How to Lose all Your Money in Franchising

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Everybody thinks all they have to do is buy a big name franchise, sit back and become a millionaire. But what you don't know, but should know is people quite regularly lose all their money, their retirement funds their nest-eggs buying into franchise industry hype. In this video I'll tell you why it's unlikely that big name franchises wont make even close to what you expect, and if you aren't careful you could lose everything.

📜 Video Chapters
00:00 Why Big-name Franchises May Underperform?
00:49 Risks of Franchising
01:16 Misconceptions about food franchises
02:15 Why do people make poor franchise decisions?
02:41 Mistake 1: Social Validation
03:36 Mistake 2: Emotional Momentum
06:11 Can You Trust Franchise 500 Rankings?
08:27 Misuse of Franchise 500 for Marketing
09:28 Final advice

So what are these bad reasons why people lose their money? First is social validation. Our brains are hardwired to equate these big numbers with success. There are over 33,000 Subway franchises worldwide that must mean they will make me successful. I'll be part of this huge winning team........ Oh that franchise I have never heard of - I don't want to even look at that one. There are almost 37,000 McDonald's restaurants worldwide that must mean I will be a success if I join this huge powerful organization. Plus the last 3 times I went to that restaurant it had a lineup waiting for food! Plus the Franchise 500, another huge organization with enormous media clout voted McDonald's as their #1 franchise. In fact everywhere I look I see these companies over, and over and over again with extremely positive social validation. How can I fail.

This is called emotional momentum. And the more emotional momentum people have the harder it is to abandon this franchise even if you hear negative things later on in the process. Now how might that work? Well call any major franchise today, right now, and say, I want to buy a franchise how many of your franchises have closed up over the last 3 years, what is the franchise failure rate, and your franchisee satisfaction rates. You wont get it. They won't tell you. They're going to tell you to complete an application and wait. While you are waiting on the edge of your seat, hoping to join the 10's of thousands of other super successful franchise owners you naturally start dreaming about how great this business would be..... sun is streaming through the windows, happy customers existing in peace, money raiing down in huge, huge bags......you know the deal...... Then the franchise finally calls ...you were accepted!! And some really sexy glossy promotional literature is sent, official looking corporate stuff, and emotional momentum will often force you to miss or even ignore the boring old numbers that you don't want to look at because it is not in keeping with your emotional momentum, with this blissful image in your mind.

We see it all the time people ask us about their franchise idea and when we give them hard financial facts, taken right from the books of the company, they don't want to hear it. Their eyes gloss over and all they hear me saying is and we become the bad guys trying to tear this wonderful dream away from them. Once this emotional momentum builds up - its hard to get people away even with the facts and figures. People..... facts and figures are what should be guiding your decision not emotional momentum, or social validation, or beautiful thoughts of how awesome your life will be once you own this franchise.

Now let's be honest. People use this 500 list all the time to validate investment decisions. Despite Franchise 500's disclaimers telling people "The Franchise 500 is not intended to endorse, advertise, or recommend any particular franchise" franchises do use their banners on their websites to do exactly that. In fact this franchise has the Franchise 500 banner rankings listed below text stating "THE PROOF". This franchise claims that the Franchise 500 is absolute proof their franchise is a good investment. So people see this social validation, they think this must be great and they absolutely do use these rankings to make their decision. Now I have blocked the name of the company out but This company that was ranked "Top Global Franchise, and "Best of the Best" by Franchise 500, closed over 625 stores in the last 3 years. And that is how you lose money in franchising.
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