Why Some Business Coaching Franchises Will Force You Into Bankruptcy

by | May 23, 2011 | Business Coaching Franchise

This is a difficult post for me to write, but an important one if you’re considering business coaching franchises as a way to get started in the coaching business.

That’s because I’ve seen tremendous heartache from friends and associates over the years.

Here’s the cold, hard truth: Many business coaching franchises will do everything they can to enforce their largely unfair contracts–even if it means forcing you into bankruptcy.

Here’s how it usually goes:

A few times each month (or week, depending on the size of the franchise system) another business coach quietly disappears. They stop showing up to conference calls, stop reporting in to their regional manager, and fail to pay their royalty for the second month in a row. OUCH! Now the franchisor and regional manager are paying attention, because they’re not getting paid.

After a few failed attempts to collect payment from the business coach who’s gone astray, the franchise goes after personal assets. They take the coach to court to enforce the agreement. If the coach owns property, they’ll attack it. If they can garnish accounts, they will. In some states, it’s become standard practice to sue a franchisee in default in order to get the franchisee to agree to a lesser amount or reduced payments. Then if the franchisee fails to deliver, the business coaching franchise can have them arrested for violating a court order.

It sounds extreme–and it is–but I’ve seen it happen over and over again.

Why are business coaching franchises so bold in their enforcement of these contracts?

It comes down to one thing: they have to keep everyone else in line.

If they let one failing franchisee out of their contract without a fight, there would be a large scale mutiny, as a majority of franchisees are profoundly disappointed in their earnings.

From there, the whole franchise would fall apart.

So they keep driving you long after the point where anyone with common sense would throw in the towel. They recite the party line right up until your house is about to be sold at the county courthouse: “Try harder! Stop blaming the system!  Get ‘above the line’ and start taking responsibility for yourself and your own results!”

And, of course, on some level this is true and good advice. But beating people continuously with this stuff while they siphon away their life savings is ridiculous. Expecting you to honor your agreement is one thing; forcing you to make royalty payments when your business is failing and the last of your assets are being liquidated to survive another day is sheer brutality.

Expecting you to honor your agreement is one thing; forcing you to make royalty payments when your business is failing and the last of your assets are being liquidated to survive another day is sheer brutality.

But hey, at least they know that if you’re completely broke when you quit, you’ll be less likely to sue them back.

This is especially egregious when you consider the fact that the license is essentially virtual real estate and the hard costs on the franchisor’s part are almost completely (if not fully) covered in the set-up and initial training fees that they charge.

Business coaching franchises have essentially licensed you to copy their business model from a home office. To take such a hard-line approach gives a truly transparent view into the motives, perspective, and underlying attitudes displayed by many franchisors in this industry.

It’s been absolutely agonizing to watch coaches slowly whittle away their life savings because they’re afraid of retribution.

I don’t mean to freak you out, but when I say this is serious business, I mean it. Make sure you understand the agreement. Never agree to a personal guarantee, ever. If they won’t award you a franchise without the guarantee, then don’t walk, but run the other direction.

Want to know what other pitfalls you need to be aware of? Download a FREE copy of our ebook, The Business Coaching Franchise Buyer’s Guide to get a behind-the-scenes look at the games business coaching franchises play–and how you can come out on top.

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