Everybody thinks all they have to do is buy a big name franchise, sit back and become
a millionaire.
But what you don't know, but should know is people quite regularly lose all their money,
their retirement funds their nesteggs buying into franchise industry hype.
In this video I'll tell you why it's unlikely that big name franchises wont make even close
to what you expect, and if you aren't careful you could lose everything.
New logo and new branding, Lots of changes at franchise city over the coming weeks.
We are going to go outside franchising and discuss business, investments and making money
in general so stay tuned for that.
So let me be the one to say it.
If you are not careful you can very easiliy lose your money in franchising.
That might sound strange coming from someone who is in the franchise industry but to say
otherwise is ignoring hard facts.
Now it's sad that despite all the information available online, services like ours that
educate franchise buyers, and more data available than ever before - most people still think
buying a franchise, and usually a food franchise is a guaranteed no risk ticket to riches.
If you follow this channel you will see our videos that show how Subway, the franchise
everyone thinks they should own, is actually the 2nd lowest earner in the QSR50, and how
they closed about 350+ stores in 2016 and closed over 900 stores in 2017.
These are real, people with real lives who have nothing to show for hard work.
You will also see videos on McDonalds franchise average earnings and how they dropped.
You will see videos on many franchises that provide hard data illustrating the other side
of the franchising equation.
Now there are good franchises, even great franchises but they usually aren't the ones
people are thinking of.
So given this available information why do people still make these terrible franchise
buying decisions and end up barely making a living, or worse, losing their money.
Well they buy for all the wrong reasons.
And unfortunately that's why sites like unhapyfranchisee.com are filled with people who went bankrupt because
they used all these wrong reasons to make their franchising decision.
So what are these bad reasons why people lose their money?
First is social validation.
Our brains are hardwired to equate these big numbers with success.
There are over 33,000 Subway franchises worldwide that must mean they will make me successful.
I'll be part of this huge winning team........
Oh that franchise I have never heard of - I don't want to even look at that one.
There are almost 37,000 McDonalds restaurants worldwide that must mean I will be a success
if I join this huge powerful organization.
Plus the last 3 times I went to that restaurant it had a lineup waiting for food!
Plus the Franchise 500, another huge organization with enormous media clout voted McDonalds
as their #1 franchise.
In fact everywhere I look I see these companies over, and over and over again with extremely
positive social validation.
How can I fail.
Now most people then use these social validators, and positive feelings to construct an emotionally
charged vision in their minds.
Oh honey can you imagine every day we go into our franchise sun is streaming through the
windows, happy customers existing in peace, money raining down in huge, huge bags......
This is called emotional momentum.And the more emotional momentum people have the harder
it is to abandon this franchise even if you hear negative things later on in the process.
Now how might that work?
Well call any major franchise today, right now, and say, I want to buy a franchise how
many of your franchises have closed up over the last 3 years, what is the franchise failure
rate, and your franchisee satisfaction rates.
You wont get it.
They won't tell you.
They're going to tell you to complete an application and wait.
While you are waiting on the edge of your seat, hoping to join the 10's of thousands
of other super successful franchise owners you naturally start dreaming about how great
this business would be..... sun is streaming through the windows, happy customers existing
in peace, money raiing down in huge, huge bags......you know the deal......
Then the franchise finally calls ...you were accepted!!
And some really sexy glossy promotional literature is sent, offical looking corporate stuff,
and emotional momentum will often force you to miss or even ignore the boring old numbers
that you don't want to look at because it is not in keeping with your emotional momentum,
with this blissful image in your mind.
We see it all the time people ask us about their franchise idea and when we give them
hard financial facts, taken right from the books of the company, they don't want to hear
it.
Their eyes gloss over and all they hear me saying is blablabla
and we become the bad guys trying to tear this wonderful dream away from them.
Once this emotional momentum builds up - its hard to get people away even with the facts
and figures.
People..... facts and figures are what should be guiding your decision not emotional momentum,
or social validation, or beautiful thoughts of how awesome your life will be once you
own this franchise.
OK great Robert so we know not to use emotional momentum, or social validation but what about
the Franchise 500 ranking McDonalds as #1?.
Surely we can use the data from Entrepreneur magazine, one of the biggest and best, to
guide our decisions?
Well did you read the fine print for the Franchise 500?
There is a disclaimer stating they dont endorse or recommend any brand and they dont measure
subjective elements like franchisee satisfaction or management style.
So how are the franchises in the 500 picked?
From the Franchise 500 website: All companies are judged by the same criteria:
objective, quantifiable measures of a franchise operation.
The most important factors include financial strength and stability, (Really, these are
the numbers taken from statista from 2013 to 2017 for McDonalds .....thats not the way
I would think the numbers should go for financial strength and stability for the #1 franchise
growth rate and size of the system.(so if a company sells a ton of franchises with really
heavy sales techniques they go to the top, even if franchisee satisfaction is terrible
because remember they don't check that) We also consider the number of years a company
has been in business and the length of time it�s been franchising,(heres a long list
of franchises that were around a long time and went bankrupt) startup costs, litigation,
(OK GNC has more litigation than I have ever seen and is #85 on the Franchise 500, and
7-11 not too far behind and they are #2 - so is it the companies with the most litigation
are at the top?) percentage of terminations and whether the company provides financing.
(Really.
so if a company provides financing that supposedly great criteria to use.
They then go on to say The objective factors are plugged into an exclusive Franchise 500�
formula, with each eligible company receiving a cumulative score.
(Thumbs up)
Now let's be honest.
People use this 500 list all the time to validate investment decisions.
Despite Franchise 500's disclaimers telling people "The Franchise 500 is not intended
to endorse, advertise, or recommend any particular franchise" franchises do use their banners
on their websites to do exactly that.
In fact this franchise has the Franchise 500 banner rankings listed below text stating
"THE PROOF".
This franchise claims that the Franchise 500 is absolute proof their franchise is a good
investment.
So people see this social validation, they think this must be great and they absolutely
do use these rankings to make their decision.
Now I have blocked the name of the company out but This company that was ranked "Top
Global Franchise, and "Best of the Best" by Franchise 500, closed over 625 stores in the
last 3 years.
And that is how you lose money in franchising.
remember -use information like the Franchise 500 and other ranking systems
what they are.
entertainment - they even caution you to do so on their websites.
They are handy to have but if you use any of them to make your final decision you have
no one to blame but yourself.
And the really sad part is to see people after working 30 to 40 years hard at their career
having saved and scrimped for a great retirement, using illogical reasons to invest.
Be careful, be critical, avoid emotional momentum and forget about social validation when making
a decision.
Ill put links to other videos here on the screen like The Truth about McDonalds, Top
reasons to Not Buy a 7-11, and 4 Top Reasons to not buy a Subway, and you can subscribe
to us right here.
If you need help finding, researching or buying a franchise give the experts a call AT http://www.franchise.city