A franchise is not one deal. It is the same deal signed, financed, supported, supplied and sold by people who each see a different part of it. The franchisor sees a system. The franchisee sees a business and a mortgage. The area developer or master sees a territory and a recruiting job. The consultant sees a match and a commission. The supplier sees volume and a contract. Every one of those views is accurate. None of them is complete.
That is the whole idea behind this part of the site. A franchise decision is sound when it still makes sense after it has been looked at from every chair at the table, and it is fragile when it only makes sense from one.
Why one seat is never enough
Most franchise mistakes are not caused by missing information. Federal law already guarantees a buyer a great deal of information. The FTC Franchise Rule requires a disclosure document with twenty-three items, delivered at least fourteen calendar days before anyone signs or pays (16 CFR 436.2). The document covers fees, the estimated investment, the training, the territory, the franchisor's finances and the names of current and former owners (16 CFR 436.5).
The mistakes come from reading all of that from one chair. A buyer who reads only as a buyer sees an opportunity and a price. The same pages, read as the franchisor who wrote them, show what the company is promising and what it is careful not to promise. Read as an owner three years in, they show which promises turned out to matter. Read as the person who recruits owners into a region, they show what support will actually reach a new location, and how far away it is.
The seats
There are more people at the table than most buyers realize. Each has a real interest, and each interest pulls in a slightly different direction.
- The franchisor owns the brand and the system, writes the disclosure document and the agreement, and earns most of its money from royalties and fees paid by owners.
- The franchisee owns and runs a location, pays those fees, carries the lease or the loan, and lives with the agreement for its whole term.
- The area developer or master holds rights to a region, opens units or recruits and supports local owners, and sits between the franchisor and the people doing the work.
- The consultant or broker introduces buyers to brands. The FTC notes that brokers "often work for franchisors, and are paid only if a sale is made" (FTC).
- The supplier sells the products, equipment or services owners are required to buy, sometimes under an arrangement that also pays the franchisor.
Rob Lancit has worked in franchising for more than 30 years as a consultant, franchisor, franchisee, area developer, supplier and executive (his franchising career). That range is the reason this site is organized around the seats rather than around a sales pitch.
Where the seats disagree
The interesting questions in franchising are the ones where two honest people in different chairs reach different answers. Five of them come up in almost every system.
- Royalties. To the franchisor, a royalty funds the support and the brand. To an owner in a slow year, it is a payment due whether or not the location made money; the FTC says plainly that royalties may be owed "even if you are losing money."
- Territory. A protected area sounds like safety to a buyer. Item 12 of the disclosure document explains what the protection actually covers, and the FTC warns it "may not protect you from all competition by the franchisor."
- Validation calls. The franchisor lists the owners. The owners decide what to say. The buyer has to work out which calls are worth the most.
- Discovery day. A franchisor uses the visit to judge the candidate. The candidate uses it to judge the team. Both are performing, and both know it.
- Required suppliers. Approved vendors protect consistency. They can also be a revenue line for the franchisor, which is why Item 8 makes it disclose whether it earns money from what owners must buy.
What reading from every seat looks like in practice
It is a habit more than a method. Before deciding anything, ask the same question three or four times, once from each chair. If the franchisor's answer, the owner's answer and the regional developer's answer all point the same way, the decision is probably sound. If they point in different directions, that disagreement is the most valuable thing found so far, because it shows exactly where the risk sits and who is carrying it.
For a buyer, that means calling owners who are doing well and owners who left, not just the names a sales team suggests. For a franchisor, it means writing the disclosure document as if the most skeptical owner in the system will read it first, because eventually one will. For an area developer, it means asking how support will actually reach a new owner two hundred miles from headquarters.
Where this stops
Looking from every seat does not replace professional advice. The FTC recommends a lawyer for the agreement and an accountant to help "understand the franchisor's financial statements" (FTC). It also has limits of its own, covered in where the every-seat view falls short. And it is not a substitute for numbers: any claim about what a location earns belongs in Item 19 of the disclosure document, with its basis, or nowhere.
Who this is for
Buyers use it to test a decision before signing. Franchisors and development teams use it to see their own offering the way candidates and owners will. Area developers and masters use it to understand the two directions their seat faces. Consultants use it to explain a recommendation in terms that do not depend on a commission. Owners use it to understand why headquarters sees things the way it does, and to make their own case in terms headquarters will recognize.
What it is not
It is not a ranking of franchise brands, an endorsement of any system or a forecast of earnings. It does not offer a franchise for sale. It is a way of reading the same facts from several honest points of view, so the decision that follows is one each of them could live with.
The pages in this series
Each page answers one question from more than one chair. They are written by the editors of this site from the primary sources cited, in plain language, for buyers, owners and the people who build franchise systems.
- The Franchisor Seat: What the Company Sees That a Buyer Does NotThe franchisor writes the documents, owns the brand and carries the whole system. Here is what that chair sees, and what it is easy to miss from it.
- The Franchisee Seat: What an Owner Knows After the First YearThe franchisee carries the lease, the loan and the agreement. The view from that chair changes fast once the doors open.
- The Area Developer and Master Seat: Holding a RegionArea developers and masters sit between the franchisor and local owners. They see both directions at once, which makes the chair unusually revealing.
- The Consultant Seat: How Franchise Brokers and Consultants Are PaidFranchise consultants and brokers help buyers find brands. How they are paid shapes the advice, and the FTC says so plainly.
- The Supplier Seat: What Vendors to a Franchise System SeeRequired and approved suppliers see a franchise system from the inside, through what owners buy. The disclosure rules treat that relationship seriously.
- Royalties From Every Seat: Who Pays, Who Earns, and What It BuysA royalty is the same number on every side of the table. What it means is not.
- Territory From Every Seat: What Protection Actually CoversA protected territory sounds like safety. Item 12 of the disclosure document says exactly what it protects, and the answer is usually narrower than the word.
- Validation Calls From Every Seat: Getting the Real Story From OwnersCalling current and former owners is the most reliable check a buyer has. Each seat shapes what those calls can reveal.
- Discovery Day From Every Seat: Both Sides Are InterviewingDiscovery day is a visit, a presentation and an interview at once. The franchisor and the candidate each come to judge the other.
- Required Suppliers From Every Seat: Consistency, Cost and DisclosureApproved-vendor rules protect a brand and can carry buying power. They can also carry a margin for the franchisor. Item 8 is where each seat finds out which.
- Where the Every-Seat View Falls ShortLooking at a franchise from every chair catches a lot. It does not catch everything, and it is not a substitute for a lawyer, an accountant or the numbers.