Stuck in a franchising agreement?
During tough economic times, lots of people start to consider going into the franchise biz.
Maybe your job with a corporation is being downsized, or you always wanted to be an entrepreneur so a severance check may help you buy a franchise. You figure it’s easier than starting your own business from the ground up.
Folks, I’m hear to tell you, take this decision seriously. Buying a franchise is not like renting an apartment. You can’t just walk away from it.
Some readers have asked me about how they can get out of franchise agreements. Unfortunately, it’s not easy.
I decided to ask an expert, Joel Libava, President of
Franchise Selection Specialists Inc. who writes the
The Franchise King blog, what his take was about pulling out.
Libava said one of the most common questions he gets is: “Joel, is there a way I can get out of my franchise agreement?”
His simple answer – “no!”
However, he adds, “sometimes a franchise company will let someone ‘out’ if there was any possible fraud or other illegal activity involved in the transaction itself. An example would be if the franchise salesperson made an earnings claim like, ‘Sure, you should have no problem making $50k to $75K in your first year in business’ in response to the franchisee asking the ‘How much can I expect to make in my first year’ question. The wise thing to do in that case would be for the franchisor to let that franchisee out.”
But if there wasn’t any fraud, you’re pretty much stuck unless you’re able to unload the franchise to someone else.
“You can sell your franchise at any time during your typical five to ten year franchise agreement,” he says. But the one caveat is “the franchisor must approve of the sale. They have to interview the prospective new franchisee, and approve him or her.”
See what I mean people. Think long and hard before you sign on the dotted line.
