How Long Did the Franchisor Run the Prototype Business Prior to Franchising? Find Out!

As a former franchisor I was always under the belief that no one should be allowed to franchise a company unless they had a prototype outlet that was making money, and had been in business for at least 10 years. Later, I realize that there's some business models that were not even around 10 years ago and therefore that would be impossible.

Still, I think it is very important and this is why I recommend that franchise buyers ask the franchisor how long they operated the prototype business before they started franchising. Sometimes you cannot tell from the franchise disclosure documents, as they do not go back far enough in the history section.

A franchisor that operates a restaurant, and yet has only operated a prototype in a couple of markets for a couple of years, sounds a little sketchy to me unless that franchisor also operates under other brand names and has sold lots of franchises and lots of markets previously. Or the owners of the franchising system have been in the business for over two decades and sold lots of different restaurants that all made money.

In fact, I think this point of contention is so important that I would advise franchise buyers to shy away from franchisors that had not run the prototype business for 10 years prior to franchising, except for a few exceptions.

Further, for those franchisors that are selling franchises without a long history or track record, I advise franchise buyers to look over their franchising documents with a fine tooth comb, and contact 10 or more franchisees prior to purchase. Please do your due diligence.

Lance_Winslow

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