Major problems await franchises that are too successful

We use franchises pretty regularly. You get your lunch at a franchise, you get your hair cut at a franchise, you exercise at a franchise, and the list goes on. Because of how saturated our lives are with franchises, I think it’s important to understand the inner workings of them. Plus the more I learn about them, the more fascinated I become.  My buddy, Josh Brown is a franchise lawyer and he’s got all the interesting insider information on franchises. This week on The Pete the Planner Radio Show he posed this crazy question: What if franchise owners are like a jealous mistress?

Huh?

Turns out, the franchisor (the parent company who owns a stake in all the franchises) can easily become jealous of the success of a particular franchise. Yep, you read that correctly. Even though the franchisor gets a 5-10% cut of the franchisee’s proceeds, they can still become jealous if a particular franchise is out performing others in the area. This jealousy can even cause the franchise owner to force the franchisee out. Instead of the small chunk of profit they are getting, they want all of it. They’ll find any legal loophole they can to pick up the store from the franchisee. And since franchise agreements are filled with legalese, any perceived “breach of contract” becomes the leverage the franchisor will use to push out the franchisee. Brutal.

Check out my interview with franchise attorney Josh Brown on The Pete the Planner Radio Show here:

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