5 Things Franchise Sales Representatives May Not Tell You

Before you sign that franchise agreement, here’s what you need to know from someone with 24+ years in franchising

Franchise sales representative are good at painting a compelling picture of financial freedom and business ownership that comes form franchise ownership. Heck, it’s their job!

After 24+ years in the franchise world — first as a franchisee, then as a Franchise Consultant helping others navigate these waters (I’m not a Franchise Consultant/Broker anymore), I’ve learned that franchise sales representatives, while not necessarily dishonest, have incentives that don’t always align with yours. They’re focused on closing deals, and there are crucial details that rarely make it into those initial conversations.

Here’s are the things that today’s franchise sales representatives may not always tell you. Buckle up!

The Franchise Territory You’re “Guaranteed” Might Not Be What You Think

When franchise reps talk about territory protection, they make it sound ironclad. You’ll have exclusive rights to your area, they promise. No competition from other franchisees in your brand, they say.

What they don’t emphasize is how narrowly that territory might be defined, or how it’s not actually protected.

For instance, year ago, I received a call from someone I helped match a franchise opportunity to. And he was angry.

It seems that his “protected” territory wasn’t actually protected.

That’s because another rather aggressive franchisee the next county away was marketing in his territory. Like my candidate, I was, shall we say, surprised.

It seems that the Franchise Agreement allowed other franchisees to market in other territories. I had no idea that was in the contract. Either did my client.

So, the next thing I did was call the corporate office to share my dismay. They did nothing and said, “that’s how it is.” Shortly thereafter, my candidate went out of business.

And it was because of that specific situation, along with several others that caused my candidates to go out of business that I left the world of Franchise Consulting/Brokering. This is what I do now to help prospective franchise owners.

Bottom line?

The fine print matters enormously here.

Some franchises define territory by radius, others by zip codes, and still others by more complex demographic boundaries.

So, ask for a map with clear borders, and pay close attention to any language about “modifications” or “adjustments” to territorial boundaries in your franchise disclosure document. or territory protection. Preferably with a Franchise Attorney.

The Financial Projections Are Carefully Crafted

Lots of franchise presentation include tantalizing financial revenue disclosures — charts showing how much you could do in sales in year one, two, and beyond. These numbers aren’t technically lies, but they’re often best-case scenarios based on top-performing locations in ideal markets.

In a nutshell, Franchise Disclosure Document includes an “Item 19” that shows actual financial performance of existing franchisees, but many franchises don’t include this information at all. And I’m okay with that. Why?

Because the way to find real-life earnings are by talking to existing franchisees.

Finally, remember that revenue isn’t profit — factor in all your costs, including the ongoing royalties, marketing fees, and your own salary needs when you’re making any type of projection.

The “Proven Business Model” Has Geographic Limitations

Franchise sales representatives love to talk about their proven business model — and they’re not wrong that the concept has worked somewhere. But what worked in Phoenix might not work in Portland, and what succeeded in a suburban strip mall might fail in an urban downtown location.

Consumer preferences, local competition, demographics, and even climate can dramatically impact how a franchise concept performs in different markets.

For example, a smoothie franchise might thrive in health-conscious California but struggle in the Midwest.

A home services franchise might work beautifully in suburban areas with lots of single-family homes but face challenges in dense urban markets.

So, before you buy into any franchise, research how similar concepts perform in your specific market.

Visit existing locations at different times of day and week.

Talk to local customers about their preferences and spending habits.

In short, the business model might be proven, but is it proven for your particular situation? Find out!

The Support You’ll Receive May Diminish After Opening

During the sales process, some franchise representatives paint a picture of ongoing support that sounds almost too good to be true. Training, marketing assistance, operational guidance — they’ll be there every step of the way, they promise. The reality is more nuanced.

Most franchisors do provide substantial support during the initial training and opening phases. It’s in their interest to help you succeed.

But once you’re operational and paying monthly royalties, the level of hands-on support sometimes decreases. It shouldn’t.

That dedicated business coach who helped you through opening week? They’re now focused on the next batch of new franchisees. The marketing materials that seemed so comprehensive? You might find yourself largely responsible for local marketing efforts with minimal guidance. Sometimes.

Now, this isn’t necessarily a problem if you’re prepared for it, but it catches many new franchisees off guard.

That’s why you need to ask specific questions about post-opening support:

How often will you hear from headquarters?

What kind of ongoing training is provided?

Who do you call when you have operational problems, and how quickly do they typically respond?

The Exit Strategy Isn’t Always Straightforward

Franchise sales representatives focus on getting you excited about the opportunity, not on what happens if things don’t work out. But understanding your exit options is crucial before you sign anything.

Many franchise agreements include restrictions on selling your business.

For instance, you’ll need franchisor approval of the person who wants to buy your franchise business.

Plus, in most cases, the new owner will need to go through the same training and approval process you did.

One more thing: some franchise agreements include non-compete clauses that prevent you from opening a similar business in the area even after you sell.

Potential Ugliness

In worst-case scenarios, if your franchise fails, you might still be responsible for ongoing lease payments, equipment loans, and other obligations even after you’ve closed the doors. I’ve seen former franchisees stuck with lots of financial obligations from a business that no longer existed.

Before you sign, understand exactly what your exit options are.

What happens if you want to sell?

What if the business fails?

What ongoing obligations might you have? This isn’t pessimistic thinking — it’s smart business planning.

Moving Forward with on a Franchise Purchase With Eyes Wide Open

None of this is meant to scare you away from franchise ownership.

Franchising can be an excellent path to business ownership for the right person in the right situation. But the key is going into it with realistic expectations and a clear understanding of what you’re actually buying.

Take the time needed to thoroughly review the FDD.

Talk to lots of current and former franchisees — not just the ones the company refers you to, but ones you find independently. And, always hire a franchise attorney to review the agreement before you sign.

Most importantly, remember that the franchise sales representative’s job is to sell franchises, not to ensure your success. They’re not your advisor — they’re a salesperson. The due diligence is up to you.

With all these things in mind, the best franchise owners I know are the ones who went into the relationship understanding exactly what they were getting and what was expected of them. They asked the hard questions upfront and made their decisions based on facts, not excitement.

Your dream of business ownership deserves that level of care and attention.

Right?

(Check out my Objective Franchise Opportunity Evaluations, so you can avoid a $200,000 mistake.)