Recently, the Wall Street Journal published an article regarding the ten worst franchise brands in terms of SBA, or small business administration loan defaults. Among the ten franchises mentioned in the article were Quiznos, Huntington Learning Centers, Cold Stone Creamery, and Planet Beach, which came in at number one with a default rate for SBA loans at a whopping 41% over the last decade.

As highly experienced Los Angeles business attorneys, we deal with people who are interested in franchising opportunities all the time. For many people, being able to join a system and build a business with the support of franchisors who will assist with marketing, sales, and that already has a process in place sounds like a dream – and unfortunately, in many cases it truly is “just a dream.” If you are considering a franchise opportunity, it is critical that you do your due diligence and learn all you can about the franchise. While you may believe that you will have a substantial amount of support getting your franchise off the ground, it is rare that franchisees receive the sales and marketing assistance necessary to achieve success. Know that for the most part all of the hard work will be up to you to get customers in the door, and you may enjoy the success you have dreamed of.

Owning one or more franchises can be wonderful, and for many people it does work. If you have significant financial resources and motivation to put in the time and effort, franchising can be one of the smartest moves a person can make. While franchisors should be interested in the success of their franchisees, this is not usually the case. Franchisors unfortunately do not often bear any responsibility at all when a franchisee is struggling financially, or has even lost his or her life savings.

Considering the bad news regarding the default rates of some well-known franchise brands, anyone considering a franchise should perform thorough research and discuss what all is involved with an LA business lawyer who is highly familiar with the complexities and risks of franchising. At Spotora & Associates, we want to help ensure your success to the greatest extent possible.