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Log In / Register | Sep 25, 2017

cover up?

The problem with trying to extrapolate anything from the FDD is, as with anything this Franchisor does, they are experts at manipulating the data in their favor.

When you try to derive their churn rate you have to dig deeper than you are able from what they provide.

First big problem is they reuse center numbers. What this means is you can not tell how many times a location has churned over. For example they may have a shop assigned unit M0078. Looks like the shop has been in business forever, number 78, well that shop may have turned over 10 times. Looks historic and successful from their disclosure.

Second big problem is they do not have to include earning for any shops that do not report 2 weeks or more of earnings during the year. Generally shops do not report earnings because they can not afford to pay the royalties. So the data you receive in the FDD is very skewed. The bottom 100 shops or so are not included.

Yes, they have 100-200 shops that struggle and have stayed in business. The reality is the bottom 250 are the constant churners, whether resale, new and failed, walk away, etc.

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