thefranchisefacts.comStop and Think
Did you know that only 34 percent of franchisees are satisfied with their business?
Updated October 14, 2019 · Public education campaign, New York
Have you thought this through?
TheFranchiseFacts.com is a website with resources to get prospective franchisees to think about whether franchising is right for them. The site was created by Dr. Gabriel Feldman, a noted consumer advocate, whistleblower, and former franchise owner. While franchising has often been presented as an easy way for entrepreneurs to make money, Dr. Feldman found research that brings this assumption into question. Completing all of the activities on this site should take less than 30 minutes and help give a better idea if franchising is the right choice.
What the survey found
of franchisees had a salary under $50,000.
2015 national survey of franchisees, Franchise Grade
would not recommend their franchise to friends and family.
2015 national survey of franchisees, Franchise Grade
Franchisee preparedness quiz
How much do you really know about franchising?
Test your knowledge. You might be surprised at some of the statistics, facts, mythbusters, and expert data we’ve found. Each statement below is followed by what the research shows.
- 1
Compared to the average American making $51,000 annually, most franchisees take home less money in profit.
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.
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.
- 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.
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.
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.
- 5
An estimated 83% of franchisees would not recommend their franchise to friends and family, according to Franchise Grade.
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.
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.
- 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.
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.
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.
US Franchise Blog & Business Opportunity Guides
Three guides, October 2019
- US Franchise Blog & Business Opportunity Guides
The Best US Franchise Businesses Opportunities For 2020
Updated October 14, 2019 · US Franchise Blog & Business Opportunity Guides
Franchising is such a perfect business model, one could almost say that every aspiring entrepreneur should try out a franchise at least once. Franchises don’t have to be forever, since you can always sell an established franchise location to another buyer.
- US Franchise Blog & Business Opportunity Guides
US Laundromat Franchise Opportunities
Updated October 11, 2019 · US Franchise Blog & Business Opportunity Guides
Why should you consider a laundromat franchise? It’s a steady volume business that’s future-proof and recession-proof. In fact, more consumers use laundromats in today’s more mobile lifestyle.
- US Franchise Blog & Business Opportunity Guides
The Best US Tech Franchise Opportunities
Updated October 8, 2019 · US Franchise Blog & Business Opportunity Guides
There is no mistake, technology is the most exciting business industry today. Worldwide adoption and dependence upon information technology have made the majority of world-class billionaires on any list.
Franchise fee and start-up cost, as stated in the guides
| Franchise | Franchise fee | Start-up investment |
|---|---|---|
| WaveMAX | $49K | $600K |
| The Eco Laundry Company | $30K | $300K |
| Maytag Commercial Laundry | $0 | $75K |
| uBreakiFix | $40K | $60K – $220K |
| CPR-Cell Phone Repair | $45K | $58K – $176K |
| CMIT | $25K – $35K | $127K – $173K |
| Experimax | $49.5K | $144K – $316K |
| TeamLogic IT | $40K | $94K – $137K |
| Wireless Zone | $1K – $25K | $142K – $328K |
| Code Ninjas | $29K | $118K – $387K |
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. Answering yes to a question below advances you to the next step of due diligence you need to perform. Answering no gives you more information and points to further resources that can help you decide whether franchising is right for you.
- 1
Have you researched potential franchises?
Franchising is a huge, trillion dollar business model in the U.S. and some opportunities are better than others. Page 12 of the 2015 survey by Franchise Grade shows 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?
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, that is, hear a mix of positive and negative feedback.
- 3
Did you have a lawyer review the Franchise Disclosure Document (FDD) for common red flags?
Unless you’re fluent in legalese, you’re probably not going to understand much of what is in the franchise agreement. An article in 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?
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.
- 5
Did you research how the franchise is performing?
Item 19 of the FDD, which franchisors are required to give you with the agreement, details the financial performance of the franchise. In addition to this Item, you need to find a third-party source to truly determine how a franchise is performing financially. Your best bet is to talk to current and former franchisees and ask them how their business is doing.
- 6
Do you know how much capital you need to launch the franchise and keep it running through its initial months?
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?
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.
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. This diagram shows where franchising and marriage overlap.
Franchise
- Compromise often not encouraged
- No honeymoon with franchisor
- Commitment made with little fanfare
- Franchisors tell you how to run the business
Both
- 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
Marriage
- Compromise encouraged
- Honeymoon
- Commitment made with pomp and circumstance
- In-laws tell you how to raise your kids
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. The questions below determine a Franchisee Personality Type and a readiness grade.
- 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 four personality types
The Calculator
Franchise readiness grade: F
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.
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
Franchise readiness grade: D
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.
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.
The Learner
Franchise readiness grade: C
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.
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.
The Worker Bee
Franchise readiness grade: B
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.
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.
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.
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.
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
NEW YORK – May 17, 2016
TheFranchiseFacts.com Highlights Franchising Risks and Myths
DR. GABRIEL FELDMAN, NOTED PUBLIC ADVOCATE AND WHISTLE-BLOWER, LAUNCHES PUBLIC EDUCATION CAMPAIGN TO SAVE NEW ENTREPRENEURS FROM MAKING A FATAL MISTAKE
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.
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.”