Franchise ownership can seem like a wonderful opportunity. Certainly franchisors market their brand as a great deal for investors looking to own their own businesses. To the investor looking at first time business ownership, buying into a franchise may seem like the answer that they have been looking for.
Over time many owners begin to realize that franchise ownership was not quite what they had anticipated. The very involved franchisor, who at first seemed like a great and solid support as the new owner struggled to establish the franchise, may come to seem like more of a meddlesome burden. A great number of franchisees begin to realize too late that what they thought would be their business has not done much to increase their sense of independence.
The high degree of accountability involved may make franchise ownership feel a lot more like employment than business ownership. Though the franchisor may have represented franchise ownership as a collaborative effort between franchisor and franchisee, this is seldom the case. The reality is most often that the franchisee finds him or herself under the thumb of a watchful franchisor that dictates much, if not all of the aspects of the business.
This sense of not owning his or her own business can lead to a high degree of dissatisfaction. This disenfranchisement with the franchisor is only compounded by the ongoing royalty fees due to the franchising organization. The added cost of doing business, coupled with heavy restrictions can quickly sour the franchise owner.
Franchise royalties may seem well worth it while the franchisee is first starting out. As the franchisor helps to establish the franchise and to guide the franchisee in successful operation, the franchisee may not begrudge having to hand over a hefty percentage of the franchise’s revenue. However, as the franchisee becomes more sure in his or her ability to run the business without the assistance or interference of the franchisor, those ongoing royalties may begin to feel like paying for the privilege of being subservient.
The twin barbs of minimal independence and ongoing royalties are what most often create schisms between franchisors and franchisees. Unfortunately, these two aspects are inextricable parts of franchising. There is little the franchisee can do to circumvent them and it is in the franchisor’s best interest to adhere to them.
Since franchisor control and royalties cannot be eliminated from franchising, it is the responsibility of the franchisee to find out how much of each will be expected by the franchisor and to determine if those amounts are acceptable prior to entering into a franchising agreement. Not all franchisors require the same percentage for royalties. Not all franchisors exercise the same degree of control. The investor must find a franchisor who meets his or her needs.
The best way to do this is to ask questions as early as possible. Much of this information can be found in reading the franchisor’s Franchise Disclosure Document. However, the most reliable way to find out the truth about franchise ownership under any franchisor is to talk to the franchisees who already operate under the brand.