At the moment, franchise regulations leave it largely up to the franchisee to ensure they are not investing in a bad business. Here are a few steps operators can take to keep from falling into a Burgerim-like trap.
The franchisee takes most of the risk in the franchisor-franchisee relationship, and failure means you can lose your business and even your personal assets. Keep that in mind as you look for franchise opportunities.
Favor franchises that provide earnings claims in their franchise disclosure document (FDD). But don’t trust them. Talk with numerous franchisees and get their profit-and-loss statements. Ask them everything you can about the brand.
Simple Google searches of the brand can do wonders. Look up legal actions, Yelp scores, Facebook, Twitter and other social media accounts to see what people are saying about a brand. Talk with customers and visit multiple locations.
Just because a lot of people are opening locations doesn’t make a brand good. Look at the FDD and compare the number of franchises sold with the number of locations open. If a franchise has a lot of sold locations but not many open, that’s a massive potential red flag.
Technomic’s latest global menu innovation showcase reveals a lot of activity at beverage concepts in countries as far apart as Argentina and Australia, France and Indonesia.
The Bottom Line: The casual-dining chain’s owners loaded the company up with too much debt coming out of the pandemic. The result was a predictable bankruptcy.
