Let’s have some real talk about franchising.
On the surface, it looks like the safest business model in the world. Proven brand. Established systems. Training. Support. Playbook.
But sometimes, behind all that polish… it’s basically a mall kiosk selling spin art T-shirts in 1989.
You know exactly what I’m talking about.
You walk by. You get sucked in. They pour some neon paint on a spinning canvas, and you think, this is genius. Kids love it. Parents pay for it. The kiosk is slammed for six straight months.
And then one day it’s gone- that mall kiosk has dried up.
Because spin art was never a business. It was a fad. A very fun, very short fad.
Imagine building your entire financial future on that-
I recently got called to review an FDD for a franchise brand that felt a lot like that kiosk.
Super trendy. Tons of buzz. Units selling fast.
But when we started peeling back the layers and digging in- nobody had really asked about the numbers.Nobody had stress-tested the model. And frankly, some of the financials might not have been entirely accurate. (I’ll leave it there.)
So here are the six questions you better ask before you wire your life savings (or borrow the money) to anybody selling you a franchise dream:
- Show me the real numbers. (Think about Tom Cruise’s SHOW ME THE MONEY)
Item 19 is where the financials live. But you have to read between the lines. How many units are included? How old are they? Is this gross revenue or profit? If it feels like they’re massaging the numbers, they probably are. - How many people have already bailed?
Item 20 shows openings, closings, transfers, and terminations. Look at it hard. If multiple people bailed in the first few years, that’s not an accident. That’s a FIRE. - How long can I float this before I drown?
Startup costs are cute. Working capital is where people go broke. What happens if it takes 18 months to breakeven? Can you survive that? Most franchisors will tell you the best-case scenario. You need to plan for the opposite. You need to ask about this. - Who’s actually supporting me?
Get to know the corporate team you’re going to be married to for the next decade. Are they franchise operators? Have they scaled? Or is it three people in a WeWork answering support emails while trying to close the next sale? - How does corporate make their money?
Healthy systems make money on royalties (your long-term sales). Unhealthy systems make money selling new units. If they make their money when you sign, not when you succeed, you’re not a partner. You’re inventory. (If they are using too many brokers for sales, this can also be a cautionary tale.) - Who have I validated with?
Don’t just talk to the people on the franchisor’s happy list. Call the ones who left. The ones who struggled. The ones who aren’t answering calls. That silence is data too.
Franchising isn’t a cute side hustle.
It’s not spin art.
It’s your future.
Ask better questions or you’ll end up with a very expensive neon T-shirt nobody wants.
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