
6. The FranchiSOR has Little Incentive to treat you Fairly
In most cases, franchiSORS make more money off your initial franchise fee than they are going to make off your royalties for years. All the risk for the success or failure of your franchise outlet lies on your shoulders. Their no-risk high-reward strategy incentivizes them to open more outlets than the market can support. They have less incentive to train you and help you succeed than they have incentive to keep on selling more franchise outlets. In fact, as soon as you sign their dangerous contract, they may even start taking steps to create evidence to make it appear as if any problems you face are your fault — not theirs.
BUYING A FRANCHISE IS LIKE BUYING A BAD BOSS:
7. The Industry Says “Do Your Research” while Simultaneously Working to Defraud You into Investing. After you Sign an Agreement, the Industry will Blame you for Being Defrauded.
While you’re shopping for a franchise, everyone in the industry tells you to be careful to do your research well while simultaneously trying to sell you their wares. Once you buy and find out that you’re not getting what you expected, if you say anything, you will be told, “You should have done your research.”
The franchise industry is set up to make it appear as if the research you’re doing is worthwhile when in actuality, the FDD doesn’t protect you, and the appearance of regulation (that actually doesn’t exist) will be used against you after you sign.
Since money comes from franchiSEE investment, people in the franchise industry’s objective is to get you to feel like all the research you’re doing to find a good franchise is worth your time. The end result will be you be signing a standard industry contract that revokes your basic rights and very likely allows the franchiSOR to take everything you own. The franchise industry feeds on franchiSEES.
FranchiSEES invest in franchiSORS’ businesses and everyone except the franchiSEE benefits. They win, you lose.
FRANCHISEE SATISFACTION AWARDS ARE DECEPTIVE ADVERTISEMENTS
8. The International Franchise Association (IFA) and FranchiSORS are Lobbying Against FranchiSEES and Taxpayers.
The franchiSORS are working together to maintain the status quo that allows them to use franchiSEE money to expand their businesses at no risk to themselves.
The IFA says it supports truth, honesty, trust and collaborative relationships between franchiSEES and franchiSORS. But in reality, it’s lobbying against franchiSEES. The truth is that the IFA feeds off of franchiSEE investment, too. They want franchiSEES to keep investing billions of dollars in franchiSORS’ businesses with franshiSORS taking no risk.
They want to keep government regulation out — even no-brainer regulation that would protect the taxpayer — so that the system of endemic fraud can continue and more franchiSEES can be exploited by franchiSORS.
THE IFA IS ALREADY LOBBYING AGAINST THE BILL. WHOSE SIDE ARE THEY ON? HOW DO THEY MAKE THEIR MONEY?
9. The “Good FranchiSORS” aren’t Standing Up in Support of FranchiSEE Causes.
Over and over again, you will hear franchise industry experts say that it’s unjust to blame all the franchiSORS for the endemic fraud. Some franchiSORS, after all, are ethical, hard-working and honestly seek to support their franchiSEES.
But these franchiSORS are NOT standing with franchiSEES in support of the new bill Senator Cortez Masto introduced to congress on July 31st. These franchiSORS are NOT speaking up against the International Franchise Association’s lobbying. These franchiSORS are NOT offering to start a new trend of using fair contracts.
Until the “good franchiSORS” use their voices to publicly support of fair contracts and regulations that would curb deceptive trade practices, and until they use fair contracts themselves, franchiSEES have no evidence that there are yet truly “good franchiSORS.”
Sure, sometimes there is a rare very ethical person who runs a franchise without taking advantage of franchSEES. But that person is a minority and that person isn’t helping heal the industry by supporting bills that would protect it.
10. Signing a Franchise Agreement can Force you to Become Complicit to the Endemic Fraud in the Industry.
You may very likely find yourself in a dangerous situation and under pressure to help your franchiSOR recruit other unsuspecting people to also sign a dangerous contract.
You may find yourself afraid to say anything bad about your franchiSOR because if you do, your franchiSOR might use the dangerous contract you signed to sue you and take everythinG you own. You may notice that your franchiSOR is intentionally making examples out of franchiSEES who stand up to them and do not help them recruit people.
By signing a franchise agreement, you may find yourself complicit to fraud you’re expected to help with because if you don’t, the franchiSOR might take everything you own.
FRANCHISEES ARE SILENT BECAUSE THEY’RE AFRAID:
Do yourself a favor. If you want to open a business and need training and support, go to SCORE instead.
STOPPING FUTURE FRANCHISEE INVESTMENT: