My Personal Experience
By now you probably realize that I do not like, nor do I advocate the franchise model, especially for service businesses. I wasn’t joking about what I have said. I did learn all the bad things that can happen in a franchise business the hard way.
I have had an existing service based company since 2001. I had been approached by several companies over the years asking me to consider being part of their “team.” I use that word in quotations for a reason.
In 2007, I was approached by a franchisor that had been around since 1995. They talked nice, and had all of the verbose flyers and franchise testimonials. Their system at the time would have me as an area developer and my employees would become franchisees.
I found out later that the FTC frequently cracks down on these systems because they turn employees into glorified subcontractors in an effort to avoid payroll taxes. Each level as it goes down passes more liability onto the lowest level until the bottom ranked franchisees end up working for less than minimum wage. This is possible because they are paid with a 1099 instead of a W2.
