Selecting a Franchise based on a Discounted Franchise Fee is a Mistake
The Problem with Buying a Franchise Based on a Discounted Franchise Fee
In the current economic climate‚ without question‚ franchisors have been more willing to compromise and negotiate the terms of the franchise agreement and the agreed upon fees to be paid. In particular‚ I am aware of franchisors who have "discounted" and reduced their franchise fee as an inducement for buying a franchise. Likewise I have reviewed alleged "articles" and blog posts from attorneys who mention that "reduced franchise fees" may be a reason why now is a good time to invest in a franchise.
While now is the time to negotiate a better agreement with prospective franchisors‚ if you are investing in a franchise because you could get "a good deal on the franchise fee" you are making a big mistake. Franchise fees are designed to compensate a franchisor for the license and rights that it is granting and to cover the costs of training and assisting new franchisees. If a franchisor is "discounting its franchise fee" you should be questioning "why" and how these discounts may pressure the franchisor to take shortcuts in training and supporting franchisees.
Choosing between franchisors based on whether or not you get a discounted fee can be a big mistake that may cost you much more in the future. While discounts sound good‚ select a franchise based on fundamentals such as the strength of the franchisor's trademarks‚ business systems and opportunity for future success.
By Charles Internicola July 15, 2009
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