Franchisees being forced to pay for a variety of expenses?
An article titled “Owners Say Franchisers Are Passing on More Costs” in the Wall Street Journal today highlights how some franchise companies are asking franchisees to pay for expenses that those franchisees were not supposed to pay in the first place.
Why this sudden way of changing “who pays what”? Well, simply because of the economic situation. What franchisors used to pay for is becoming a real financial burden for them and they don’t want to be responsible for 100% of these costs, which I totally understand and agree with.
Here are a few snippets from the WSJ’s article.
Franchisees of Hollywood Tans LLC, an upscale tanning salon chain, say the company is billing them for maintenance on some equipment they had purchased under warranties that covered servicing charges.
“They’re reclassifying what had been normal wear and tear [and] we now have to pick up” the cost on items such as fans and booth door locks, says Jeff Wogan, who operates a salon in Ranson, W.Va., and is a member of the franchisee owners’ association. He adds that it can take days for someone to show up to fix items, partly because the company’s maintenance crew has been downsized.
These tough economic times are even influencing the training that franchise companies provide:
Training is another contentious area for some franchised systems. “More franchisers are saying, ‘We’ll do it, but only for a fee’ or ‘We’re going to drop that activity,’ ” says Andrew Selden, a franchising attorney at law firm Briggs & Morgan in Minneapolis. “It adds an unexpected cost to the franchisees’ business.” Franchisees in such situations may not realize services they had assumed were contractually promised really were provided at the franchiser’s option, he says.
While I understand that franchise companies want their franchisees to chip in on the various costs associated with the business, I think we may see some lawsuits coming up in the near future. Any comment on this situation is more than welcome. In the meanwhile, hop over to the WSJ to read the full article.
Filed under: Franchise News, Franchise Talk
This is the very reason why it is so important to really evaluate the franchise opportunity before committing yourself to a binding contract. You have to review carefully the FDD and the franchise contract with the help of an accountant and a lawyer to study these documents for your awareness and protection. Conduct your due diligence. Talk to current franchisees to assess the franchisor and the business relationship. Once you start the business, you can’t turn your back just easily if you experience something you don’t like. It’s for your own good to be careful at the start to avoid future troubles.
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