Franchisors Generally Have a Hard Time Collecting Royalties During Recessions

When you go online and search topics on modern day franchising you get a mixed bag of results. There are tons of websites and millions of pages on advice for franchisees, franchise buyers and links to endless sites for Franchise Attorneys, Franchising Regulators, and Consultants in the field of franchised businesses. Still, for a franchisor just starting out, there are only a few sites with information. Most of these websites have just a little bit of information in the form of articles, which are free and then a link to a Franchise Consultant that charges a good chunk of change. There are a couple of Franchisor Associations, but they are quite costly to join and to really get into the thick of the information they really need they must sign up for classes or pay someone to assist them. The biggest problem for new franchisors is cash-flow and that makes collecting their royalties paramount. Of course, new franchisors often have trouble getting their royalties on time or during recessions at all. Without this income the new franchisor can only stay in business if they continue to grow, which is not so easy during stressful economic times, even if there are more franchise buyers than usual. All Franchisors must stay up on their collection of franchise royalties from their franchisees and it is absolutely critical and paramount during hard economic times. A franchising company may assume that they are helping their franchisees by forgoing or lowering royalties during economic crisis, but if they do not make enough money or maintain a strong cash-flow then they are of no value anyway. And if the franchisor files for bankruptcy, as many have in the last decade, those franchisees often fail also and the entire system implodes. Franchisees may want a break when sales are down and that makes sense, but the system also needs the money to implement is plan and to capitalize on its economies of scale to make it through the recession. Think on this.