By choosing a franchise, the buyer wants to reduce his entrepreneurial risk and get a recognizable brand and original product that will give him a competitive advantage. But at the same time, the entrepreneur who buys a franchise is afraid of making the wrong choice and getting losses and disappointment instead of the described advantages. Based on his experience in packaging (15 projects) and sales of franchises (more than 100 sold franchises), the expert Denis Evstigneev collected and formulated a list of the signs of unreliable franchises.
1."Our model works in Boston, which means it will work for you in Lafayette."
The most common problem, which occurs even with decent-looking at first glance franchises. Russia is very heterogeneous: different time zones, different religions and cultures, different solvency and population size. If the franchisor doesn't understand this, you will have problems with this franchise.
2. "We don't have our own locations open yet, but our model is very strong."
If a franchise has fewer than two locations of its own, it hasn't yet learned how to scale its business even within its network. Instead, the company wants to practice on you and get experience for your money. It's not worth going for that.
3. "We are ready to start working with you without a lump sum fee."
From time to time I come across franchises like that. They work without any fees. If the franchise receives no money, then it has no resources to support the network. That is, the franchise either understands in advance that it will not accompany you, or the profits are simply sewn up in other sources: supplies, furniture, equipment, etc. Get into it and look into it.
4. "We don't want to show you the supply contract, but you have to do all your purchasing through a single supplier."
Do you feel like you're losing your freedom? Mandatory supply is something that directly affects your profits and the ROI of this project. Sometimes a single supplier is driven by quality standards. A chain can buy from a single supplier because that supplier has some original, unique product that you can't get anywhere else. But if you're being forced to buy at exorbitant prices something you can get for less from an alternative supplier, that's just a way of making money on you.
5. "We closed the outlet because the franchisee there wasn't very good."
Any negativity about past partners is a bad sign. The same will be said of you if you run into problems with that network. Instead of support, you'll get the odd subjective evaluation. Well, if the success of the outlet depends only on the franchisee, the model has no significant value.
6. "Our product has no competitors."
In today's developed market, every product has a competitor: the iPhone has competitors, McDonald's has competitors, the Kalashnikov assault rifle too. If you hear words like that, the speaker is completely ignorant of marketing and connections to this franchise are dangerous to you.
6. "We have a rebranding planned soon, and everything will be new."
An alarming signal that says that everything you are currently investing in opening a location will need to be re-spent: replacing signage, packaging, uniforms, etc. If rebranding is coming, it's better to wait until it's gone.
7. "Show your bank statement that you have the money to open."
Only once have I encountered such a "murky" request. It really is a strange request. It's unlikely you'll encounter it often, but if you do, know that it's not normal.
8. "We can't show the financial calculation because it's a trade secret."
When buying a franchise, an entrepreneur wants a sustainable business model. Its sustainability is confirmed by numbers. If those numbers can't be seen, then there are questions about the business model itself. Any normal franchise is ready to show the income and expense structure. Naturally, you will not get the results of a particular branch, because they are a trade secret, but the structure and the model itself, the franchise must provide.
9. "We guarantee you a payback."
This is the most dangerous phrase because it shows you want to be scammed. The guarantee can only be in legal form with a mandatory reimbursement of all expenses incurred to open that outlet. This is a suicidal commitment that no one will ever make, but any guarantees "in words" will dissolve as soon as you encounter difficulties.