You want to start a franchise, but you need to make sure you do your due diligence and investigate the opportunity before investing your time, money, and energy. Some red flags can be a warning sign of potential trouble down the road. Today, we’ve compiled some of these red flags so that you can find the best franchise opportunities (and avoid the worst!).
1. Franchisor is not transparent:
If a franchisor is reluctant to provide detailed information about their business, or if they’re providing unrealistic projections of potential earnings, it could be a sign that something isn’t right. The franchise opportunity you choose should have a track record of success and provide accurate information about the potential cost, risks, and rewards associated with investing in their franchise. If you ask a question, they should be willing to answer because they should want you to succeed.
2. Limited support:
A good franchisor offers continuous support to its franchisees. This includes training and assistance with marketing, operations, and other areas to help you get your business off the ground and running. If the franchisor offers limited or no support, it could be a sign that they aren’t invested in you as much as you’d like.
3. Poor track record:
If the franchisor has a history of failing to meet expectations or if there have been an excessive number of franchise disputes and lawsuits, then this is likely one to avoid. Ask for references and dig deeper into the company’s history. These days, we have the luxury of the internet – use it to your advantage and look for reviews and reports.
4. Unethical practices:
If you find that a franchisor is not above board with its business practices or engages in questionable activities, this is a definite red flag. Avoid any franchisors who are known for their unethical behavior or for not following through on promised services.
5. Poor communication:
Communication is critical in any business relationship, especially when it comes to franchising. If the franchisor is not responsive to your questions or requests, this could be a sign of things to come. If the franchisor doesn’t answer your questions and answer your calls at the beginning, this is only going to get worse over time.
6. Unclear fees:
Be aware of any fees that are associated with the franchise opportunity. Make sure you understand exactly what these fees cover and how much they cost. Avoid franchisors that are not upfront and transparent about the costs associated with their franchise opportunity.
7. Unsatisfied customers:
Research franchise opportunities by reading reviews and speaking to existing franchisees. If there are multiple reports of dissatisfaction among customers, this is usually a red flag that the franchise is not a good investment.
8. Unprofessional marketing materials:
If the franchisor’s website, printed materials, or presentations appear sloppy or outdated, this could be an indication that they’re not invested in the franchise opportunity. Invest your money elsewhere.
With all these red flags in mind, take the time to do your due diligence and research any potential franchise opportunity before investing. Talk to existing franchisees and read reviews online. If you’re still unsure, look for a franchise consultant or lawyer who can provide additional insight. Don’t let yourself be fooled by a franchisor who appears too good to be true; many times, they just are. Make sure you’re making the right decision for your future!