Our own Jennifer Lucas, Co-Founder & Franchise Coach, had the honor of being interviewed by FranchiseWire recently for their article: "What are Red Flags to Know When Buying a Franchise?"
Check out her interview and great franchise information from other top Franchise Executives.
Here's the excerpt of her contribution to their article.
“Buying a franchise may be one of the largest financial investments you make, and it’s certainly a commitment you shouldn’t take lightly. Discovering red flags within a franchise brand early is the key to avoiding pitfalls and assessing the potential for success. Five glaring red flags are: unhappy franchisees, high franchisee turnover, a lengthy litigation history, consistent negative feedback and unrealistic financial projections.” —Jennifer Lucas
If you're like us though, you like deeper insight. So here's even more on the topic of red flags when buying a franchise.
Here are 5 glaringly “red” flags to help you choose the perfect franchise brand.
Unhappy (and unavailable) franchisees. It may seem obvious, but a quick way to see if a franchise system is a great choice is to see what those who have already experienced it think about it. If you talk to unhappy franchisees, or worse yet, are unable to get any franchisees to talk to you – this is a major red flag. It likely means the system offers poor franchisee support, like inadequate training, lack of franchisor support, or poor communication between the franchisor and franchisees.
Another obvious red flag, high franchisee turnover. If a franchise has a revolving door of franchisees, it could indicate underlying issues with profitability, support, or overall satisfaction within the system.
A less obvious, but important red flag to search for is litigation history. Check to see if the franchise brand has a history of legal disputes with franchisees, vendors, customers, or other parties.
As with any purchase you make, reviews are like a crystal ball. Search out online reviews, testimonials, and feedback from customers and franchisees. Consistent negative feedback, with limited response from the brand could signal big issues.
Lastly, and maybe the hardest red flag to interpret is unrealistic financial projections. If it sounds too good to be true, it probably is. Be cautious if the franchisor promises unrealistic profit projections or fails to provide transparent financial information during the evaluation process.
Investing in a franchise can be a life changing experience, offering you the entrepreneurial freedom you’ve always wanted. Do your due diligence, and don’t let a few bad brands scare you away from an amazing business concept.
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