Last week, I attended the Annual Forum on Franchising. As always, it was a great chance to connect with peers, share stories, and stay in tune with what’s happening across the franchise industry.
But something stood out this year.
The two most crowded sessions focused on topics that should raise concern for any current or prospective franchisee:
Franchise breaches and workouts between franchisors and franchisees.
People were packed into the rooms, lining the walls, notebooks open, and listening intently. These were sessions about conflict, about legal issues, about what happens when a franchise relationship breaks down.
At first, it just seemed like a shift in interest from franchise disclosure issues. But the more I thought about it, the more concerned I became.
Because here’s what it really tells us:
Franchising is becoming riskier for franchisees.
Every year, individuals and families invest hundreds of thousands of dollars into franchise systems. They commit their time, savings, and often their future to a business they don’t fully control.
And based on what I saw last week, more of those relationships are hitting trouble. It’s almost like a roll of the dice on whether you will end up with responsible franchisor.
Link to But here’s the good news. But here’s the good news.
Franchising still works. When done right, it’s a powerful path to ownership, scalability, and community impact. But it only works if franchisees go into the relationship with clarity, eyes open, and protections in place.
If you’re a franchisee, or considering becoming one, here are three things you can do to reduce your risk before you invest.
Link to 1. Talk to Former Franchisees, Not Just Current Ones 1. Talk to Former Franchisees, Not Just Current Ones
Franchisors will happily connect you with current franchisees. You should absolutely speak to them.
But the most honest and informative feedback often comes from those who have left the system.
Take time to read Item 20 of the Franchise Disclosure Document. It lists every franchisee who exited the system in the past year. Reach out to them directly. Ask why they left. Find out what they wish they had known when they started.
Their insights often reveal parts of the business that aren’t obvious during the sales process.
The people who walked away have stories that current operators might not tell you.
Listen carefully.
Link to 2. Hire a Franchise Attorney Who Knows the Industry 2. Hire a Franchise Attorney Who Knows the Industry
Franchise agreements are unlike standard contracts. They are long, detailed, and heavily tilted in favor of the franchisor.
You need someone who understands how franchise law works. Not your friend who handles divorces or your cousin who does real estate closings. A fellow franchise lawyer posted while at the Forum, “Don’t hire a dabbler.”
A qualified franchise attorney will break down the agreement in plain language. They will help you understand exactly what rights you’re giving up, what obligations you’re agreeing to, and what red flags to watch for.
This is not the time to save money by cutting corners on legal advice.
A few thousand dollars spent now can prevent much larger losses down the road.
Link to 3. Stress-Test the Financials With Conservative Assumptions 3. Stress-Test the Financials With Conservative Assumptions
Most franchisee failures are not the result of a bad brand. They happen because the operator ran out of cash, expected more revenue, or underestimated costs.
Franchisors may show you average earnings or even top-performer data. But you need to run your own numbers and then test them under pressure.
Ask yourself:
- What happens if your costs are higher than expected?
- What if you open later than planned?
- What if revenue is half of what’s projected in your first year?
Build a model that can survive slower growth or unexpected delays. Give yourself margin. Avoid operating on razor-thin assumptions.
The more breathing room you have financially, the more options you’ll have if things don’t go perfectly.
Link to Final Thought: Preparation Is Protection Final Thought: Preparation Is Protection
Those packed sessions on franchise disputes weren’t just full because the topic was trendy. They were full because more franchisees are running into problems they didn’t anticipate.
And the best way to avoid becoming one of them is to prepare differently.
Franchising still offers enormous potential, but it isn’t a guarantee. It requires diligence, discipline, and a clear-eyed understanding of what you’re signing up for.
Remember this:
You are entering a long-term relationship where the other party wrote the rules.
So, take your time. Ask the uncomfortable questions. Seek advice from people who have been where you’re going.
The franchisees who thrive are rarely the ones who rushed in.
They are the ones who took the process seriously, did their homework, and built a strong foundation from the very beginning.
Reach out today for a focused, practical consultation.