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Dear Franny (Guests Post Questions Here)

Franny answers franchisee questions

Ask FrannyThis forum was created so that readers and members of Blue MauMau can post questions to Franny about issues of interest to small business and franchise owners. Franny sometimes invites world-class subject matter experts to answer tough questions

If your post is answered by Franny, it will be featured on the front page of this journal under the "Ask Franny" column.

In your post, please do not mention your franchisor's, vendor's or your own firm's name. The intent of this forum is not to give press to a brand name but rather to ask general questions that franchise owners within and outside one's brand might find of interest. (There are press release areas to sell what's great about a brand or other forums to tell tales of franchisee rip off.) Your question may be edited for clarity, brevity and frankly, some entertainment value.

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Granville_Bean's picture

why would doctors use this?

I've seen various franchise "concepts" that are supposed to provide services to doctors.  And I always wonder "why would doctors buy this from the Franchise?"  Are the doctors having trouble finding this service now?  What advantage does the Zor offer that will help obtain doctor customers?


It seems to me that the ones's I've heard of emphasize the wrong thing: "we will teach you our system for doing medical billing" or "we will teach you our system for performing lab tests", but how does knowing how to do this, obtain customers?  Is there really a shortage of people who know how to do this, such that doctors will be so glad to get a cold call from the Zee and throw all their business their way?


Not saying it can't be done, but I would want to know what the differential advantage is to having a franchise in it.

Meineke or Napa Auto Parts or Midas...Please Help :)

Hello all!
Great site, but I find the forums very confusing.
IOW I don't seem to see topic oriented forums like on other sites.
IOW, General, Legal, Top tier etc.
All I see are comments on the right side of the page.

So if I am in the wrong forum, please point me in the correct direction :)

Anyway, I am looking at an auto repair or parts type franchise.
I have the FDD from Meineke and in reading it and all the stipulations, I have to wonder if I can make any money?

I have also considered going into the auto parts side of the business, say Napa or CarQuest.

My experience is as a computer engineer for 25 years, dealing with client side problems and resolutions so customer service is something I am very good at.
I also have excellent mechanical skills although I have never worked in the auto industry other than working on my own and family members cars.
I'm what would be termed a "professional" shade tree mechanic, haha!

So any advice or pointers to useful resources would be greatly appreciated.
TIA!

RichardSolomon's picture

Steve - where are you located?

If you are in/near a big city, forget about a car repair franchise.

--

Richard Solomon, FranchiseRemedies.com,  has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School

I'm looking for Suburban area

Hi Richard!
I'm actually looking towards a suburban NY location. I've scoped out the surrounding area and they do have a Midas, Goodyear and a Carquest but I would be looking about 10 miles away and as far as I know there is nothing around that area.

My main concern is number of cars in the area and number of competitors.

If I go with a parts franchise, like Napa or 1800radiator etc Carquest would be my main competitor.
There does seem to be quite a few independent garages in the area so that would be a good thing for parts and a bad thing for Meineke.

As you can tell I am still in the very early stages of this and am doing my research.

Granville_Bean's picture

don't rely on "no competitors"

If it is a good area, the day after you open, a competitor could open across the street or down the road. OTOH if you are a good operator, you can open across the street from a competitor and then eat their lunch.

We did this. Our first store was built new (literally) across the street from an existing, direct competitor. About five years later, the competitor (who, remember, was there first) closed. We remain. The year they closed, we were up about 30%.

You are trying to do your homework, but in general you take a BIG risk opening your first business in an industry in which you have no business experience. DO NOT think it will be okay because you are relying on "a proven business concept" and/or that your Franchisor will "show me the way". It's not about CONCEPT, it is about EXECUTION, and we have heard the sad story too many times of some newbie who thought the Zor would show them the way.

Very Good Advice Granville-Bean and Michael.

Thank for the informative reply! My area of expertise is in computer servicing of mainframes, networks, SAN, LAN, you name it. I deal in a very high pressure arena including Wall Street, the FAA and others so I am used to solving problems and dealing with clients.
I would say a good 90 percent of my job is customer relations, face to face, and about 10 percent is actual service or "fixing".

The business I am in is very similar in that something is broke, client calls for service (actually the systems place automatic service calls), you go on site, diagnose the problem, order the correct part or software, repair and leave. Follow up a day later to make certain all is well.
It's not quite that simple, but that is the gist of it.

So it is these type of skills, which IMHO take a long time to perfect, that I bring to the table. Dealing with irate clients, especially at the executive level is not an easy skill to learn.
I have almost 30 years of doing this.

I'm very familiar with mechanics, especially automobiles and on the very rare occasions where one of my cars go in for service for something I don't have the facilities to repair (transmissions, warranty work etc), I typically know far more than the person doing the repair.
I also see dirty shops, poorly dressed mechanics, owners with poor communication skills, improper diagnosis of simple problems, crooked shops and just a general poor look and feel to the industry in general.

This is where I would like to be different.
Maybe it's a fools dream but I feel that looks, quality and presentation of the shop and it's employees is very important to differentiate yourself from the competition.

What I don't have is skills in how the business works.
IOW the nuts and bolts of daily operation.
Hiring employees.
How much to pay them.
Benefits for them and myself.
etc.

That's what I really need to learn and expect the zor to assist me with.

Thank you Michael, I will look into the organization.
Ideas?

Granville_Bean's picture

Not to single out THIS guy...

But now three of us have given him pretty much the same advice.

That a Zor isn't gonna run your business for you, that you have to know how to run THAT particular business, and that if you have no experience in that particular industry it would be a good idea to go work in it for 6 mos.

This poor guy just happened to walk into being like a 'composite example' of what we hear over and over. For whatever reason, people get it in their head that their first foray into being a business owner, should be in an industry where they have no direct experience, and NO WAY on earth would they be agreeable to working as an assistant manager in that industry for 6 mos.

No way, they wanna be the OWNER from Day One.

Owning your own franchise business is still owning your own business. Even if you have owned a business before, it is risky going into an area you are not experienced in, and don't think it's okay just because it is a franchise. And it's even worse if you've never had your own business before.

Not everyone who is a great employee will be great as a business owner.

michael webster's picture

Franchisor's Obligations

Steve writes:

"What I don't have is skills in how the business works.IOW the nuts and bolts of daily operation.
Hiring employees.
How much to pay them.
Benefits for them and myself.
etc.

That's what I really need to learn and expect the zor to assist me with."

The franchisor's obligations in most franchise agreements extend no further than assisting you in opening your store, and for which you are going to be overcharged. If you want to learn the daily nuts and bolts, you should try to hire on as an apprentice for one of the franchise systems that you are interested in.  

Making due with a minimum income for 6 months is a good introduction to franchising or owning any business.

The Midas IndFA is here: www.imdaonline.org

The Meineke IndFA is here:  www.meinekedealers.com

If you need help with Meineke, drop me a line. 

Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"

Barbara Jorgensen's picture

Well put Michael!

Zor's extend no further than assisting in opening a store.  The down fall for many zees.  If people understood this I believe with all my heart no one would sign a franchise agreement.  Many not all believe because the zor tells you just follow the system and you do not need business experience.  This is the biggest misrepresention in the franchise world.  Naive but still a major misrepresentation.

Franchise assistance

Barbara, I don't know what franchise you previously owned but your global statement that franchise companies provide no assistance beyond opening the store would indicate that your experience is quite limited. I have been a field consultant for over 35 years in various franchise businesses and I can assure you that there are reliable experts in the field helping owners every day. My experience is that the majority of failures in the franchise business happen because the incoming owner fails to understand the basic concepts of running a business. Not necessarily the particular franchise but ANY business. It would seem to go without saying that a new owner should follow the "system" after all, that system produced the successful operations that likely attracted the new owner in the first place. Doing a minimum of due diligence in contacting existing (and former) owners within a franchise system should answer the question of support fairly quickly. In the case of the thread that your answer was attached to I am not familiar with that industry, but I would advise the gentleman who asked the initial question to contact existing units and ask the questions he is asking in this forum. I think it is quite conceivable that the systems in question do, in fact, have answers to most of his questions.
Barbara Jorgensen's picture

You are correct about many of the things you said

I managed to raise 5 children successufully.  I have always said managing a business is like running a household.  Money coming in and money going out.  When one gets taken from the beginning of a franchise there is no hope.  The numbers were based on what was estimated in the UFOC.  That is where many people get taken.  It was almost three times more to open the doors.  What would that do to anyone's numbers.  We were screwed from the beginning.  The key word here is ESTIMATED.   Estimated is not concrete.  This where many zees get hurt.  After you sign on the dotted line and EVERYTHING cost more you are screwed.


I believe there are good zors out there.  Very few.  How I wished we had hooked up with a good one.  I have been told that I manage money well.  The key is rouge zors purposely put you in a desperate situation to turn and churn.  They don't care about you.  A good zor would give you good advice and be on your side.  Making it a win win business deal.   

Quiznos Going under?

About 8 Quiznos near me have closed I heard their having big time management problems and trying to dump CEO

There is some truth in this.

I think it really depends upon the company and how long it has been in business. Something like a Midas, McDonalds, Meineke and so forth really do have proven methods that when followed have a very good chance of being successful. Still these are only guidelines and if the person running the business doesn't adjust according to market fluctuations, the business will be in trouble. I notice that this site seems to attract people looking at very new, immature franchises and in that respect I would advise being even more careful because it's quite possible the franchise really doesn't have a proven method. The top franchises don't want their franchisees to fail because it's a blight on their reputation.  When my wife and I opened our first shop we were assigned a project manager who assisted us with real estate, equipment purchasing, insurance,leasing and just about everything needed to get started. Of course he wanted us to purchase everything from the company, but we were ale to find fixtures and tools from liquidation sales and so forth whenever possible. We also started small rather than trying to do everything at once. For example we didn't offer a wheel alignment rack at first because it was very expensive. We also did not do A/C work for the same reason. As far as location was concerned, we had our mind set on a particular location but the demographic study the company did was not favorable for us to turn a profit. Initially we argued this because we thought we knew the area  better than some out of state company. It turns out that we didn't and the location we finally settled on turned out to be a great area for business.  I don't feel that blanket statements can be made about franchising other than to do your homework, ask questions, be realistic and take your time. A top tier franchise like a McDonalds or a Midas is going to offer you far more support than something like "Suzies Rug Cleaning" but at the same time it's going to cost you a lot more investment and potentially far more to lose as such.  Each franchise is different and each potential franchisee brings a different set of skills to the table. The trick is to make a good match for all involved and that is not an easy trick at all.

Barbara Jorgensen's picture

I have to agree with you

Homework is number one.  Some people believe homework is a couple days of surfing the internet.  Let's face it most people before they entered the world of franchising the biggest item they bought was their house.  There is alot of help when one buys a house.  A franchise is another story.


I believe most people have been spoiled as far as choices in the business world.  Unless you are directly involved in business.  When people see alot of Quiznos what do they think?  Quiznos is successful.  Quiznos must be a good company because we see them everywhere.  Little do we know many are struggling, working for nothing and working long hours.  Then they open a fitness center.  The future zee wannabees are intrigued that this new business coming from a successful franchise will do the same.  Down the road you read about a suicide and a note left behind.  Then you get afraid.  Then there are many horror stories about the successful franchise run by a man that you would compare with a dictator.  Then you get scared and then you know you were duped by men who only wanted to get rich on you. 


How can you become a good fit with men like that?  It is premeditated otherwise why would they have a one sided agreement?  If they were good there would be obivious benefits for the zee?  Not a horrible one sided agreement that most common layman would never understand.  What is even worst many lawyers who never studied franchising in school would not be able to tear it apart. 


That is why after much research I believe zee wannabees should take at leat 16 months or more to study the FDD before even signing the agreement.  Getting a lawyer like the one's on BMM is a rarity.  Afterall the FDD only says take it to a lawyer. 


Most zees are in a comfortable situation before you sign a franchise agreement.  Why rush?  Take your time.  Hopefully you will find that perfect match in franchising.  Hopefully you will make a good passive income for your future.  Hopefully you will not have to work it at all.   

Great Advice Michael !

Thank you very much for the links. I have also connected with a local dealer who is a member of my car club so that will be a good thing as well.

I think you guys are mis-understanding or maybe I am.

I obviously don't expect the Zor to run the business for me nor do I expect a cookbook to success. In effect I *have* been running my own business for 30 years, albeit in a different industry and without responsibility for the financials and as a microcosm under a huge company. I currently manage 11 techs who work  in the computer maintenence field. This is not PC repair like GeekSquad etc. It is everything from mainframes, to complex networks, SAN, WAN, LAN to you name it and mostly for Fortune 100 companies. I know full well how to deal with the "service business" all the way from the mom and pop opration screaming about their DSL line to a Fortune 100 company CIO complaining about his trading system being down for 10 minutes and how many millions of dollars he has potentially lost. I've taught classes, attended classes and have more certifications than you could paper a good sized Quiznos with :)

That part I know and am very good at.

The mechanics I am familiar with. I've been around cars my entire life, repairing them and somewhat making a second career out of it. So much so that the local parts stores give me mechanics pricing on my parts. I've been haning around speed shops and so forth since I was a teenager so I do know "something" about the business. Have I done this 7 days a week for a living? No I have not.

I have basically been a "service writer" amongst many other tasks for 30 years so I am very good at extracting useful technical information from non-technical people, dealing with call backs, parts procurement / accounting etc.

What I don't know is the SPECIFIC to whatever franchise I decide upon, nuts and bolts so to speak. I'm sure Meineke does things different from Midas as well as from say an auto parts store.

I like the idea of working in the business for a while to learn the specifics but a service writer would be a waste for me because on the rare occasions my cars have had to go to the dealer (warranty work) I typically have scanned the car, wrote down the symptoms and handed it to the SW along with any clarification that might be needed. I haven't been wrong yet with the exception of factory secret warranties which of course I wouldn't know about.

I need to learn more of the business side of the operation.

I intend to hire qualified mechanics should I decide on a repair business.

I've been reading a lot about service businesses and even in my own business I know that it's easy to find someone who can "fix things" but it's very difficult to find a person who has client side skills, especially in the technical fields. They either tend to have zero personality or they are just uncomfortable around people.

I feel the skills I bring to the table are worthwhile and might be missing from the typical auto shop, at least from what I can see.

So in many respects, more so I suspect than a lot of people getting involved in franchising, I do have transferable skills.

Why am I switching businesses?

I'm going to be retiring and have always wanted to own my own business. I have a passion for cars and I feel that this is an area that will continue to grow as less competition for dealerships will be out there. Additionally the closing of dealerships has left a pool of skilled mechanics to hire from so that should also be of help.

After 30 or so years I have had enough in computer business and despite a 6 figure salary I'm sick of working for someone else and I'm not afraid to put in the hours and deal with the pressure.

I am going to contact the various organizations everyone has posted and again I thank each an every one of you for your excellent advice. Like I said, I am in the very, very early stages and some good sage advice is always a good thing!

Better to learn BEFORE than to make a costly mistake!

Peace!

Granville_Bean's picture

you misunderstanding us

You may be misunderstanding us.  We are not telling you to get a job as a service writer so that you can learn to write service.  We are telling you to do it so that you have the opportunity to stand behind the counter of an auto repair for 6 month, and it is a job that you might actually be able to get with NO EXPERIENCE in auto repair.  What would be more to your liking, General Manager?  Will they hire you for that with no automotive experience?


Actually with your background a job behind the coutner at Geek Squad might be more attainable.  Here's the problem with your experience as you describe it.  First you do NOT run, or "almost" run a small business since you are NOT RESPONSIBLE for the financials.  As a small business owner, you will be PERSONALLY responsible.


Here's more. Do your current customer drive to your site with their broken item?  Are they consumers who more often than not are highly ignorant about the broken thing they own?  Are they (always) people who will PERSOANLLY be paying for the repair, and who might choose NOT to have it fixed if it costs $20 too much (no, they are often large trading businesses who will lose MILLIONS for every hour their network isn't running).  Do you curent customers odften get their credit cards declined, checks bounce, and when they do, it is YOUR money involved?


Also, do you set the hiring rates that your current techs were offered to come work for you?  Do you decide what their benefits will be?  Which health insurer your business will use?  What level of insurance contribution to offer?  Running the WHOLE SHOW in a small business is a LOT difrerent from running a small department in a large business. A LOT different.


Your expereience is nowhere close, but if you think you know, I am not gonna convince you different, and in the end it's YOIUR money so spend it as you'll like.

You sound illiterate Granville.

Don't let a wannabe discourage you Steve. I run two franchised auto centers and when my wife and I entered into this business we would have given our left arm to have as much experience dealing with customers as you do. Both of us were graphic artists working for a large firm and neither of us had any experience what so ever dealing with customers or automobile repair. We started with a small 4 bay shop and learned the hard way. We hired mechanics with assistance from the franchise company and learned the ropes.It doesn't take a rocket scientist to price a job using the online software that the franchise company will provide. the training we received was decent and allowed us to learn the day to day operational tasks that need to be done. Granville seems to believe that you need a degree in micro economics to learn this. You don't. After a couple of months it will be like second nature to you. Granville is also  wrong when he states that your experience is nowhere close. Actually your experience is pretty much a drop in for what I do each day which can be described as follows:

1.Manage people

2.Manage people.

3.Manage people.

The inventory takes care of itself. You seem to be experienced with customer relations so that is a plus and as far as insurance, benefits and so forth, the franchise company will have plenty of offers for you to choose from or you can join an association and benefit from group rates. All that considered, I would suggest that you take a basic business course at the local college. Something related to starting and running a small business. I would also suggest that you take a basic book keeping course as well if you intend to keep your own books. Plan to live on much less money than you are used to for at least the first year and try and eliminate any personal debt that you might have prior to getting involved in this adventure. Contact every franchisee listed in the disclosure document that is practical for you to visit. A personal visit is imperative because you will get much more information that way ad build a trust. You will need to be able to think on your feet and solve problems as they arise. The worker who calls in sick, the wrong parts getting delivered, the lady who swears she hears insects in her muffler and so forth. Be honest, willing to work hard, take everything the franchise company says with a grain of salt and get everything possible in writing. One item you may want to consider is that companies like Midas run specials like $15.00 oil changes where it's barely worth your while but you are forced to participate. This is a good chance to up sell but at the same time a perfect opportunity to alienate a customer. It sounds like you are good at reading customers but you should still tread lightly and try not to push.Contact the independent owners organizations that Michael posted and ask as many questions as you can think of. You will certainly hear an earful and that's a fact!  Well that's about it and like I've already said, don't let wannabes discourage you from your dream. My wife and I just opened our second location which has 6 bays and we are looking toward a bright future for our family. Oh, one last thing, neither of us had any experience with mechanics or auto repair other than dropping our car off at the shop and writing out a check so you are ahead of the curve again Granville sounds like just the type for a door to door vacuum franchise although even that might be over his head.

Feel free to contact me at johncarlson29@yahoo.com if you want to talk.

 

 

Granville_Bean's picture

pssst, John:

Shhh, don't tell anyone - I'm an Attorney/MBA, finance director for our organization, we've been multi-unit franchisees for 15 years.


You said it yourself: you learned "the hard way".


Glad you did okay, but we see waaaay too many posts here from people who've lost their life savings and their homes because they went into an industry that they had no experience in, as well as having no experience as a business owner, but thought that would be okay since they expected the Franchisor to show them what to do. 


Oh yeah, it's easy, just follow the "proven system".  Just ask Barbara Jorgensen!

Barbara Jorgensen's picture

People believe if it is a franchise

they are selling a system that has been battle tested.  Regretfully this is not the case in many systems.  Beany you have to be aware of there are so called systems like Quiznos that give the appearance of success because there are many units.  Yet their system invovles turning and churning .Rogue zors use people's money to build their empires.  This is what people need to be aware of.   

Get a job

If you are serious, which is a troubling idea all by itself, you might do yourself a favor by getting a job in a car dealership as a service write up tech. Get some first hand experience, learn about the business, see if you're theoretical skills match the ire of a really angry customer. You get paid and learn the ropes and don't blow the family nest egg.

Granville_Bean's picture

That's not really what a Zor is for.

"What I don't have is skills in how the business works.
IOW the nuts and bolts of daily operation.
Hiring employees.
How much to pay them.
Benefits for them and myself."

The typical Zor puts you through a couple of weeks of training and then will expect their royalties, regularly. Some of the things you list are what the Zor would expect an independent business owner to do for himself.

The biggest value of a franchise is if the brand name brings in business. If it does, it is worth the royalty. The Zor will not run your business for you day to day. If you need sonmeone who can do that, hire an experienced General Manager. But then who watches him.

If you want to own a business, can you own one DIRECTLY in the industry in which you are experienced? Why is the grass greener in a different industry, is it perhaps that you know all the challenges in your own industry, but have not seen what they are in the new one yet? If you want to be in auto repair, can you go get a job at the service desk for six months, BEFORE you jump in (and pay your money). Then you can learn the auto repair business on somebody else's dime.

michael webster's picture

Contact IndFA

Both Midas and Meineke have active Independent Franchisee Associations, and you should contact them for information about their franchise system.

Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"

Re: Dear Franny (Guests Post Questions Here)

Anybody have any information or insight on Rapid Recovery Refrigerent abatement company?

Re: Re: Dear Franny (Guests Post Questions Here)

Yes - they suck (refrigerant) Depends, if you like climbing ladders onto hot roofs and dealing with toxic gas. Hey at least you can work on your tan. Other then that I am sure they are probably a fine a company as any other. The 100K entry fee seems kind of steep for a gas powered vacuum pump, a few ladders and tanks.

Tasti D Lite

Whatever happened to the NYC licencess? Did they convert to franchises? How is this franchise doing now after one year with Amos et al?

Restoration Franchises

Can anyone provide an unbiased opinion on ServPro and Puroclean franchises? Is the market saturated? Would it be better to get the training on your own and be an independent without the huge upfront costs of a franchise? Is the support from a franchise really worth the money?

Granville_Bean's picture

In any line of business...

In nearly every type of business, you would be better off getting some training in the business BEFORE you later decide to buy a franchise in it.

A franchise can be worth it IF THE BRAND NAME BRINGS THE BUSINESS IN. Otherwise, ask yourself what the "support" you expect really consists of. If it is only stuff you could learn in 6 mos. working as an employee for that type of business, then no it isn't worth it.

Question re: Franchise Sales Organizations

Folks,

I have a client that currently owns a chain of 25 stores. They are now interested in selling the concept as a franchise. We're almost done with their FDD and we're looking for an organization to take over the sales of the franchise. We've contemplated doing the sales in-house, but thought that it would be more effective to hire an outside sales group that already has a database of prospects. I know that there are alot of bad actors in this area and hoped that the Blue MauMau community could steer me in the direction of a good quality franchise sales organiation.

Thanks in advance for your help.

Re: Question re: Franchise Sales Organizations

Franchise Sales Outsource (FSO) is a very bad idea for a new franchisor.

While it may be attractive to go to an outside group that purportedly has prospects ready and waiting the new franchisor risks losing control and increases the likelihood of litigation because of pre-sale shenanigans that you will not discover before it is too late.

And all those prospects that you've been told are "sales ready" for your concept, well the FSO is starting at square one other than some old and stale leads that will get flipped to you so you feel good that the FSO has "hit the ground running". The FSO will have to develop leads for your specific concept and prospective franchisee profile. Most franchisors regret using FSOs ans if they could do it all over they would have started in-house instead of paying high commissions and many times a percentage of their royalty to the FSO.

Part-time franchise

I'm looking for a part-time franchise opportunity. I can devote 20-30 hours per week. I would prefer something with a minimal (up to $20k) investment. I would also like to find something with a fast (no more than one year) ROI, and annual revenues of no less than $40k. Any recommendations based on the criteria listed?

Granville_Bean's picture

Santa Claus, The Easter Bunny and....

A part time franchise with a low price but has substantial revenue and a quick profit.

If there was such a thing, wouldn't EVERYONE have one?

The problem is that a bogus Zor salesperson could easily pick up on such hopes & dreams and claim to have what you seek. Be careful....

Re: Part-time franchise

Check out Instant Tax Service... it was ranked as the #1 low cost franchise in America and it is also seasonal which might fit into your time availability

Granville_Bean's picture

Ranked by who, and on what basis?

Well?

Are you a shill for the Zor?

Cuz a tax service would be a seasonal business. Sure, few if any hours at all for much of the year. But MORE than full time during tax season. Therefore not a good fit for someone who wants to work 20 hrs./wk.

Blue Coast Financial Group

Does anyone know anything about Blue Coast Financial Group? Can you really work part time? How effective is the lead generation program? If I work part time, how soon could I expect a return on investment? What is realistic in terms of annual revenues?

Cruise Planners American Express

Please give your opinion on Cruise Planners, American Express franchise. Does anyone have experience with this franchise, or do you know someone who owns this franchise? Thanks for your feedback!!

Poolwerx

I am an ex poolwerx franchisee who has recentley sold for next to nothing but escaped with my home unlike many of my co franchisees who have lost everything.
is there a way to find out how many franchisees have fallen over in the 15 year operation..this info would have been great for me when purchasing the unprofitable business.

Ex Poolwerx Franchisee

I too feel your pain.


I too have a story and given the right forum would dearly love to tell it. My immediate thoughts are that franchising is a big con. My only saving grace is that many people smarter than me have also been conned. I too have recently sold for next to nothing, lost money but kept my house and got my life back. The only winner was the franchisor. It makes me so angry when I see reports from franchise CEO's that I know are totally wrong yet there is very littel that one can do about them. How a zor can allow a zee (almost force) into more debt (twice the value of their house) by creative financial to buy out a competitor and expect them to survive is beyond me. The zor got the unpaid fees and interest owed to them (quite a considerable sum) as this zee's business was not profitable enough and got behind in fees.


When I was a zee I continually voiced my concerns particlarly on zor accountability and for my trouble got threatened with and received breahces and was told I was a threat to the system. The real threat was in me exposing the 'con' hence the bullying tactics employed by the zor.


All this from one of the most 'highly' respected and supposedly one of the best franchise systems. What a joke. If I was in one of the best the others must really be crap.


The sooner something is done to protect the average dad and mum entering franchise systems the better. From what I have read this is very unlikely to happen as Franchisors are a law unto themselves and get away with their very dubious tactics. Even the ACCC seems powerless against them.


'Victims' of franchising are in a powerless position as most do not have the financial resources required to hold rogue Franchisors accountable and zee's are usually that demoralised that to take any action only hurts them more.


Franchise - never ever again!!!!!


 


 

Boudica Lawson's picture

Re: Poolwerx zees in trouble.

Unfortunately,

getting the kind of info you seek is nigh on impossible.Proper statsistics on franchises are known to nobody except the franchisor.

 

Changes to the franchising code of conduct in March 2008 have only gone half way to adressing this problem.

Franchisors in Australia must now disclose the franchise activity that went on prior to your purchase and disclosure documents must now detail a little more explicitly how many franchisees have gone through the system and for what reasons they exited the system however there is still room for the franchiosr to mislead you with these figures. I suspect, like me, you purchased your franchise before this rule came into effect.

 One of the bones of contention in Australian franchising is that absolutely no one collects proper statistics on these things so not even the highest positions in govt can tell you what happened to other franchisees in the system. Franchisors can get away with all kinds of misleading representations when it comes to statistics and you are dead right: this info would of given you a better idea of the health of the franchise and if the true "Facts" were disclosed to you there is every chance that you would not have purchased if the"facts" had been properly represented.

I know that if I knew about failed franchisees then what I know now, there is no way I would have signed up.

In fact, the only way we can collect these sort of statistics independantly is when people such as yourself speak up and tell everyone that they have might have been ripped off.

Franchisees are unfortunately, the only ones who know the true health of a system, but because these franchisees have a vested interest in selling their (often dud) franchise to the next person, you cannot trust existing franchisees to give you an accurate report on the health of the franchise.

 I am so glad to hear you were able to keep your home, unlike, as you say, so many others who could not.

There is only one small thing that  helps to prevent franchisors from getting away with this kind of behaviour and that is people like yourself writing about their experiences. Franchisees in bad systems need to speak up, as you have done, about their experiences, good or bad, to educate others about what they may be getting themselves in for.

 

The problem you speak of, not being able to find out how many failures before you buy, is a very good illustration of where franchising "regulation" is completely useless.

 Good luck Mr Foote and congratulations on speaking up.

 

 

 

Re: Re: Poolwerx zees in trouble.

Boudica is 100% correct..."The problem you speak of, not being able to find out how many failures before you buy, is a very good illustration of where franchising "regulation" is completely useless."

All the information is in the hands of the franchisor and it is up to them what they want to reveal, and perhaps more to the point how to present it. As the old saying goes, there's lies, damned lies and then there's statistics.

Take a look at the chief spin doctors, the FCA. They spuke that all is well with franchisng because 'x' number of disputes are lodged with the Office of Mediation and only 'y' number proceed to litigation, so mediation must be a raging success right? (They don't even acknowledge the possilbility that this might be as a result of not being able to afford the only other alternative - litigation?)

After my experience, I have zero faith in relying on full diclosure in the Disclosure requirements, or even any level of portrayed honesty and fairness. Even if the information is wrong or left out or whatever, nothing will happen to the franchisor....the franchisee can be fed anything to make the franchise look good - anything that casts a doubt, just leave it out.

A great expamle of putting a positive spin on statistics is Jim Penman from "Jim's Group". Jim will willingly tell you all the wonderful things about his company...how many franchisees there are, what percentage are happy, how much work there is via "unserviced leads" etc, BUT....

JIm will never tell you where the available work is, what divisions it comes from....just simply "there is work".

The question is asked how you can find out about what has happened to franchisees over 15 years or so in the life of the franchisor. Jim will never ever tell you how many franchisees have fallen over...especially from the Divisions that are really struggling. Try getting him to even tell you about any Division that is struggling!!!

I could name at least four, but for obvious reasons won't (Jim loves using his lawyers as foot soldiers)

Try getting Jim to explain why franchisors fees go up if they do not sell franchises. I wonder what happens when franchisors get a bit more desperate to sell franchises to keep their own costs down? With the overall structure of "Jim's", nothing is ever Jim's fault, it is ALWAYS somebody elses.

Best of all Jim proudly boasts that he has never been successfully litigated against. I would suggest that has more to do with the cost of litgation to the franchisee (or franchisor) relative to the potential result. Low cost entry to franchises presents it's own problems in relation to justice - you would likely spend a few hundred thousand to get only a small portion back, even if you get awarded costs. Franchisors are well aware of the costs!!!

Who in their right mind would litagate under the Trade Practices Act and/or the Franchising Code of Conduct, when you have in all probility paid a total of about $30,000 for the business? The first court enforced mediation with your counsel in attendance will cost you upwards of 30,000 dollars, and you are still along way from the court room and Judge. It just isn't a commercial decision, which is advice that all lawyers should offer when confronted with such numbers, a fact again that franchisors are well aware of.

There is absolutely nothing in Australian franchising to deter franchisors from stretching or bending the truth. Franchisees are completely reliant on the honesty of the franchisors, and that is a dangerous game in anyones language - especially in the current economic climate. Franchisors are rubbing there hands together as the unemployment rate climbs, and they wheel out their marketing machines about the 'safety' and 'security' of franchising offered under the Code...all a big bunch of crapola

Like any law, the franchisig laws are only there for those that want to comply. Those that don'tn, the risk/reward is still weighted very much in favour of the franchisor.

Snap On Franchise

We have the opportunity to buy (if that's the correct term) a route/franchise with SnapOn. We have always heard that if you can get one, grab it. My concern is that this particular route has been open for over a year. If this is such a great opportunity, why hasn't someone already jumped at the route. Is it a dead route? Why was it given up? No one will give us any good information to base a decision on. In this economy, I'm not so willing to take that kind of chance. But, I don't want to pass this up if it's going to work out. Any information that can be passed our way would be greatly appreciated.

Ray Borradale's picture

SnapOn - the good info

This comment is not in relation to any specific franchise.

1) Ask yourself how much you will invest? 2) Ask your self how much you lose if you fail and you should include any costs associated with contractual obligations you will incur through to end of term?   Do that before you make any other decisions.

Then listen to your 'gut' when people are withholding the information you need to make a decision or if you cannot manage that then add to the cost of this investment the cost of getting an experienced franchising adviser with a track record to help you.  It won't cost much at all if you consider the second question I asked above.

What you should know here is that you probably don't know what information you need and if you did get it you probably wouldn't know how to interpret it.  I'm not having a 'shot' at you it is just that most people don't and most franchise salesmen love that in a prospect.

You have to consider the franchise financial model and the relationship with the franchisor.  You have to consider the 'dead route' or a 'burnt' customer base.  You have to consider whether the ROI happens within the term.  You have to consider end of term conditions.  Cash Flow and credit effects? You have to consider a whole lot of things.

This is SnapOn and that is a quality product to sell.

The quality of the product is one key to a good investment but there is more to considering an investment.  A good product does not necessarily make a good franchise or a good franchise investment.  Don't get all excited when you see a pretty truck.

This may be the right deal for you - and it may be entry to a nightmare - find out!!  Or don't.

Barbara Jorgensen's picture

waiver by franchisor of royalty obligation due by franchisee.

If the franchisor agrees to waive our franchise obligation to pay the yearly royalty, will he be liable to other franchisees who have paid, or will he have to grant them the same waiver? We are asking for waiver of the franchise royalty fee for this year due to inablility to generate a profit this year; If he does it for us, will he have to waive fees for everyone?

royalty waiver

So what you're suggesting is, you want to get into business, but you only want to pay your bills if you make a profit? Is that the deal that you and your franchisor made when you signed the franchise agreement? If the franchisor doesn't make a profit this year, should they not pay their bills, or no longer afford any kind of support to franchisees (assuming your franchisor supported you at all; some of them don't)?
You're in business: will you waiver the fees and bills that everyone paid you if they didn't make a profit this year?
That's about the most foolish question I've seen posted this year.

royalty waiver

So what you're suggesting is, you want to get into business, but you only want to pay your bills if you make a profit? Is that the deal that you and your franchisor made when you signed the franchise agreement? If the franchisor doesn't make a profit this year, should they not pay their bills, or no longer afford any kind of support to franchisees (assuming your franchisor supported you at all; some of them don't)?
You're in business: will you waiver the fees and bills that everyone paid you if they didn't make a profit this year?
That's about the most foolish question I've seen posted this year.

Re: royalty waiver

not to get into a debate, but this is a valid question, because you are assuming that all bills are always paid, but companies go bankrupt every day due to change in business conditions or many other reasons and so the parties can voluntarily alter the payment terms of any contract. So the question was can the franchisor agree with one franchisee to make a change without having to worry that now he will have to make the same change for all franchisees.

Royalty Waiver by franchisor is likely a bad idea

Franchisors open a Pandora's Box when they make exceptions like waiving royalties. Other franchisees will certainly find out and have an expectation that they deserve the royalty waiver as well.

It is a better idea to put unpaid (arrears or future) royalties into a personally guaranteed short-term interest bearing note payable to the franchisor by the franchisee providing royalty relief, but not forgiveness. The franchisor should demand an interim business plan where the royalty relief is invested in growing the franchisee's business otherwise there is no commercial logic for the franchisor to agree to the relief. It is a very slippery slope for the franchisor to give up royalties and allow a franchise to "free ride". The note itself should be drafted by franchise legal counsel to ensure that it does not diminish any provisions of the franchise agreement and has a General Release from the franchisee protecting the franchisor. If done incorrectly this action could from the franchisor's perspective fall under the category of "no good deed goes unpunished".

Granville_Bean's picture

why?

Why would he have to do it for everyone?

Re: why?

the question is can a franchisor agree with one franchisee to not strictly enforce the terms of the agreement requiring certain payments, and if he does that is he then obligated to provide that same relief for all other franchisees?

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About Franny

Franny's picture

Public Profile

Franny is a columnist for Blue MauMau who answers questions about running and owning a franchised business establishment. Those who have questions can post them under the Ask Franny forum. Readers may comment on the questions there. If the post is answered by Franny, it will be featured on the frontpage of Blue MauMau under the "Ask Franny" column. Franny sometimes invites Subject Matter Experts to answer. Please do not mention your franchisor, vendor or your own firm's name in your question.