Franchises: "90% of them are a scam", says forum user

Franchises: you pay for the brand, you take the risk

The question that opens the topic is simple and has gone unanswered for years: is a franchise profitable, or is it a mechanism for transferring risk from the franchisor to the franchisee? The starting point is a market observation: there are sectors where almost only franchises operate, such as express delivery companies like Seur or MRW, or home care for the elderly. And a suspicion: every time you read something about the subject, it is bad news.

The majority response among those who claim to know the sector is damning: around 90% are a scam, according to one participant. The nuance comes quickly: not all of them. The ones that work require large investments, backed by market studies, well-positioned brands and models tested over decades. The others, the ones aggressively marketed with promises, are usually the fastest way to lose your savings, according to several posts.

Why nobody offers you a good franchise

The most repeated argument is sheer logic: if a franchise is really good, it does not need to sell itself to you. It has enough demand to select its franchisees. When someone insists that you set up their brand, it is usually because the business cannot stand on its own.

The exception proves the rule. A McDonald's franchisee in central Madrid has been raking it in for decades, according to the testimony of someone who knows him. But that case requires a 200-square-metre premises in an exclusive area and an investment of close to one million euros. For ordinary people, that door is closed.

Some add an important nuance: a franchise does not guarantee success, it only reduces the chance of failure. It puts you in a proven structure, with rules that reduce the margin for error in purchasing, marketing, pricing and logistics. The price is the fees and the restrictions. Like playing with many defenders: you concede fewer goals, but you score fewer too.

The franchisee working to pay the royalties

The recurring complaint is the asymmetry. You risk the capital, and if the business makes money, the head office keeps part of the profit; if it loses, you lose alone. You have already paid for the know-how upfront. Several posts insist on the same thing: often you work just to pay the franchise's royalties.

The case of DIA supermarkets is cited as an example of a trap: you think you are a business owner but you are really just a worker for them — and you have even invested to become one. The warning extends to all those franchises where you depend exclusively on the head office for goods and they set your margins.

The experience of a parapharmacy illustrates this: the conditions were absurd, with high percentages for the franchisor and an obligation to buy from specific suppliers for a substantial amount. They set up on their own instead and it went well.

The Devuelving case and franchising as sales rep recruitment

A good part of the conversation drifts towards one specific case that keeps coming up: Devuelving. It is described as a business whose real goal is to recruit cheap sales reps to sell its products. The initial investment is around 4,000 euros, and some point out that many people try to sell it on because they have no time.

The paradox is obvious: if they handle everything, why don't you have time? The explanation given is that you are a cheap sales rep and the net margins do not add up. When you get tired of handing out flyers and your acquaintances get fed up, the business deflates. Several posts ask for a detailed analysis, which is offered but not reproduced here.

The head office decides, the franchisee pays

Another recurring problem is the loss of control. The head office decides how much you have to buy, when to run sales and what discounts to apply. It does not matter that the season is different in Alicante than in Zamora. When it is time to sell with a good margin in your area, they push promotions on you; when you want to offer discounts, they tell you it is not the time. The franchisee loses out.

The closure of the McDonald's in central Algeciras, after more than twenty years, is cited as proof that even the big ones guarantee nothing. The high rent of the premises is mentioned as the cause. A brand is no shield against the market.

The alternative: learn first, then copy

Against the pessimism, a middle path emerges. Work at one of the franchise's stores, learn the know-how from the inside, earn a pittance if you must, and then assess whether it is worth it. Almost always it is not. But you learn without risking capital.

Another option mentioned: set up the business on your own, and if it works, replicate it with your own branches. A franchise makes sense when it provides a well-known brand that attracts customers. If nobody knows the brand, you are paying for a decoration and a name that give you nothing.

The exact point where the analysis gets stuck is the same as at the beginning: there are no aggregate profitability figures by sector, only individual cases. And with cases, everyone defends their own thesis.