The Problem with Franchises

MSN (via Franchise Business Opportunities) ran this article on “start easy with a franchise or business opportunity”. Supposedly that’s always the “safe way” to get into business.

There are great “shortcuts” involved in starting a franchise if you have the money up front.

I was talking with a friend of mine the other day about his franchise.

He used to be a federal employee working for the EPA. There he learned all about gasoline tanks. He decided that since he knew the in’s and out’s he’d buy a gas station that owned it’s own tanks to keep more profits (instead of leasing the tanks and the rest of the property from a national company).

He sold that business and moved here to own a motel, sold that, now owns a sandwich franchise.

What he told me mirrors what I keep reading about other franchse operations.

Like any corporation, they can start out “lean, mean, and entrepreneurial”.

They used to do “business with a handshake”.

But as the corporation matured, went public, “got too big for their britches” soon the corporation becomes the SOLE SUPPLIER of Everything. That means this man must buy everything from the “company store” and can’t save money by buying from someone else or do that to improve quality (for example - by buying locally grown tomatoes in season here from Amish farmers who have very reasonable prices).

When you’re buying a franchise… ask where the franchise is in it’s life cycle. Talk to other franchise owners. If they’re starting to see the parent company nickel and dime them, it’s not likely to get better.

So I asked him… “would you still rather work for yourself?”

“Most days,” he said.