Money Back Guarantees When Buying a Franchise: Reliable or Not?
Entrepreneurs interested in buying a franchise are sometimes reluctant to invest tens or hundreds of thousands of dollars of their hard-earned money into a franchise opportunity that they are not completely sure of. When searching for the right franchise to purchase this doubt often hinders people interested in purchasing a franchise from going through with a deal. Some franchisors are now trying to introduce a new way of reassuring their potential franchisees that their money will not go to waste and will indeed turn into a well prospering and profitable business.
A recent article by Business News Daily‚ "Franchises Offer Money-Back Guarantees"‚ reports that one company has developed their own way of reassuring potential franchisees that their franchise will produce the profit franchisees are looking for. Service Brands International‚ the parent company of Molly Maid‚ Mr. Handyman and ProTect Painters‚ is currently offering a money-back guarantee to new franchise owners. If the franchisee does not experience gross sales in the amount of $150‚000 within the first 18 months of purchasing‚ the franchisor will refund the franchise fee to the franchisee. Service Brands International states that "the main reason behind our money-back guarantee is to convey our confidence to our franchise candidates that we strongly believe in our operating models".
So is this a good thing or bad thing? My opinion – neither. The reality is that‚ as a franchisee‚ what good are "guaranteed gross sales" when "profits" are really what you should be interested in. Also‚ in terms of a refund/money back promise‚ keep in mind that you will be investing much‚ much more than the amount of your initial franchise fee. The guarantee sounds great but don't base any franchise purchase decision on this promise. You have too much at stake. We suggest reading "Issues to Avoid When Buying a Franchise: A Preventative Approach is the Best Method for Avoiding Franchise Failure".
For additional information about buying a franchise request a complimentary copy of "An Entrepreneurs Guide to Purchasing a Business or Franchise" by franchise lawyer Charles N. Internicola or for assistance in purchasing a franchise contact our franchise law office about our Franchise Protection Program at 1-800-976-4904.
By Charles Internicola September 2, 2011
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