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How Franchisee Candidates Can Make Some Franchisor Selling Techniques Passé
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Having worked in the franchise industry for 35 years I've witnessed just about every selling technique used by franchise sales people and developers. In my opinion, the most prevalent practice was providing verbal financial information to prospective franchisees whereby there was no Item 19 disclosure. Another commonly used practice was to provide a list of existing franchisees that prospects should contact for feedback, rather than encouraging contacting any franchisee. Finally, there were a number of franchisors that employed overly aggressive franchise sales representatives. 

It's my opinion that these franchise sales techniques are becoming a thing of the past although it would be naive to believe that these practices have totally disappeared.  To prevent falling victim to questionable sales techniques, candidates can do the following:

1.     Absent an Item 19 disclosure, request any financial representations made by a franchisor representative in writing. If they decline, report the incident to franchisor senior management. A number of franchise professional advise that the absence of an Item 19 disclosure (except for a startup franchisor) should be reason to eliminate that franchise from your list.

2.     Don't limit franchisee feedback from franchisee contacts suggested by the franchisor but rather contact existing as well as any terminated franchisees. Try to gain feedback from a cross section of franchisees; those in operation for one year, three or five years.

3.     Obtain franchise performance data and statistics from credible firms like FranchiseGrade.com, that doesn't promote or sell franchise opportunities.

4.     Contact third party lenders that specialize in the franchise industry to determine if the franchise you're considering is on their list. Certain lenders like Apple Pie Capital have stringent qualifying standards for franchise systems. Ask if the franchise you're evaluating is on their list or was reviewed by them.

5.     Unless you have a strong financial background you should engage the services of a CPA with some familiarity with franchising.

 The franchise industry has raised the bar for franchisors when it comes to marketing and selling franchise opportunities. However, caution should be the watch word, when evaluating any franchise opportunity.  

Posted on December 20, 2015 at 12:34 PM
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