I recently went to a seminar on this subject. It was attended by numerous well-known franchisors, as well as representatives of Solicitors, franchise consultants, academics and others from well known organisations.
Unfortunately there was not a franchisee in site!

It is well recognised by franchisors, that having an unhappy ex-franchisee is bad for business. No. Really? Who would’ve thought?

The seminar discussed the basic philosophy about “looking after” departing franchisees by conducting exit interviews etc. All great stuff.

It also discussed the “defensive” actions that franchisors should take – actions that unfortunately do NOTHING to deal with the root cause of the problem, and that simply address the symptoms. (Example: Include clauses in the Agreement to stop franchisees using the franchise name in a website address that may be used to “rubbish” the franchise – XFranchiseSucks.com.au ).

The new Disclosure rules also make it mandatory for franchisors to list franchisees who have left the system – That’s good.
But then it goes on to say something like “unless the franchisor is prevented from doing so by Privacy considerations” - BIG MISTAKE!!!

Why? Because the “lawyer” in the room volunteered that provided the franchisor got franchisees to state in the Agreement that they did not want to be contacted when they left, the franchisor would never have potential franchisees being able to contact ex-franchisees. Yes, simply taking advantage of the BIG MISTAKE above. Lesson: You cannot give franchisors the opportunity NOT to be scrutinised. Having an “out” like this exclusion is begging franchisors to take the gap. Those that have the “correct” culture will not succumb to the temptation.

To the credit of the presenter, he indicated that this was not in the spirit of the new Disclosure rules – good on him!

HOWEVER, the fact is that this is the kind of “blocking” behaviour that potential franchisees should expect. It’s not right and its not fair, but that’s the way it is!
If franchisees think that it’s all “open cards”, and you are being told everything you need to know in order to make a fully informed decision, all we can say is “WAKE UP & SMELL THE ROSES”!
Only you are looking out for you – no one else.

One presenter indicated that research shows that whilst the expected “financial performance” (of the franchise) was not a major issue for incoming franchisees, it was THE major cause of discontent for outgoing franchisees.

Here’s a news flash! - Incoming franchisees believe that they have been told enough about probable future financial performance not to worry too much about it. That’s why it’s no big deal “coming in”.

Now I wonder … Who led them to believe that?

Whilst some franchisees fail because they are lousy operators, many fail because they simply can’t make the numbers stack up. Why? Because in many instances, the financial model can’t meet the “expectation” of financial returns that was created.

So here’s what we have to say to Franchisors: If you want to have ex-franchisees who do not “rubbish” you, make sure that the financial information that you both give them, and that you give them access to (from your franchisees) is indicative of what they can expect, and is verifiable by them.

THIS IS NOT COMPLEX – Simply tell franchisees what they need to know in order to make an informed decision regarding whether to buy a franchise or not.

And as I said at the meeting –The Regulator must ensure that REAL financial data is made available to prospective franchisees in a useful, verifiable and easy to understand format. Until that is done, under-performing franchisees will continue to be disappointed with financial results, and will “blame” the franchisor.

Oops! Another bitter ex-franchisee.

Michael Marcus – The Franchisees Advocate Group
Saving Franchisees. Assisting Independent Business. BEFORE it’s too late!
The Franchisees Advocate Group - Australia
Business and Franchise Help - Australia

Thanks for the article it is amazing how bad of business people some of these franchisors are

Why? Because the “lawyer” in the room volunteered that provided the franchisor got franchisees to state in the Agreement that they did not want to be contacted when they left, the franchisor would never have potential franchisees being able to contact ex-franchisees. Yes, simply taking advantage of the BIG MISTAKE above. Lesson: You cannot give franchisors the opportunity NOT to be scrutinised. Having an “out” like this exclusion is begging franchisors to take the gap. Those that have the “correct” culture will not succumb to the temptation.

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I agree franchisors never want the prospective buyer to talk with a franchisee even the best ones do not want the sales process to be distorted by an disgruntled franchisee

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