Tips Before You Purchase a Franchise

Last week, I mentioned my SCORE colleague Betty Otte, who has extensive experience in the franchising business. I asked her to give me five tips that I could pass along to someone who is considering the purchase of a franchise. Here is what she told me. I think they are gems!

1. You are a customer to the franchisor. Many people believe that going into a franchise is like joining a partnership where you, the franchisee, will be protected from failure. This is not true. While franchisee companies have a much higher success rate than individual start-up companies, up to 20 percent of all franchises do not do well. However, this failure rate is far lower than that of individual startups.

2. You and the franchisor have different goals. Although both parties, franchisee and franchisor, have the common goal of building the brand, the franchisor’s goal is to sell franchises and the franchisee’s goal is to service the consumer or end user.

3. You may not have an ongoing relationship with the franchisor sales representative. If you are dealing with an independent agent or with one of the brokerage houses that represents franchisors, chances are that although they are knowledgeable about the franchise, you will not see that person after the point of sale.