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Franchises: The biggest risk of your life?

Peter Singler, a franchise attorney in California, who is also counsel to the Culligan Distributors has some very interesting observations about franchises.

Who is Peter? Apart from the former Chair of the American Franchisee Association. Well, he is legal expert representing exclusively franchisees and their associations.

"There are few franchise legal experts in the country, and only a handful that represent exclusively franchisees and franchisee associations. I stay with it because franchisees tend to be hardworking, committed and down-to-earth people who are a joy to work with."

What does he think is the biggest mistake the prospective franchisees make"

"Making a rash or uninformed decision about the franchise system they enter.

This is the biggest (and riskiest) investment a person will probably ever make, and it needs to be given due respect.

People often equate the publicity given to a brand name with the success of individual units or franchisees.

These two are often completely independent of each other, if not diametrically opposed.

For example, the rapid expansion of units or surge in a franchisor's stock can be detrimental to an individual franchisee's businesses."

This is a critical observation.

Don't get attracted to a franchise because you like it as a consumer.

The franchise system may be serving the consumer customer very well - but the split of the money may be largely in the franchisor's favour.

Absolutely critical to put aside the enthusiasm you feel as a consumer and take a hard look at the economics of the deal.

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Full post as published by Misleading Advertising Law on July 17, 2008 (boomark / email).