But not all turnover is necessarily due to failure, they say.
Sometimes franchises buy back stores and terminate franchise agreements for
strategic reasons or the franchisee wants out for reasons besides failure.Mario Herman, an Adamstown, Md., lawyer who represents
franchisees, says franchisers might be tempted to underreport turnover rates.
“They don’t want to put a number that looks too bad,” since turnover is often a
deciding factor to would-be franchisees. He says he’s seen many franchisees fail
because the franchise fees and royalties are too high for the franchises to
sustain profitability or the franchiser isn’t providing enough assistance.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-715-8115.
