Sorry. Thought that was a given.
I think it is just as simple as McDonald’s structuring their greed to the point where they’re actually in a symbiotic relationship, not a parasitical one. For example, McDonald’s requires a franchisee to spend a certain %age of gross revenues on marketing, just like Puroclean. However, it’s rather obvious between the two who is spending their franchisees marketing $ effectively.
Here’s Entrepreneur magazine’s top 500 franchises for 2021. Here is their “Understanding the Ranking”:
Understanding the Ranking
Entrepreneur’s 43rd annual Franchise 500® shines a light on the unique challenges and changes that have shaped the franchise industry over the last year. The effects of the pandemic are evident. But so is the overall resilience of the industry, as many franchisors adapted and evolved to hold steady—or even grow. And the attraction of franchising as a method of expansion clearly hasn’t faded, as hundreds of newer companies have submitted for our list, resulting in a record-breaking number of applicants.
So just how do we go about evaluating all those applicants, from categories as varied as salads and estate sales, ghost kitchens and gyms, to bring you the world’s first, best and most comprehensive franchise ranking? Here’s an overview:
The Five Pillars of the Franchise 500®
Some key factors that go into our evaluation:
COSTS & FEES
- Franchise fee
- Total investment
- Royalty fees
SUPPORT
- Training times
- Marketing support
- Operational support
- Franchisor infrastructure
- Financing availability
- Litigation
SIZE & GROWTH
- Open & operating units
- Growth rate
- Closures
BRAND STRENGTH
- Social media
- System size
- Years in business
- Years franchising
FINANCIAL STRENGTH & STABILITY
- Franchisor’s audited financial statements
Note: Pillars are not listed in order of importance or weighting.
The first step in our ranking process is gathering data—lots and lots of data. Starting in June 2021, we asked franchisors to fill out our online form and submit a copy of their current Franchise Disclosure Document (FDD) or Canadian Disclosure Document. A total of 1,177 companies supplied all the required information. Submissions were vetted by our editorial team before being entered for data analysis.
To be eligible to rank, a franchisor must be seeking new franchisees in the U.S. or Canada and must have had a minimum of 10 units open and operating as of July 31, 2021, with at least one franchise located in North America. Each eligible franchisor was scored based on more than 150 data points, and those with the highest cumulative scores became the Franchise 500.
Note: The Franchise 500 is not intended to endorse, advertise, or recommend any particular franchise. It is solely a tool to compare franchise operations. You should always conduct your own careful research before investing in a franchise. Read the FDD and related materials, get help from a franchise attorney and an accountant to review legal and financial documents, talk to as many existing and former franchisees as possible, and visit their outlets. Protect yourself by doing your homework to find the opportunity that’s best for you.
Research compiled by Tracy Stapp Herold and Michael Frazier, with assistance from Sean Strain, Isabel Esquivel, Maria Kim, and Andrew Robinson; technical assistance from Michael Flach and Angel Cool.
This is HubSpot’s take on the data. Neither site goes in to the nitty gritty that the OP’s friends got involved in, so I’m not sure how “complete” the rankings are. Take it with a grain of salt, I guess.
Yeah, that’s pretty much my take. I mean it sucks on so many levels that vets are getting ripped off, but if I were to propose a solution it might be some sort of outgoing business startup liaison through the VA, which seems to exist.
~Max
Ameritrade is notorious for preying on vets - they more or less haunt areas around the Navy base here looking for prospects.
And everything else I’m saying stems from getting a lawyer. Skipping the first step because you don’t want to spend a couple of thousand or because you think you’re smarter than you really are is the very first bad decision you make.
Absolutely, nothing wrong with that. I’m just saying that doesn’t absolve these vets of all responsibility. This isn’t like scamming old people over the phone by saying their grandkid is going to jail if they don’t pony up $5000 in Walmart cards.
Come on, really? There are lots of lawyers that specialize in contracts, you can easily find one. You don’t need an insider or friend to get a competent lawyer.
First they’re being left to hang by the military, then they are being preyed on by a franchiser, then they just aren’t able to find a lawyer. These are military veterans, they all probably had good educations plus all they learned in the military. Maybe they should stand up and take responsibility for their mistakes, even the part about them being scammed. Then they could help out other veterans by talking to them about getting a lawyer before investing their life savings.
How do they do that exactly? AFAIK, Ameritrade has a pretty good rep.
Interesting list, thanks for posting. It’s amazing (to me) how many of them are obscure – most I’ve never seen, and many I’ve never even heard of. In the first few pages that I skimmed, there were at least two franchises devoted to swimming lessons for young children, at least three devoted to STEM tutoring for kids, and a scattering of things like cinnamon bun and frozen custard shops. I find that perusing the list is rather strangely scary; as someone who is risk-averse and not at all of an entrepreneurial mindset, most of those seem like a black hole that just swallows up money and leaves nothing behind.
If I had the kind of money that some of those franchises require as a typical investment, I’d use it to buy a nice lakefront cottage up north with a dock and a sailboat and shut myself off from the world. Let someone else manage the wars between franchiser and franchisee, and between useless employees and irate customers, and drive themselves to an early grave. I’ll be out on my boat with a glass of wine soaking up the sunshine.
Desperate people grasp at straws, and the puffery and personalities of salespeople take advantage of this. Yes, people should be more prudent and get lawyers, but both of those require some training, some time, and calm reflection. Those are not always to hand, and this business model preys on that. Blame the victim, and that’s fine, but let’s also blame those who actively plan to take advantage of desperate, trusting, hopeful people who often do not have the advantages of relevant experience, money, and education.
They recruit MLM style for the active duties and their spouses to sell insurance to the people in their units [it is illegal to sell to your division mates, part of the whole don’t socially interact thing, pressure being potentially put upon one to buy because PO1 Smythe is your LPO and if you don’t buy from her she will give you the shit duties. Same as why one doesn’t date in your command because PO1 Jones will give you shit duties unless you spread your legs.]
Sounds good to me =)
I always thought 1-800-GOT-JUNK would have been an interesting franchise to get into. I worked for a waste management company and frequently had dealings with them, and they all seemed pretty happy to be a franchisee.
They worked by selling you a territory, the truck or trucks, operating the 800 call center that people call in and that sends the call to the right franchisee. The cost back in the early 2000s was reasonable [something like $150 000 for the franchise, and about the same for the truck.] It was actually a franchise that you could get into with yourself and a couple hefty guys, and someone’s wife to answer the phone and do the paperwork. The major cities were populated, but of you didn’t mind going and setting up house somewhere like Asheville NC, or Tulsa, OK you could have a nice niche for yourself. [for those who don’t know it, you are setting up to move, or clearing out a house of junk, yard waste and such you call the number, get a quote as to how long the job would end up being, how much stuff needed hauling off and if you like the price, they come out with the dump truck and haul everything off. The junk guys are responsible for disposal - they have contracts with the local dump, the local electrical and metal recyclers and such, they pride themselves for recycling as much as possible. Or at least back then they did.]
But you are right, with enough money one can invest and live on the dividends - my mom had enough invested she was making about $2500 a month from investments after taxes. [she did actual stocks, not mutual funds.]
I’m going to nitpick and say that I was smart enough to read his whole post and make sense of it, but I was glad that he explained which was which. Even if you get the general idea of how franchises work, the jargon is not always clear - after all, people get mortgagor (the home purchaser) and mortgagee (the bank) wrong all the time.
I read that kind of in the middle: that I should have introduced the terms naturally within the body of the article itself, and not as a separate intro.
But then, my favorite part of Dune was the glossary, so lol.
That’s what I was going to suggest after reading @muldoonthief’s post.
Quick, what’s difference between chaumarky and chaumas?
Some of the franchise startup costs seem high, but investors are counting on being able to get that money back when they sell the franchise. Essentially, they are in the business of creating businesses with predictable cash flows which they can then sell to other investors at some multiplier of that cash flow.
One example might be setting up health clubs like Anytime Fitness. Someone spends the money to get a territory, set up a few clubs, getting members, and so on. A couple of years later they can show that they make $X/year profit. They put the territory up for sale and another investor comes in to buy that cash flow for $Y, which is some multiple of $X. The $X/year profit might not seem worth it considering all it took to build all the clubs, but the payoff comes from being able to sell all the clubs to an investor who is looking for a certain cash flow.
This is kind of how you might think about buying a house. You may spend $500k for your house, but you’re not just flushing that money down the drain. You hopefully get that amount back and more when you sell. You get the benefit of living in the house for some years and then get your money back out at the end. These franchises can be something like that. Put your money in at front, pull some cash out from regular profits, then sell for a large profit at the end. At least the good franchises will work like that.
I’m an actual lawyer, and while there are plenty of lawyers whose practice involves review of commercial contracts, even other lawyers have difficulty finding one. I’m a member of a Facebook referral group - mostly for the lulz as I represent institutional clients - and every day someone is looking for an expert on a particular contract type.
Out of all the lawyers I went to law school with or have gotten to know through my practice, there are probably only one or two who would be comfortable reviewing a franchise agreement. So while “have it looked at by a lawyer” makes perfect sense, it’s a bit more difficult in practice than in theory.
As someone else said, predatory sales practices are wrong and should be regulated even if they are spelled out in a contract. In fact, it’s one of the principles of contract law.
That said, I’m not entirely convinced this is an unreasonable franchise agreement. Comparing it to McDonald’s makes very little sense, because this sort of business is totally dissimilar to McDonald’s. A McDonald’s franchisee is operating a relatively large, fixed retail space, with umpteen costs that come with that. A water remediation business can operate out of a van.
I think you have the wrong company. Ameritrade is a online business for trading stocks. AFAIK they have nothing to do with insurance and are rated as one of the best companies in the country at what they do.
Some letters?
First off, nice to see you back posting. No, you don’t know me, but I remember you from way back when I didn’t post at all.
Yep, no problem with that. I have no idea what constitutes predatory under the law and I agree with regulation.
I don’t remember seeing it in the OP, but is there a listed failure rate for the franchises? If we could compare that to similar franchises that would clarify things quite a bit. I suspect such things are not readily available, who would want to publish their failure rates?
Hey, @mordecaiB , is your handle inspired by Mordecai Brown?
Is that for major floods only, or all flood damage?
For every major flood, there’s going to be a number of burst water lines, broken sub pumps, or just bad luck that fills your basement or lower levels with nasty water.
It’s my real name, but it’s not Brown. My dad liked to say that he named me after the baseball player, but since there are quite a few relatives named Mordecai on my mom’s side, she would just roll her eyes whenever he said that.