Selecting a Franchise Based on a "Discounted Franchise Fee" is a Big Mistake
Recently I came across an article written by an attorney discussing the benefits of buying a franchise in the current economic climate. The assertion raised in the article (an assertion that I completely disagree with) was that now is a good time to invest in a franchise because "in today's economic climate many franchisor's are willing to negotiate and discount their franchise fee".
If you are buying a franchise because of a "discounted franchise fee" you are making a mistake - a big mistake. Why? the decision to purchase and invest in a franchise requires a detailed evaluation of the franchisor and the quality of the franchise system. "Discounted" franchise fees or a franchisor's willingness to negotiate its franchise fee should not be viewed as an "incentive" to purchase a franchise but rather a "red flag" to question the franchisor's commitment to the long term stability of its franchise system. Franchise fees represent a significant source of short-term revenue for franchisors. As a franchise system expands adding "discounted franchisees" a franchisors ability to support its expanding franchise base and business systems may be severely diluted.
In today's economic climate dedicated franchisors focused on the long-term success of its franchisees should not be focused on short-term revenues (generated through the sale of discounted franchises) but rather the continuing development of quality training programs and business systems. Discounted franchise fees are typically accompanied by the addition of unqualified franchisees and the dilution of the overall franchise system.
So if you are considering the purchase of a franchise don't be swayed by any alleged discounts or bargains. Focus on a due diligence process that places an emphasis on a franchisor's commitment to its "business systems" and the overall profitability of its franchisees. Keep in mind that your overall "franchise investment" goes well beyond an initial franchise fee.
