Financial Representations in Franchising
One of the biggest questions asked by new potential team members and franchise buyers of a franchise system as they work to determine if they should purchase a franchise is; How much money will I make. This is a good question however one which is so very difficult to answer as it depends on so many factors, such as their work ethic, business acumen and location chosen, economic factors and a host of other potential eventualities.
It is for this reason many franchisors do not state how much money one can make, but rather the franchise buyer can call up or visit with franchisees of the system and ask them directly. This eliminates any potential false, misleading or unsubstantiated earnings claims which could come back to haunt the franchisor later in litigation if the franchisee fails for some unknown reason.
In fact often franchisee attorneys will lie and file false claims against the franchisor stating that the franchisor gave the franchisee earnings promises, which did not come true. Attorneys and this is only my personal opinion from 27 in business are the biggest self serving lying sacks of feces on the planet. But we figured a way around these professional parasites and I inserted this clause into our franchise agreements;
7.17.2 No Representations
Franchisee acknowledge that there have been no representations, promises, guarantees or warranties of any kind made by Franchisor to induce Franchisee to execute this agreement except as specifically set forth in the Franchise Offering Circular that has been delivered to Franchisee. Franchisee also acknowledges that Franchisee has decided to enter into this Franchise Agreement with Franchisor under their own free will. Nothing on any website has induced Franchisee to enter into this Franchise Agreement. Franchisee further acknowledges that much of the material on any website contains a degree of ‘corporate propaganda’ and enthusiastic and aggressive consumer-oriented advertising.
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Further I insisted that each franchise buyer initial this paragraph in the franchise agreement, put this clause in all caps and had them also initial the page it was on as well as sign the franchise agreement. As a franchisor you must make sure that people will do what they promised and not try to screw you over via some ambulance chaser who has never had to make a payroll or earn and honest living. Consider this in 2006.
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