I often get e-mails or phone calls from prospective franchisees, thanking me for the information Dave Thomas and I included in the book Franchising for Dummies. Sometimes they'll recommend topics to include in a future edition, and I frequently respond pro bono to e-mail questions regarding real-life scenarios we couldn't fit into the book.
For most prospective franchisees, the franchise researching and investing process is successful. However, "successful" doesn't always mean without any hitches, as you'll see in a few of these situations.
The Deal Is Different
A couple had been looking at buying a franchise for over a year. During that time, they investigated a number of industries and met with several franchisors. They established the benchmark criteria they felt were important in a franchise, including certain levels of fees, types of services and experienced management. Finally, they made their choice and, full of excitement, went back to the franchisor they had met the prior year to tell them they were ready to invest. Everything was great...until the franchisor sent them a copy of the latest Uniform Franchise Offering Circular, and the couple realized the franchise opportunity had changed. They felt the franchisor was trying to pull a fast one and asked me what to do.
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Franchisors routinely and frequently reevaluate their franchise system for ways to improve its performance. Often, a prospective franchisee won't see the changes, since they might impact operating procedures, field services, training or hundreds of the other details related to the franchisor's operation of the business.
Franchisors also modify their franchise offering to reflect changes to the business or competitive changes as they relate to franchise sales. Anytime a franchisor makes those types of changes, they're included in the new UFOC, which is typically published annually. Changes to franchise offerings are routine, and, unfortunately for this couple, the royalty rate and the overall investment requirements had increased since the prior year.
Once we were able to explain what had occurred, we recommended that they reevaluate the franchisor based upon the criteria they had originally established. In addition, we suggested they speak again with some of the existing franchisees to determine what they thought of the changes and whether those franchisees planned to invest in additional franchise units in the future. We also advised them to talk to the franchisor about buying an existing franchise, to see whether the franchisor would allow them to simply transfer the agreement, leaving in place the terms of the original agreement.
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