What to Look For When You're Buying a Franchise | Franchise Law Blog

Avoid the Hype when Buying a Franchise: Focus on Specifics and Not Overall Industry Trends

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Driving into the office this morning I listened to a radio commercial that I found to be repulsive. The commercial was not political, did not contain any profane language and, quite possibly, did not contain any false statements. Nevertheless, the information conveyed in this commercial (really just a bunch of self-serving platitudes) could do harm to the unprepared.

So what was this commercial about? The sale of franchises for a national mall based/strip-center consumer video game franchise. You see, the commercial was not promoting the operations of their retail stores or franchisee operations, but rather the sale of franchise opportunities. Since I don’t have the actual text of the commercial (I am basing this post on my memory of 5 minutes ago), I will not disclose the name of the franchise.

What do I think is so wrong about this commercial? The fact that rather than promoting existing franchisee sales and informing consumers about the advantages of their stores (compared to competitors) they offered a generic pitch about buying their franchise. Their franchise sales pitch followed the following formula:

Basically, alot of hype and platitudes – many words but little, if any, information.

Points for Prospective Franchisees:

(1) Just buying a franchise does not make you your own boss;

(2) Just because an overall industry is growing and profitable does not mean that as a retail franchisee your business will also be profitable;

(3) Before buying a franchise give serious thought about what makes them unique and the added value that they bring to the table. Most importantly, when you hear a franchisor brag about proven and powerful systems, ask specific questions about those systems and what makes them proven and powerful.  Don’t wait until after you pay a franchise fee and invest in build-out.

Points for Franchisors:

Advertising franchise sales is no a bad thing and, in fact, may be a key component to overall system development and growth. However, the ads should be based on the unique and fundamental characteristics of your particular system and the advantages that you offer. If these unique characteristics are not readily identifiable, then you are doing something wrong and you should be focusing on true system development and not unit sales. Significantly, the witnessed success of existing franchisees is the best source of growth for a franchise system.

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Date: 12/07/2015 | Category: Buy a Franchise

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