Challenges of Selling the First Franchises
Posted on May 26, 2009 by Lizette Pirtle
Selling or awarding the first few franchises is not always an easy task. One of the main barriers to overcome is the inability of franchisors to discuss financial information about the business unless such information is disclosed in the Franchise Disclosure Document (FDD). Because of inherent problems with earning claims most franchise companies choose to not disclose financial information in the FDD via what is termed earnings claims. (We’ll discuss the use of earning claims in a future posting.) Without the inclusion of earning claims in the FDD the only source of financial information about the business must come from other franchisees. That is, a prospect wishing to know the financial potential of a franchise offering must rely on gaining this information by asking current and former franchisees. For a new franchise company with no franchisees this is a problem.
Franchise prospects can get some idea of the financial potential of the business by visiting the franchisor’s location but they won’t be able to get direct answers about financial potentials from the franchisor. This can become a big issue for prospects evaluating a franchise opportunity.
In addition to the constraints surrounding financial discussions, many new franchise companies fail to correctly assess the work that selling those first franchises entails. They may wait too long to start letting people know about their franchising plans. It is important to be prepared to market the franchise as soon as the documents are ready. A strategy to make this happen should be in place as soon as the decision to franchise has been made.
There are several strategies that help ameliorate the obstacle of not being able to provide financial information. Make sure you get the right advice from a professional franchise consulting firm.
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- Are your Franchise Prospects Thieves?
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Tags: Franchise Sales, Franchise Success
