Calling it Quits If a franchisee fails to meet the obligations spelled out in the contract, there are consequences. “When someone does something they contractually said they would not do, we have to stand up and say don’t do that. The result could be losing the franchise,” Sloan says.
“That’s why we are tougher in up-front qualifying,” Dwyer says. “If they can’t make it through the qualifying, they will not make it through the blows of a new division.”
Whether a franchisee is not meeting requirements or they want to sell the franchise, franchisors have rules that govern getting out, all of which are spelled out in their contracts. Some buy back the franchise, while others offer services to help the franchisee sell. Others allow sales but regulate whom the franchisee can sell to.
Maile says he likes being held accountable by DreamMaker. “I wanted to be pushed. Had it been less demanding, I would have been more suspicious about spending the money to purchase,” he says. “The demands were in proportion to what I was paying.”
Before You Buy Federal law requires franchisors to give potential buyers a Uniform Franchise Offering Circular (UFOC). This packet includes contact information for previous purchasers, financial statements of the seller, background of key executives, and the cost of starting and maintaining the business.
The Federal Trade Commission offers suggestions on what to do before you purchase a franchise.
For more information, visit www.ftc.gov/bcp/conline/pubs/invest/franchse.htm