How to dig your own grave buying the wrong franchise or How to recognize a franchise that's not a franchise

The word "franchise" is associated with reliability and income security. But, unfortunately, this word sometimes hides not the most conscientious business, but in other words — a “dummy” or deceit.

A company that calls itself a franchisor offers a crude business model and makes no guarantees. Franchisees suffer from this. Buybrand did research, studied feedback from over 100 franchisees, and came up with mathematical averages.

Statistics have shown that only 30% of franchisees go to court. Win claims 5%. Others waste time and money on legal fees. We studied the real stories of those who stumbled upon an unscrupulous or fake franchise, and tried to figure out how you can recognize the "franchisor" at the initial stage, which is not worth messing with.

Let's just note for objectivity: among the stories about the poor performance of the franchisor, about 40% — this is the result of a misunderstanding or incorrect work of the franchisee himself. On closer examination, it turns out that in 15% the franchise buyer violated the standards, in 15% he did not calculate the initial investment, another 10% — these are the ones who miscalculated with the location. But in the remaining 60%, the reasons are different. We tell you what.

Not a franchise, but vending

Faith in passive income failed about 20% of franchisees, who eventually abandoned the franchise. Egor has been looking for a franchise for more than a year and stumbled upon a promising business at initial consideration — mini dumplings. Negotiations lasted about two weeks, the franchisor promised a passive income of 100 thousand monthly. As a result, it turned out that the income is not at all passive: dumplings must be sculpted on their own and loaded into the vending machine on their own.

“They are very reluctant to send the contract, and then I realized why. It’s just onerous conditions, where you give them money, they deliver the device to you in six months, and nothing more in terms of the promised support».

Moral: providing a vending machine — it's not a franchise yet. Do not confuse vending with franchising: in the first case, you get a device and technical support, in the second — full business support, supply of ingredients/products, guides, brand book and much more. And most importantly, a conscientious franchisor is interested in your business flourishing. It is enough for an unscrupulous person to sell you a device and leave you to your fate.

Another example of — franchises of household chemicals and cosmetics "in bulk", about 15% of buyers complain about them. “A company under various names that sells vending machines for liquid soap. They take 180 thousand, send 3 shelves and 2 packs of plastic bottles. A lot of people fell for them, », — Igor writes in a group in VK. 

And there are many such reviews about other alleged franchisors. 

Let's note that there are also conscientious companies in this market: the main thing — check the franchise before you buy it. Learn about the history of the company and talk to existing franchisees. And, most importantly, request statistics not only for openings, but also for closings. And find out how long the running points worked. Another simple — see if a particular franchise business is up for sale. If so, find out why — the answer can explain a lot about the viability of the "franchise".

Not a franchise, but a scheme

Another common way to masquerade as a — it is the offer of a "magic scheme" that will allow you to bypass all competitors. One of the brightest examples of — so-called "franchises" alcohol markets. They receive more than 28% of complaints from franchisees. The buyer is promised easy access to a highly profitable market and increased sales through round-the-clock trading. But in reality, this turns out to be a typical "poll": a store with a license to sell alcohol imitates a catering establishment, although in fact it is not. Doing business in this format is prosecuted by law, actively against "pourings"; the State Duma is trying to fight by proposing options for laws. Therefore, the purchase of such "franchises" threatens to lose not only money in the future.

Business on marketplaces

"Avito offers to open your own store on Wildberry from scratch", — shared by enthusiastic potential franchisees. Such offers are often passed off as a franchise. Only in Moscow their — more than 2000. The authors of the ads promise to launch a turnkey business with return on investment and guaranteed income. At the same time, they often claim that they have their own production. That is, in fact, they are looking for an investor, not a franchisee.

The difference is that you are offered to open a completely new business, under your own (not yet created) brand, without an approved product matrix, according to an untested scheme. But on the other hand, with “well-established logistics”. None of this has anything to do with franchising. Unlike official marketplace franchises, which involve the opening of pick-up points (PIU).

Moral: You can enter the marketplace yourself, this does not require an intermediary posing as a franchisor. You need either a finished product or a supplier, and then negotiate with the marketplace without the participation of a third party. This will save you from unnecessary financial costs and minimize legal risks. 

Services instead of franchising

One of the main signs of dishonesty of the franchisor — refusal to provide contacts of existing partners and a ban on sharing information with other potential buyers.

Partners of one of the agencies complained to us that it offers services for the creation and development of its own franchise network, but does not assume any obligations. “They successfully manage to both deceive and excuse themselves in the courts ... And what is most terrible — keep new customers at bay — the very first thing that they give out in training videos — do not communicate with anyone who wants to buy — otherwise we will stop cooperation unilaterally. Therefore, everywhere only positive reviews, — shared Lyudmila, who suffered from the company. She was not the only one left with nothing after buying the alleged "franchise." And all as one say that because of the intricacies of the contract, they drowned in court delays.

"This is a hassle, and due to the small investment and initial trust in the authors, no one goes for this", — recognized by members of the affected franchisee group. Unfortunately, this is not a rare case when a company masquerading as a franchisor protects itself as much as possible from any liability from the legal side, and partners do not have enough strength and funds to continue litigation.

Moral: read the contract. Involve a lawyer who can find "pitfalls" in it; and the very rake that you step on when trying to defend your rights. And, of course, communicate and communicate again with existing franchisees. If the company does not provide contacts, you can find them yourself. If it does, keep in mind that you could only be given the phone numbers of satisfied partners. We advise you to do your own research — perhaps there will be dissatisfied. Their opinion is most valuable.