Are there any ethical franchisors?

[Mug]

We bought into a franchise and have been running now for some time. It has been become clear to us and many other franchisees that the business model is flawed.

We and many other franchisees have approached the franchisor but they do not beleive us, claiming it is us because various other franchisees make it work. It is becoming clear to us that those who do continue to trade and do not have a grievance are those who for whatever reason do not need a living wage, ie those with successful working partners, those without mortgages, etc. or those with a lucky combination of features in their territory. The hours are long, the work is unsociable, the financial rewards are often at a level that would not be tolerated by the employed, and not what was expected given the numbers we were given to base our forecasts on.

My questions are:

• 1
  How do you make a franchisor listen who beleives that anyone who complains is just a troublemaker
• 2
  I am wondering having read much of this forum if this is just the norm in franchising. We are very disillusioned.

Approaching the bfa for mediation is out of the question as one of the managers at the franchise is an official of the bfa. Is that not a conflict of interests?

We tried franchising because we beleived this myth that it is safer to start running a business as a franchisee because of the safety net of the franchisor's infrastructure to support us, but it is proving to be a hindrence.

[CatherineL]

I'm sorry you're having problems. I have been a franchisee, and did not enjoy the experience, but probably for many other reasons than those you have listed.

I'll try my best to help you decide what you should do, and don't let it stress you too much. I was on the verge of a nervous breakdown by the time I sold my franchise, and I'm fine now and have started a new business, so there's hope for you.

First you say that you and many other franchisees believe the business model is flawed. In what way is it flawed? Are you able to achieve the profit margins given to you in their projections, or is it the turnover you are struggling with more?

Does the franchisor still have and run the pilot area, and did they even have one to begin with?

If you, and others feel the business could be improved in some way, could you not approach the franchisor collectively and ask to have a meeting?

You also mention that the franchise works in some more favourable areas? Why is it working in their areas and not yours? Are they doing something differently? It is worth asking them. It could be that you need to market your business more effectively to do as well as them.

You said that: The hours are long, the work is unsociable, the financial rewards are often at a level that would not be tolerated by the employed, and not what was expected given the numbers we were given to base our forecasts on. Sorry for all these questions, but I'm trying to suss out what you need to do. Last one: Have you had the franchise for long? Whatever business you set out in, you'll need to put in long hours at first. In what way is the work unsociable? Is it the type of work they told you they would be doing? If you managed to increase your turnover, would it be possible to employ people to do some of the work for you, and would you still be able to make a profit?

To answer your questions: 1 How do you make a franchisor listen who beleives that anyone who complains is just a troublemaker

This is a tough one - some just won't listen. You could do as I suggested above, and collectively approach the franchisor and thrash it out with him/her.

2 I am wondering having read much of this forum if this is just the norm in franchising. We are very disillusioned.

There are many unhappy franchisees out there, and there are also some happy ones - it all depends on whether franchising is suited to you. Also, there are good and bad franchisors out there, but they all seem to have one thing in common - they will have tied you into a very restrictive contract, which is completely in their favour.

Approaching the bfa for mediation is out of the question as one of the managers at the franchise is an official of the bfa. Is that not a conflict of interests?

This is the norm I'm afraid. I'm not certain, but the BFA was probably set up by franchisors to begin with. They really seem to be there to help the franchisor, to attract people to franchising, and to promote the businesses of their own members through their own awards.

We tried franchising because we beleived this myth that it is safer to start running a business as a franchisee because of the safety net of the franchisor's infrastructure to support us, but it is proving to be a hindrence.

You are correct, this is a myth. I read an article in the New York Times, which told the other side of the franchising story. Fewer franchises are meant to fail than ordinary business, but the article claims that the figures are distorted because many franchisees simply walk away, or are squeezed out, or struggle on not really making anything more than a poor living etc and the figures don't account for these failures.

I've spoken to many people who wish they could actually sell or walk away, but they can't afford to as they have huge overdrafts.

Franchising is a big business, and many people profit from it, including the franchisor, websites promoting franchising, the banks, magazines etc, so they all tend to paint a rosy picture of franchising.

I think you do have a few other options, in addition to collectively approaching the franchisor. 1) If the business model is badly flawed, and it really isn't a viable business, you could take legal action. But, do be careful, and get a solicitor to read through your contract first.

2) Could you sell and walk away without debt? This is what I did. I was completely honest with the people I was selling to and they still bought. Different people want different things, so they seemed quite happy with it.

3) You could set up another business on the side, and ditch your franchise later. I toyed with that idea, but didn't dare a) Because my contract didn't permit me, or my husband to run another business. b) I would have struggled to run both businesses at the same time. But, some people do it. The people who owned my area before me had apparently started another business, more or less the same type on the side, and it is v successful, which made it difficult for me at first. Of course the franchisor didn't do anything about it, as they had pushed them out when they realised what they were doing. This happens a lot. I have even known people who have bought franchised areas off a franchisee only to find that they are running a business which competes with theirs. That is very unfair, and something you shouldn't do. If you want to run a competing business, you shouldn't sell - you should just walk away.

4) You could just walk away. Some people do this, but it really is a last resort. One of the not so nice, sexist managers of my franchisor tried to pressurise me into doing just that, and I refused. Why give them your franchise back, and allow them to sell it again?

I hope some of this helps. If you want further advice - send me a message - I think you will need to go into my profile to do it, and I'll give you a ring if you want.

Good luck.

[LisaTalkingTots]

Yes ... we're ethical franchisors There's 2 layers really ... if our franchisees are unhappy and not making money .... then we're unhappy and also not making money (ie: from the royalty fee!) and secondly .... we know that people are investing in us and trusting us with a life changing decision ( I know that we're only small fry compared to other franchises but still!).
Regards,
Lisa

[Franchise Information]

Unfortunately being ethical is not enough.

I have come across many completely ethical franchisors but unfortunately they do not live up to the greatest 'myth' about franchising - and that is it is a tried and tested business model.

It is far to easy to start franchising your business and charging other people for the right to trade when the original business has never proved itself or made any money.