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Time for the Franchise Industry to Face the Truth

by Ed Teixeira

Like every industry, franchising has its winners and losers, yet the impact from the losers on franchising is more striking.

Anyone with the slightest amount of franchise industry knowledge recognizes that there are certain franchise systems that are flawed. Although the large franchise systems with high franchisee turnover coupled with a problematic franchise program may be publicized by the media, many more continue to operate under the radar.

The good franchise systems that have satisfied and profitable franchisees share positive growth, few lawsuits and a healthy franchisor-franchisee relationship. On the other hand, the franchise systems that are poor performers have high franchisee turnover, negative franchise relations and a steady stream of lawsuits that flow between the parties.

In light of recent pressure being placed on the industry by the SEIU and other groups that lobby for franchise legislation, it's critical that poorly performing franchise systems address their problems and correct them. However, it's easier said than done and one expects these poor franchise systems will continue to ignore their problems and continue selling to unsuspecting franchise candidates.

So long as losing franchise systems continue to operate unabated there will be opportunities for industry critics to use this as an arrow in their quiver. How then does this situation get addressed?

I would suggest the following:

1. There has to be greater exposure and recognition regarding poorly performing franchise systems, especially by the IFA. Historically, the IFA has to my recollection never publicized or acknowledged that there are a certain number of franchise systems that are not up to industry standards. By continuing to make assertions that basically there are no significant problems is a mistake and a head in the sand approach to critiques doesn't work.

2. With the exception of certain start-up franchisors, consultants and brokers should refuse to accept and endorse those franchisors that fail to make an Item 19 disclosure.

3. Franchisors should seize and utilize defensible and accurate performance statistics to promote their franchise.

4. Franchisors should make their Item 19 disclosures as complete as possible.

5. There has to be more focus placed upon franchise systems that are poor performers.

As long as key opinion makers in the franchise industry continue to look the other way when it comes to weak and problematic franchise systems the industry will face criticism from select constituents.


2015 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow.com and Chief Operating Officer, FranchiseGrade.com. He is a former franchise executive and franchisee. He can be contacted at 631-246-5782 or at  franchiseknowhow@gmail.com



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