Did you know
that only 34 percent
of franchisees are satisfied
with their business?

Have you thought this through?

Franchisee preparedness quiz

How much
do you really know
about franchising?

Test your knowledge in our quiz. You might be surprised at some of the statistics, facts, mythbusters, and expert data we’ve found.

1.Compared to the average American making $51,000 annually, most franchisees take home less money in profit.
  • true
  • false
INCORRECT ANSWER

A 2015 survey by  Franchise Grade found that about 79% of franchisees had a salary under $50,000.

2.Only about 34% of today’s U.S. franchisees are satisfied with their businesses, according to Franchise Grade.
  • true
  • false
INCORRECT ANSWER

Franchisee dissatisfaction can be caused by a variety of different factors, including disagreements with the franchisor, failure to meet revenue expectations, or simply the stress of keeping the business up and running. Franchise Grade also reported that only 31% of franchisees felt they could get a fair price for their location if they wanted to sell. This means it would be unlikely you could recoup your investment if you wanted to plan an exit strategy. Make sure you look over our  Path to Franchising Due Diligence to ensure you are prepared for the challenges.

3.A majority of franchisees are required to pay a mandatory cost in the form of royalties and advertising fees to the franchisor. These can range anywhere from 5-40% of a franchisee’s annual net profit.
  • true
  • false
INCORRECT ANSWER

The amount you are required to pay can also increase. A nationwide survey from  Franchise Grade found that about 70% of franchisees reported increases in mandatory fees and charges since they first signed the Franchise Disclosure Document (FDD).

4.It’s important to have an attorney review the FDD for common red flags and to advise you during negotiations prior to signing anything.
  • true
  • false
INCORRECT ANSWER

67% of franchisees said “yes” when asked if they had an attorney review the franchise agreement, and 76% consulted with an advisor of some kind (an attorney, consultant, or accountant), according to Franchise Grade. If your attorney raises red flags, pay attention! Learn the most common red flags to look out for with  Franchise Help.

5.An estimated 83% of franchisees would not recommend their franchise to friends and family, according to Franchise Grade.
  • true
  • false
INCORRECT ANSWER

The same survey found that the majority of franchisees (63%) had not owned a business of any kind before getting into franchising. An article in  Forbes details how franchisors are increasingly looking for franchisees with more entrepreneurial experience.

6.Once the FDD is finalized, franchisors cannot change the operating manuals or procedures.
  • true
  • false
INCORRECT ANSWER

Franchise Grade found that about 75% of franchisees received changes to their operating manuals or procedures. These changes resulted in increased operating costs for the franchisee. Regarding the FDD, only some parts are negotiable, and you shouldn’t expect your changes to always be approved by the franchisor. For more franchisee advice, head to  BlueMauMau.

7.The success rate for franchised, start-up businesses is typically higher than for non-franchised start-up businesses. After 10 years, the failure rate for franchised businesses runs between 10 and 20 percent.
  • true
  • false
INCORRECT ANSWER

This is a common myth.  These outdated statistics have been cited repeatedly over the last 20-30 years, but were never confirmed in any reliable, independent studies. Franchises are said to  fail at about the same rate as independent businesses, according to an article in Forbes.

8.Franchisees are usually encouraged to speak out about problems within their franchise system without fear of negative consequences or reprisals.
  • true
  • false
INCORRECT ANSWER

Your response may vary depending on the franchise, but Franchise Grade found that 46% of respondents said “yes” when asked whether their franchisor indicated there were negative consequences to participating in a franchisee association or speaking out about problems within the franchise. You should take our  Franchisee Personality Quiz to check to see if you have a personality suited to following orders.

You've answered correctly
on 8/8 questions.

Now that you know a little more about franchising...

See what franchising has in common with another major commitment: Marriage

Franchising Vows

Franchising and marriage: On the surface, the two don’t seem to have a lot in common. But when you look closer, you will find that they both require a serious commitment and due diligence. Check out this diagram to see where franchising and marriage overlap.

Franchise

Marriage

  • Compromise often not encouraged
  • No honeymoon with franchisor
  • Commitment made with little fanfare
  • Franchisors tell you how to run the business
  • Need to do due diligence before committing
  • Multi billion dollar industry
  • Large percentage dissatisfied
  • Need excellent listening skills
  • Legal advice generally required with termination of contract
  • Need substantial financial resources
  • High likelihood of going into debt
  • Compromise encouraged
  • Honeymoon
  • Commitment made with pomp and circumstance
  • In-laws tell you how to raise your kids
Do you know what franchising and marriage have in common, but how they also differ?

Like marriage, franchising is a serious commitment

Make sure you do your due diligence before you commit to franchising by checking if your personality is a good fit for it.

Franchisee personality quiz

Do you have the right
personality for franchising?

It’s worth finding out before you commit yourself to a business that is not suited for everyone. Answer the questions of this quiz to find out your Franchisee Personality Type and see if you’re ready for the commitment.

1.The song that best describes my interest in franchising is:
  • ADaydream Believer – The Monkees
  • BMoney (That’s What I Want) – Barrett Strong
  • CGetting Better – The Beatles
  • DTaking Care of Business – Bachman Turner Overdrive
2.When I experience stress in the workplace, this is my reaction:
  • AWhatever. I can think of a way out of it.
  • BI completely and utterly lose it.
  • CI bite my fingernails while I try and work through the project.
  • DI work my fingers to the bone to make myself forget about the stress.
3.Which of the following characters best represent your entrepreneurial personality?
  • AMark Zuckerberg – The Social Network
  • BDilbert – Dilbert
  • CJerry Maguire – Jerry Maguire
  • DTess McGill – Working Girls
4.What do you do if you have to complete a task you think won’t be profitable?
  • AI present an alternative to my superior with clearly defined reasons as to why it will improve the overall profitability of the company. I know he’s the boss but I think I know better.
  • BI grit my teeth and work on the assignment, knowing full well it will never succeed.
  • CI take an online quiz to help me decide the best course of action.
  • DI complete it anyway. At least I can’t be blamed if it doesn’t help the company.
5.You win the lottery after opening your franchise location. What are you going to do with the winnings?
  • AI start my own side business separate from the franchise. I can’t be contained by just one business!
  • BPurchase a brand-new Maserati.
  • CPay off my student loans. You wouldn’t believe how much I still have left!
  • DSave it for a rainy day. Or at least a not so sunny day.
6.The best part of owning a franchise will be _____
  • AOpening a new gelato store. I have a great idea for a fried pistachio gelato.
  • BBeing my own boss. I’m tired of working for the man.
  • CLearning exactly how french fries are made.
  • DHelping to serve chicken nuggets. Every. Single. Day.

The Calculator

You’re the kind of person who likes to play it safe and have a stable work environment and life. You avoid taking unnecessary risks as they often bring you high levels of stress. You’re most interested in finishing out the work week and bringing home money to provide for yourself and your family.

Franchise Readiness Grade: F

If you’re looking for a stable work environment, franchising might not be right for you. Whether it’s long hours or inconsistent paychecks, being a franchisee is a lot of stress. We suggest sticking with the normal 9-5 route or investing your hard-earned money into a less risky investment so you can sleep at night.

The Independent Thinker

You’re a free spirit who loves taking a creative approach to problems. You’re constantly looking for a new venture and you often wake up in the middle of the night to write down your next great idea. You have owned multiple businesses before and are on the lookout for new opportunities.

Franchise Readiness Grade: D

Being creative and independent makes for a great personality in other industries but probably not in franchising. Creativity is not always encouraged in franchises and you could find yourself getting restless without being able to express your ideas freely. We recommend you take our Franchise Preparedness Quiz if you still think you are ready for franchising.

The Learner

You are not a natural entrepreneur but are willing to put in the time to learn. Whenever you find a problem you can’t solve, you strive to find a solution, no matter how long it takes. Stress makes you nervous but you can handle it a little better than most.

Franchise Readiness Grade: C

You have some of the qualities that make for a good franchisee but not all of them. You might want to consider going into this venture with a more experienced partner. Franchising is a fast-paced world and there’s not a lot of time for on-the-job training. Regardless of what you do, we’d recommend completing the rest of the activities on our site and doing A LOT more research before you commit to franchising.

The Worker Bee

You are a hard worker who rolls with the punches and can adapt to new situations on the fly. You’re able to follow directions to a tee and you thrive on pressure. You’re a cog in the machine and are happy to play that role if it means your business will be successful.

Franchise Readiness Grade: B

You seem to have a lot of the qualities that might make for a good fit for franchising. You’ve owned your own business before, you enjoy following orders, and you’re fine working inconsistent hours. Complete the rest of the activities on our site to make sure you are ready for franchising.

Still think you are ready for franchising after taking our test?

Think again. See what research you need to perform by completing our Path to Franchising Due Diligence.

The Path to Franchising Due Diligence

Franchising is a serious commitment.
Do you know the steps you need to take?

Franchising is a big commitment. And like any commitment, you need to do the necessary legwork before you go deeper into the process. If you click “yes” in response to the questions below you will be advanced to the next step of due diligence you need to perform. Clicking “no” will give you more information and guide you to further resources that can help you decide whether franchising is right for you.

1.Have you researched potential franchises?
  • yes
  • no

Franchising is a huge, trillion dollar business model in the U.S. and some opportunities are better than others. Check out page 12 from this 2015 survey by  Franchise Grade to see what kind of research franchisees performed before signing on to a franchise.

2.Did you speak to a minimum of 10 current or former franchisees?
  • yes
  • no

Well you should be speaking to everyone within a 100-mile radius, but 10 will do. Make sure you speak to someone on each side of the spectrum (i.e. hear a mix of positive and negative feedback). Take our  Franchisee Preparedness Quiz to get an idea of the level of satisfaction of current franchisees.

3.Did you have a lawyer review the Franchise Disclosure Document (FDD) for common red flags?
  • yes
  • no

Unless you’re fluent in legalese, you’re probably not going to understand much of what is in the franchise agreement. This article from  Forbes explains why you really need to hire an experienced franchise attorney before you sign on the dotted line.

4.Were there items in the FDD with which you weren’t initially comfortable, but tried to change?
  • yes
  • no

While changes can be very difficult to negotiate, you should at least try. Joel Libava, also known as the Franchise King explains why this is so important in  this article.

5.Did you research how the franchise is performing?
  • yes
  • no

Item 19 of the FDD, which franchisors are required to give you with the agreement, details the financial performance of the franchise. However, in addition to this Item, you need to find a third-party source to truly determine how a franchise is performing financially. You can find financial performance information through the franchise’s SEC filings if they are a public company or you can purchase a  PrivCo report on the company’s financials. Otherwise, your best bet is to talk to current and former franchisees and ask them how their business is doing. If you’re unsure of how to ask this question,  The Franchise King has some good advice.

6.Do you know how much capital you need to launch the franchise and keep it running through its initial months?
  • yes
  • no

Some franchisees invest up to $2 million to get the franchise launched and geared up. Whatever the case, do as much research as you can to ensure you are not undercapitalized.

7.Are you aware that it may take several years for you to recoup your initial investment?
  • yes
  • no

The common misconception of franchising is that it’s easy money. The truth is that even as your franchise begins making money, it may take years for you to break even let alone recoup your investment. Our Franchise Preparedness Quiz provides some statistics about annual profit that might surprise you.

You've answered "YES"
on 8/7 questions.

YOU'VE COMPLETED YOUR PATH TO FRANCHISING. BUT THERE'S STILL MORE DUE DILIGENCE TO BE DONE.

Now what? We recommend taking a look at some of the other franchisee resources on the Internet to make sure you are fully prepared if and when you decide to buy a franchise.

Resources

There are countless articles and websites about franchising on the web. How is a prospective franchisee supposed to know where to start?

TheFranchiseFacts.com scoured the web for the best and most objective franchising websites. The resulting list represents a recommended starting point for prospective franchisees for their research.

Looking for more data about franchising? This national survey from Franchise Grade has some surprising statistics about franchisee satisfaction.

Blue Mau Mau ( www.bluemaumau.org) – News website that covers both positive and negative stories and opinion pieces about franchising. It also has a ranking of the best and worst franchises to buy. The site is funded through advertisements though not from any franchisors.

The Franchise King ( www.thefranchiseking.com) – Joel Libava, also known as the Franchise King, is a paid franchisee consultant who also routinely blogs about the best and worst reasons to get into franchising. He has strong opinions on the International Franchise Association and seeks to ensure that only individuals who are the right fit for franchising make the leap into the industry.

Franchise Grade ( www.franchisegrade.com) - Site that has grades for 2,387 franchise systems in the U.S. The site’s 2015 National Survey of Franchisees surveyed 282,809 franchisees nationally. The site does not yet use franchisee satisfaction as a major factor in its grading process, which is why we recommend using this site in conjunction with Franchise Business Review for your due diligence.

Franchise Business Review ( www.franchisebusinessreview.com) – This site provides reviews of franchises and also publishes an annual “Top Franchises” report that ranks franchises based on a survey of their owners. To our knowledge, this remains the only site using franchisee satisfaction data to produce an annual “Top Franchises” list. The site is free to use and makes its money through custom reporting, consulting, and other services for franchisors.

The International Franchise Association ( www.franchise.org) – Founded in 1960, the IFA is one of the largest organizations representing franchising and hosts annual conferences for franchisors. They have advocated for 3rd party franchisee satisfaction surveys though as of this writing, only Franchise Business Review uses such surveys in grading franchisors annually. The IFA lobbies the government on behalf of franchisors so it should be noted that it has a close relationship with them.

American Association of Franchisees and Dealers ( www.aafd.org) – The AAFD is an organization that seeks to expose unethical practices in the franchising community. The organization established standards of fair franchising practices, and bestows a “Fair Franchising Seal” upon any franchisor that meets its standards, though only a handful appear to currently meet these. Only franchisees can nominate a franchisor. There is a membership fee to join the association and franchisees can also pay to form a franchise through the AAFD.

U.S. Department of Veterans Affairs ( www.va.gov) - The VA website has links to franchising opportunities for veterans who are looking to get into the industry. Veterans are said to own about 15 percent of all franchises and, on paper, might seem like a good fit for franchising.

About Dr. Gabriel E. Feldman

Dr. Gabriel Feldman, MD, MPH, MBA, MHA, FACPM, was born in Brooklyn, New York and has owned multiple small businesses, including a franchise. He has since worked on curating a significant sample of public domain research about small businesses. He is also a leading public advocate and voice for ethics, whose history as a whistle-blower dates back to 1990.

Dr. Feldman has spent most of his career working in the public sector. He served as a medical specialist for the New York City Department of Health and Mental Hygiene from 1993 to 1997 and was the first national director of colorectal cancer prevention and education for the American Cancer Society from 1998 to 2000. After years working to draw attention to Medicaid fraud, he filed a whistle-blower lawsuit against New York City in 2009, alleging that the city was squandering taxpayer money by purposely giving Medicaid recipients overly generous benefits. The case was settled in 2011, with New York City paying what was then one of the largest whistle-blower awards it had ever paid.

Dr. Feldman lives in New York and graduated from Brandeis University with a BA Degree and completed his MD at the Tel Aviv University Sackler School of Medicine. He completed a residency in public health and general preventive medicine, and received an MPH degree from New York Medical College. He is board certified in public health and preventive medicine. He received his Master’s degrees from Georgia State University. He is a fan of Frank Capra movies, which he credits along with his mother and father, with instilling his sense of right and wrong.

Press Release

DR. GABRIEL FELDMAN, NOTED PUBLIC ADVOCATE AND WHISTLE-BLOWER, LAUNCHES PUBLIC EDUCATION CAMPAIGN TO SAVE NEW ENTREPRENEUERS FROM MAKING A FATAL MISTAKE

TheFranchiseFacts.com Highlights Franchising Risks and Myths

NEW YORK – May 17, 2016 – Gabriel E. Feldman, MD, MBA, MHA, MPH, FACPM, a public advocate and whistle-blower best known for exposing New York City’s role in committing Medicaid fraud, announced today the launch of a public education campaign using only public domain data to raise awareness of the potential pitfalls and real risks of becoming a franchisee. The campaign, Are You Ready for the Franchising Commitment? Stop and Think, centers around a website designed to bring attention to the risks of franchising by way of an eye-opening true or false quiz, revealing personality quiz, interactive guide to franchising due diligence, and light-hearted Venn diagram comparing marriage to franchising. Users can also engage with others considering the franchise business through Stop and Think’s  Facebook channel.

Franchising has long been presented as a safer path to easy money and an ideal industry for entrepreneurs. Yet, according to a 2015 nationwide survey of franchisees by  Franchise Grade, only 34% of franchisees were satisfied with their businesses. Even more striking, 83% would not recommend their franchise to a friend.

“I was alarmed by the statistics in this study,” said Dr. Feldman. “Some people are investing their life savings into franchises, and I felt it was imperative they have a resource to give them all the facts before they go into an industry for which they may not be a good fit.”

Dr. Feldman is a leading voice for medical ethics, whose history as a whistle-blower dates back to 1993. After his attempts to draw attention to Medicaid fraud fell on deaf ears in New York City, he filed a whistle-blower lawsuit in 2009, alleging patients were receiving benefits that squandered taxpayer money. He won a settlement in 2011 that was one of the largest ever paid by the city in a whistle-blower case. As an entrepreneur prior to the fraud case, Dr. Feldman opened a kosher barbecue restaurant in Atlanta, an endeavor which caused him to go bankrupt. That experience motivated his current desire to help prospective franchisees and new entrepreneurs.

The main goal of TheFranchiseFacts.com is to reduce future levels of dissatisfaction, loan default, bankruptcy, and to identify those new entrepreneurs who are least suited to franchising. Visitors who complete the Franchisee Personality Quiz will receive a grade and personality type which estimates their fit for franchising. Other tools include an interactive Path to Franchising Due Diligence; a Franchise Preparedness Quiz that reveals stunning facts and statistics about the industry; and a provocative but realistic diagram comparing franchising to the biggest commitment of them all: marriage.

“While the institution of marriage and today’s franchising business model might not seem to have much overlap on paper, you might be surprised at how much they have in common said Dr. Feldman.

Visiting the website will give potential franchisees a better understanding of the commitment franchising requires, though Dr. Feldman encourages people to look at additional sources of information to make sure they are fully prepared.

“By encouraging prospective franchisees to stop and think before making such a serious commitment, my hope is this website moves the needle on both franchisee satisfaction and due diligence,” said Dr. Feldman. “People should not be left unhappy or bankrupt simply because they didn’t know all the facts before buying into a franchise.”

For further information or interviews with Dr. Feldman, contact Zachary Halper at  862-224-3233 or  zhalper@momentum-cg.com.

This site is not funded by any individual or entity actively involved with the franchising industry, or any active franchisors or franchisees. This site does not constitute an endorsement or disparagement of franchising, or an offer to buy a franchise. The site uses only public domain data, and is not responsible for any information on any links listed. This site is for educational purposes only and does not constitute financial advice regarding franchises, small business, or the franchising industry. The user assumes all risks and liabilities associated with any actions he or she takes regarding franchising or small business after use of the site.

Contact Us

Questions? Comments? Interview requests?

You can get in touch with TheFranchiseFacts.com team
by emailing zhalper@momentum-cg.com.

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