What do Burger’s and Coffee Have in Common?

The answer to the title of this article is, “They are poster-boys for the franchise business for better or for worse.”

A CBC story about Marufa Ahmed and her husband Mohammed Hashen, caught the eye of a VCSFA reader who forwarded the article to us. Marufa and Mohammed purchased a Lick’s burger franchise (they operate in Ontario), gave up 18 months of their lives, day in and day out, only to have the store taken from them.  Here in Vancouver, the VCSFA has received reports of ex-coffee Franchisees who spent well over half a million dollars (CND$) on their investment and over 60 months of their lives only to lose it in an even worse way than this couple.

What the reader needs to understand is that Franchising is not your ‘own’ business.  In fact, if one were to take a few steps back he or she would realize it is perhaps the furthest thing possible from having ‘your own business’, other than the fact it requires a capital investment and the financial business model is similar.  The time when the Franchisee sooner or later comes to realize this, is when they encounter the triangular relationship between the Landlord, the Franchisor, and the Franchisee.

The ‘relationship’ is held together by hand-crafted and very clever legal documents.  In some reputable franchises, the Franchisor actually works side-by-side with the Franchisee to establish the best possible rent rates.  They are transparent and they work diligently to make sure their front line soldiers (the Franchisees) are comfortable with the decisions. Conversely, in other franchises,  the Franchisor will sign lease documents with the Landlord with ‘unknown motives’ and will keep the Franchisee completely in the dark throughout the experience.

We have a current member who asked his Franchisor for lease details over 36 months ago (he was trying to sell) and the Franchisor refused to provide the information he needed claiming ‘we don’t know what the future holds’.  Then, when the very last legal deadline to begin lease negotiations with the Landlord was upon them, they slowly started the process, but still keeping the Franchisee completely in the dark throughout.  The Franchisee today still has no idea what will happen to his store in the fall because nothing has been provided him on paper and there are less than three months remaining in his lease term.  This is definitely not ‘owning your own business’.

We have just become aware of another location where the Franchisor may have paid above market rents in comparison to other similar businesses in the area, and the Franchisee will now be paying for that decision each month.

Before purchasing a Franchise, it is extremely important that you investigate – in great depth – this relationship between the Franchisor, Franchisee and Landlord.  If something seems fishy, or there is any lack of transparency, run and do not look back.  On the contrary, if you find that all the books are open and all the relationships where you stand to lose or gain are open, then you may have found a good Franchisor.

As always, do not hesitate to contact the VCSFA if you have any questions.  We are always happy to help.