The unspoken truths of franchising
With a dealership, you’ll avoid many of the drawbacks, limitations, restrictions, and controls that most franchisors DON’T want you to know about. Here are just some of the pitfalls you’ll encounter with a franchise:
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In addition to GOVERNMENTAL REGULATIONS at both the federal and state level, many countries outside of the USA also regulate franchising. Such burdensome conditions drive the developmental costs of setting up a franchise system to an astronomical level. The only way for the franchisor to recover these costs is to pass them on through an insanely high fee structure, which is why you’ll encounter a whopping franchise fee, a staggering monthly royalty, and a shocking monthly advertising fee. Furthermore, the franchisor, to ensure that they’ll recover their costs, will often lock the franchisee into an ungodly, long-term contract, often running 10, 15, or even 20 years. If there’s no escape clause, there’s no way out!
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A franchise is so bogged down by BUREAUCRACY that the franchisee is often unable to enter vital markets in many states, provinces, territories, and countries.
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In fitness, franchising is so riddled by litigation against the deceitful and deceptive practices of many franchisors that it no longer holds the credibility it once did as a viable business structure.
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Franchisors, almost always, FORCE their franchisees to use ONLY a particular brand and grade of equipment, and REQUIRE that it be purchased directly through them. In the process, the franchisor will drastically mark-up the equipment, way beyond what the franchisee would normally pay, given the opportunity to purchase it on their own! This margin, often a hefty one, is just another little trick, something that franchisors don’t want their franchisees to know they do…something that they use to create an additional revenue stream to help in recovering those astronomical developmental costs. Some franchisors will even FORCE their franchisees to purchase all of their needs through them, including: flooring, mirrors, televisions, office furniture, security systems, and more, all at a fat profit for the franchisor! And if that isn’t enough, some franchisors will even FORCE their franchisees to use equipment that’s painted with their corporate colors and decaled with their logos. This is another little tactic that only benefits the franchisor, by further locking in the franchisee, making it next to impossible for them to get rid of the equipment, thus break away, in the event that they become dissatisfied or wish to switch brands!
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A franchise is set in a tightly CONTROLLED environment, whereby the franchisee is FORCED to follow various rules, regulations, policies, procedures, and methods of business operation. They must not be altered or varied from, and must be strictly adhered to at all times. It’s a very militaristic structure that not only requires an extreme willingness to comply, but won’t tolerate any lack of consistency or deviations from standard policy.
- When it comes to efficient and effective business management, a franchise offers plenty of assistance and guidance, but it’s NOT FREE! The franchise fee is used to recover costs associated with this function.
- The typical franchise fee is normally around $30,000!
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The typical royalty is normally between 5% and 8% of gross revenue, which on sales of $10,000 means the franchisor is going to snap up $500 to $800 of your hard earned money, month, after month, after month!
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The typical advertising fee is usually between 2% and 3%, which on sales of $10,000 means the franchisor is going to swipe another $200 to $300 out of your cash register, each and every month!
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A franchise is undoubtedly the MOST EXPENSIVE way to start and run a fitness business!