Franchisees: One Entrepreneur Shares Risks, Dangers and Advice

Entrepreneur Describes Risks, ‘Antics’ Of Some Franchisors

Gregory Coston, experienced franchisee, attends the International Franchise Expo in New York City. (Image: File)
International Franchise Expo welcomes attendees in NYC

Elaborate on the concept of under bidding in terms of franchises.

[Those interested should do their] own bidding, which is why [they] should learn the business. Again, I’m only speaking about the businesses I’ve been involved with. In those cases, for new franchisees, the bidding process to acquire contracts for your franchise is handled by a sales group or sales rep. They work on commission. So maybe I get offered a contract for $2,000. I accept and when I start the work, I realize it’s really worth about $8,500, but they underbid just to make the commission. I learned that the hard way over time. Jani-King was new to me, so I didn’t know. With Coverall, I had a better idea, so I understood about the marketing and the bidding plans by this time.

How profitable were your franchises?

My first was a learning experience. The second one, I had an idea what was going on. I’ve built my franchise up to the point where I’m not needed that often. But it’s essential to learn the market because you have to do your own bidding. If the contract is worth $30 an hour, they might bid $10 an hour, just to get that contract. You have to learn about the competitive market in the industry. You’re trained how to do the cleaning but not enough about the bidding process because they want you to come back to them.

So what are the sticking points?

The franchisors don’t check up on me like I believe they should. They don’t have the requisite monthly meetings in the New York region. It’s different from maybe a Texas or West Coast region where they have monthly or quarterly meetings among their franchisees. The New York region doesn’t do that. Plus, underbidding was a sticking point. In addition, to having to pay the fee on each contract they secure, because they underbid, it might take a year to gain a profit off that particular contract.

So what’s your advice for potential franchisees?

Ask lots of questions. I can’t stress this enough. Do your research before you go out there and get a franchise. There are a lot of good ones out here but you have to do your research. The salesmen usually give a good pitch about the concept and what they can do for you, but you have to talk to other franchise owners if you want to know what’s really going on.