Franchising What are some of the worst Franchises ??

Advertising funds across the $170 billion franchise sector need closer scrutiny

seems like the franchise group is getting pounded

 

The Lessor also has a major say as to who operates a store - they want the franchisors to go guarantor on the lease as well as vetting the tenancy application closely. If the proposed franchisee lacks the relevant experience, the lessor can reject them.

 

@TMNT , I feel really sorry for all of the franchisees who signed up for these agreements.

For anybody that has been in a retail business for long enough, the Gross Profit numbers can only provide enough money for some, but not always all, of the mouths to feed.

It's difficult to believe that anybody who signs up for, to use your words, "...a royalty fee of around 9% plus marketing, plus you have to buy supplies from the head office plus you don't have any control on pricing, product range etc etc.", is going to have an ideal outcome, when this is added to the normal costs of doing business.

Is a coffee or donut shop really a place that requires "a system" that requires paying a large amount of money for?

If so, why aren't the franchisees insisting the franchisors take a share of Gross Profit?

ie. Forget turnover, if the franchisee is not making a profit, then neither is the franchisor.

And it's well known that some of the large Retail Landlords also charge rent with a percentage of turnover.

How long will it be, in 2018, when the store owners will insist that if all of these ticket clippers want a percentage of turnover, then the ticket clippers can provide staff (at their own cost) to work, say, late Thursday nights and Saturday and Sundays?

Or they can turn up themselves.

Which will be unlikely, given they wont earn any money.

 

And this would be a MAJOR red flag to any franchisee purchasing a business when a number of others have a veto as to who they might sell to, should such a situation arise.

 

‘I want my life back’


Scary stuff...
Really is

These guys put so much blood sweat and tears into it and come out in ruins

 

It would be good to see some real stats on these franchises as a whole, and the numbers they are doing, and the fail rate.
Businesses are always going to fail due to many reasons.
One major reason would be that inexperienced people are jumping into these businesses and they simply don't have the skills or ability to run a successful business.
To add further pressure with many of these franchises it seems that the franchisor wants to flog them as close to death as possible to extract maximum fees/profits.
If the business if financed, that is just more pressure to deal with and they generally don't end well as the franchisee holds on as long as possible dying a slow and painful death.
One thing which should be investigated is whether there has been misrepresentation of the business being sold to the franchisee.
It's still always going to be a bad idea to buy into any business where you don't have full control over key departments, too many restrictions are in place.

 

And that's the reason why I feel and believe that franchises shouldn't be a graveyard for the average Joe.

Frankly your average Joe doesn't know how to market a café or produce good cakes or sandwiches or choose the best supplier for coffee et.x.

But put in a good franchisee and I believe that the business success depends on location., exposure, marketing etc etc etc rather than how good an operator is.

My local domino's is full of Indian staff who I'm sure are nice but have got bad service skills. I still go there cos I want that pizza. As long as there isn't hair in my pizza or the order is wrong or my pizza is medium rare. I don't care

 

Would have to do a survey on this, but I'd expect most people would be willing to pay more for the same product delivered with exceptional service over a vendor with poor customer service.
The majority of these franchises being discussed are highly customer service orientated.
Customer retention skills would make a huge difference to overall and long term results.
I have a feeling that most of these operators only focus on the short term view of the business.

 

yeah pf course, totally agree with the service aspect,

I dont drink coffee but sometimes I go with my friends or work colleagues down to the local franchise coffee shop, everyone has their opinion on which bean or shop is the best, frankly I dont care, the people there are asian, hard working, probably not the best service with a smile, but they mean well,

my colleauges seem to still go there probably due to convenince,

maybe im not the target market but I was having this debate with a 7-11 owner a few years ago who said he sponsors a local footy club for exposure and presence,

I did tell him, I wouldnt go out of my way to visit a particular 7-11 no matter how good they were, to me a 7-11 is a place of conveniece,
I dont go to 7-11s because everything is expensive, for generic stuff

what does everyone else think?
a large survey would be good

 

‘Every single one of them wants some sort of legal action’

 

Customer service is pretty bad everywhere. Convenience is the thing that gets me to spend. I would have spent $600 plus the cost of parts and labour to get a couple of accessories fitted to my car. For someone that knew what they were doing it would be a half hour of work at the most but no one wants my money yet. So frustrating. Three hours of my time wasted today and refunds to be demanded. I spend more when I am tired and going through hell and I wish businesses would get that. Be civil and go the extra mile and don't get too greedy and I'll spend.

 

From memory franchise businesses are 80 per cent likely to succeed after two years versus start ups which are 20 per cent likely to last after two years. The systems and hard yakka of a franchise have significant benefit but there's no guarantees still just better likelihood of good stuff at the end.

 

When I first heard about royalties of turn over and not gross profit. I could see the pros and cons of both sides.

If it was gross profit. If the franchisor was doing a bad job. Eg having 5 staff on when only 1 was required. Then he franchisee wouldnt get any commission through no fault of their own

I don't have a solution that would be fair on both sides

 

I have been involved with a Franchise before. Never again!

 

However the franchisor getting a fixed percentage of turnover (not to mention the extra fees in the current regime), without putting any capital up feels like the pendulum is too much in favour of the franchisor.
IMO, the franchisor should have to take a stake in the business if they want a ongoing share of income outside of the franchise fees, etc. At least that would go some way towards aligning the interests of the franchisor and franchisee. It would be closer to branchising than franchising
Looking for an alternative to franchising? Step up, branchising

 

After some thought, the only way I see to balance the interests of the franchisor and franchisee and prevent it becoming a feefest for the franchisor is for the franchisor to take a stake in the business and not 1-2% but 25-30%+
That way the interests of the franchisor and franchisee are aligned. The way I see it as well is that the franchisor should have enough confidence in their processes, product and business model to put up capital if they want to franchise it.
I guess it comes from my thoughts about capitalism - that if you want income from a business that is not invoicable (this includes labour and rent) and not debt related, then you should be putting up capital into the business and taking equity.

 

There’s no shortage of punters willing to take the bad odds from the franchisors.
The franchisor will want to squeeze as much as possible out of the deal.

 

True, which is why I’d never go near it. If they aren’t willing to put capital into the business they are pedalling then it does not inspire confidence.
TBH the only long term buyers I see are people who want to buy them and their families permanent residency visas or fronts for laundering money

 

Was never going to be good news but truly woeful outcome from RFG:

Retail Food Group, owners of Donut King, Gloria Jean’s, to close 200 stores

 

RFG as a company will survive. The franchisees, unfortunately... a lot will go for bankruptcy...