I know you plan to be the next billionaire franchisee but you should get solid legal advice (from a bankruptcy attorney because I am not a lawyer) where you live before you sign anything.
This is a good idea to look into this if you’re already a franchisee, too.
This goes for your partner, as well. Most franchise relationships try really hard to have your spouse co-sign. [They may be after your net worth too. Do not, soft-headedly, loan hubby more of what the industry calls: love money.]
Three rules about a spouse signing any franchise document [agreement, bank debt, etc.]:
The Financial Standard of Australia reports today that BOQ writes off franchise loans.
Of 55 owner-managed branches in New South Wales for BOQ, most have been trading for only three years or less. More than three-quarters of the BOQ franchises set up in Sydney over the last three years are failing to meet business targets.
Normally the costs are very high when a franchised business fails: personal and corporate bankruptcy for the investor.
Owners of BOQ outlets in Sydney often walk away from their businesses. The owners of the Kellyville and Rhodes franchises are two to have done so in the last two weeks.
That is not happening here.
When an owner of a franchise opts to walk away from the business (and its continuing losses) BOQ invariably employs the staff directly in order to keep the branch open.
In a number of cases BOQ has also hired the former franchisee as branch manager, a situation that appears to include relief from at least some of their liabilities to the bank as part of a package deal.
I believe there are several solid reasons for this very unusual banker charity:
As I always say, whenever you get a chance, complain to self-regulatory authorities and sue the professionals [lawyers, bankers, accountants, appraisers]. Double that sentiment when you can threaten to put dozens of pissed-off whistleblowing industry insiders on the stand within a massive a civil lawsuit.
These are just like Canadian professionals.
Tell you what: I’ll let the kids carry on at university while T and I emigrate. Let me find out where the washrooms are [a little draw] and let me keep, say, 5% of all settlements. Heck, start passing the hat.
Les Stewart :: Ace Bounty Hunter
BTW: This article shows how much franchisor:franchisee relationships are very much like employer:employee relationships.
In fact, some franchise contracts have been seen to be so controlling of the franchisee’s business that the relationship was judged to fall within labour law. In other words, the franchise was seen for what it is: the veneer of an independent business with all relevant control given over to a dominant party.
I think this is very fertile soil for getting money back. Complain to labour boards saying franchisors are just trying to evade duties as an employer. The janitorial cleaning segment is notorious for having microscopic control over their faux investors
I bet a clever banker could make the same argument because of the complexity, huge information investments needed and memberships in affinity programs such as Visa, MasterCard.
I wonder how much lending the Bank of Queensland does for other franchise systems and if this is what they really want to protect from scrutiny?
No question: guaranteed loans at prime +3% v. prime or less for mortgages.
It was wishful thinking that I could be profitable as a Mom-and-Pop operator when I got hooked up with, what turned out to be (see hindsight bias) a system that didn’t have a proven business model. I kept putting more and more time and money in (sunk costs) believing I could turn the corner.
Michael Kernaghan of the Weed Man was right: I didn’t have enough money to grow the business quickly enough to be sustainable.
Once in the soup, I created an internal fallacy or illusion. It was fueled in part with my increasing attachment to the money I had lost (loss aversion) which is usually 2 times as powerful as the desire for a comparable economic gain (prospect theory).
It was very difficult to square this failure with the frequent successes I had had in my life up to the at time (cognitive dissonance). And the franchisor could always be counted on to counsel perseverance and asking relatives for more money.
Whether a system is predatory or incompetent, it does not matter: The investor will lose it all, in all likelihood. The only difference will be the style you exit with.
Of the tens of thousands of dollars I have spent on professional advice, the most useful franchise expenditure was with my Bankruptcy Trustee.
He once mentioned that the average indebtedness of a client was $25,000.
My former franchisor realized less than seven per cent (7%) of their claim on my business’s disposal. That was no surprise to a 1,800 franchisee multi-brand international corporations.
Credit counselling is a part of the process of being a first-time bankrupt. It went pretty smoothly for me.
When my counsellor said, “What lessons have you learned, Les?” and I replied: “Don’t buy another franchise?“, the questions stopped.