Franchise Businesses

Franchise Businesses operate on a franchisee/franchisor relationship. The sales pitch from the franchisor goes like this. "You benefit from our corporate branding" "we have done all the hard work for you" and developed a "unique system". "As you will be part of a large group of franchisee's, you will have buying power, that you would not have on your own".

Lies, lies and more lies. First there is zero benefit to their brand unless they have been around a very long time, think McDonalds. Most people looking at buying a franchise, cannot afford something like McDonalds so investigate all the smaller franchise businesses. These smaller places have no advantage because you get to use their logo, here's a tip, make your own signs and logo.

An even bigger lie that you will get yourself locked into is the myth of buying power. When you buy a franchise you will sign the agreement that states, you will only buy from their "approved suppliers". They tell you that this way they have uniformity across each store (fair enough) and that you can get deals at better prices. (total lie). Their "approved suppliers" will mark up the price, because for each thing you buy as a franchisee, the franchsior will take a commission or kickback if you like. This is for everything. They make alot of money out of you this way, without you even knowing.

Not only does the franchisor make money this way but they may be paid in other forms. Instead of money, the supplier might give them free stock for their company run stores. Big discounts based on volume of sales to franchisee's. There are many tricks. Franchise businesses are not what the media, government or the franchisor make out, they are rife with underhanded practices to strip you of your lifes savings. Don't let them do it to you.

Before I finish I will tell you a true story, first hand as told to me by a Contours franchisee. A little while ago an email was received by all Contours studios stating they now had a servicing company to service the gym equipment and that all studios could get everything fine tuned and checked for $400. Naturally I declined as I saw through it immediately. By now I had worked the system out. Unfortunately for my friend, being a new owner, thought it was a good idea. The servicing guy came out to her studio, spent less than 20 minutes putting grease on the equipment and 40 minutes talking, that's $400 thank you.

Of course my friend was upset and rang the franchisor to complain, the serviceman came back out and spent a little more time there and told the owner the following....

"In future if you don't want to pay that much, ring our office direct and DON'T tell them you are from Contours, then it will only cost you $200"

That is a prime example of the kickback in action -
1. Mark up the price
2. Invent a Mickey Mouse service
3. Franchisee pays ridiculous money for nothing
4. Franchisor takes 50%

There are around 150 outlets, let's assume half took up this offer. Now we know Contours head office made $200 per studio $200 x 75 = %15,000

Unknowingly each studio combined has contributed another $15,000 to the 20 million dollar net profit of this company. Tisk Tisk, you should be ashamed, how can you look yourself in the mirror? There is KARMA, there is judgement day.

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