How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
Reading about franchisee missteps is a rite of passage for prospective franchisees in Canada. After all, the best way to avoid mistakes is to learn from the experiences of others who have already made them. However, it's important to note that it isn't just franchisees who make mistakes; franchisors can make them, too, and these errors can impact an entire system and all the franchisees within it.
There is no single way to completely guarantee that the franchisor you are considering is making all the right moves. However, you can do some more digging to ensure they are not falling prey to these typical franchisor missteps.
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Expanding too wide and too fast
Expansion is great for a franchisor, but it needs to be controlled and planned. When a franchisor expands too fast and/or too far, it can actually end up damaging the brand and creating issues for franchisees, such as oversaturated territories. Look at where your franchise is and how they are approaching expansion. Are they growing in markets where there is demand but not enough locations, or are there too many locations in one area or an area without enough demand to support them?
Learn what your franchisor's growth strategy is and consider whether they appear to be following that plan. Decide whether that approach is sound or leaves something to be desired.
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Poor franchisee screening
Not everyone is cut out to be a franchisee. Therefore, it is important that franchisors properly screen candidates and only take on those who are the right fit for the brand. When a franchisor doesn't screen candidates adequately, they can end up with franchisees in the system who do poorly, and this can impact everyone else within the system. Remember that for many people, it's a franchisee location that offers their first impression of a brand. If that impression isn't good, those people are not likely to try a different location, even if it is run by a franchisee who is doing a great job.
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Squeezing too much revenue out of franchisees
Pay close attention to the fees and costs of your franchises. Some brands may essentially have revenue demands that are too high for the average franchisee to profit under, and this is clearly something you need to avoid. Look for a brand that is just as committed to your profits as you are.
