As part of my educational studies through the International Franchise Association’s (IFA) Institute of Certified Franchise Executives (ICFE); I have had the opportunity to work many different case studies covering a wide array of topics including franchise development. In this course, Franchise Executives learn the proper ethics and standards in searching for the right potential franchisee to award a franchise to. Also covered in the curriculum is the legal compliance aspect in this highly regulated industry. The things a Franchise Development Specialist (FDS) can say and can’t say, legally! I would like to share with you a recent case study that crossed my desk. It is a pure example of how some FDS’s bully prospects into buying a franchise that might not fit the needs of the buyer. I share this with you; so that you are aware of these practices and prepare yourself to ask the right question “Why do I want to own a franchise with this company?” Is it because you were sold by an FDS? Or, is it because you and the franchisor see a long lasting relationship together?
The following case study shows how FDS’s can influence a person by scare tactics and bullying. This is done by spewing rhetoric to confuse and compromise those that are not informed. Pay close attention to the tone of the written word; especially the grammar, LOL. You’ll paint an interesting picture in your mind as you read it. The communication is real, only the names of the companies, prospects and proprietary information have been disguised. This is an actual communication to a potential franchisee of “Alpha” company who is strongly now considering “Delta” company as an option. The rest is reading magic and I encourage you to find the moral of the story.
Hi JOHN DOE,
All I can say that if you feel you have done the correct due diligence…..that’s great and I wish you the best. I however find it odd that that you would let me speak to you to address the “issues”. You could have had a choice of not just 4 to 5 of our unsuccessful franchises and spoke to 50 of their franchises that came to “Alpha Company”- you may have had a different perspective. And for the record because it seems they have danced thru the fees …here they are:
It’s important to note I know who they referred(Bob Doe and Jane Doe) They were terminated from “Alpha Company” for lack of sales activity. This is an unfortunate technique in selling and I did warn you of their style. We deal in facts and the truth will prevail. Unfortunately you, my friend will realize after it’s too late.
More Importantly you seemed concerned over the cost of doing business as a franchise. “Alpha Company” has no required monthly fees. I thought I might just point out what “Delta Company” I’m sure has not mentioned to you.
“Delta Company” MONTHLY FEES:
ROYALTY FEES– Over “Delta Company’s” X year contract you will have paid for your franchise fee again. The X% difference in fees versus “Alpha Company” equals to $X,XXX additional royalty Fee per year or $XX,XXX in X years.
MARKETING FEE*- The Franchise must pay “Delta Company” XX% of Gross Sales or $XXXX to be returned to the franchise end of year- Interest free loan from you to “Delta Company”. Have you spoke to franchises that actually get this back??
ADMINISTRATIVE FEE*-The <BLANK> day of the <BLANK> month “Delta Company” will charge each month to your credit card $XXX . That’s $XXX in the 1st year /$XXX every year after and $XXX over your X year contract.
<BLANK> ADMINISTRATION FEE*-Any mistake on entering <BLANK> is a $XX <BLANK> Fee.
<BLANK> ACCOUNT REBILLING FEE*-Customers Credit Card is Turned Down-you pay a $XX transaction fee.
*”ALPHA COMPANY” does not have this fee
Even if they waive the first years fees you will be paying a significant amount of fees over your X yr. contract. That’s approximately $X,XXX over X years.
JOHN DOE ,you seem like a good guy. If you don’t wish to speak with me just call one X “Delta Company” franchise and hear it from them-ROBERT DOE-<CONTACT INFO HIDDEN>. What do you have to lose? If I’m wrong no foul ,if I’m right I’ll save you from making a mistake. Being a larger company is only an indicator that you have been misled. Their last class had XX people while ours had XXX. Could XXX people be wrong? None of our franchise would say what these trump up “Delta Company” people are saying. Have you called any??
Wow, that FDS is pretty mad. I envision the anger and adrenalin that must have been pumping when this was written; and that poor keyboard, whew! Now every case study is up for opinion; but let us call out some of the obvious. I love that 50 of “Delta Company’s” franchisees have allegedly signed on with “Alpha Company”; but the FDS only gave one of those alleged contact info. Obviously, the tone of the communication needs to be considered! I mean JOHN DOE is still considering “Alpha Company” as a potential choice. How would this make you feel? This tone is meant to bully a potential franchisee in to thinking that they are making a bad decision. The rhetoric about the fees is amazing. All franchise systems have fees and royalties. That is the cost of using someone else’s system to run the business. Make sure all the fees are disclosed and NOT hidden. Things like affiliation and technology fees should be disclosed. This is where you, the potential franchisee, need to be informed. You need to read through all of the Franchise Disclosures Documents, which are written in identical fashion, no matter what business category you are interested in. You can actually compare companies side by side, item by item. Be educated, don’t be sold! In fact, as a Certified Franchise Executive I enforce a level of professionalism with my FDS in the field. If anyone is ever treated this way by a member of my team; please email me at firstname.lastname@example.org.
By Tim Courtney, Certified Franchise Executive