The global recession is putting franchisees in that classic spot between a rock and a hard place.
According to Charles Miller, a shareholder and director of San Francisco-based law firm Bartko, Zankel, Tarrant and Miller, a variety of factors are putting the squeeze on franchisees. “They have an obligation to pay royalties, franchise fees, regardless of how they’re doing,†he says, adding that those fees are typically based on sales volume. “That could put a crimp in things if business is down and expenses are going up.â€
Add in the fact that many franchisors are cutting back on services, and franchisees are feeling the pinch from both sides. “It’s one of those damned-if-you-do, damned-if-you-don’t situations,†Miller says. “If you hold back on your royalties, the franchisor is obviously not making any money and is not going to provide the services.â€
Recession Hits Home… read on.