Have you ever received a cleaning proposal from a national janitorial franchise company? If so, you may have noticed that a great deal of service is promised for a seemingly low monthly fee. You may also have noticed an inordinate amount of legalese in the contract, with difficult cancellation procedures and punitive terms.
Aside from being aware of these terms, you should also understand their business model. The franchise company typically advertises a business opportunity for individuals to own and operate their own cleaning business. The individual pays a franchise fee, in exchange for a cleaning account (a customer) or several accounts. The amount of the franchise fee is based upon the amount of monthly contracts the individual wishes to purchase, normally at least 3 times the monthly revenue of account contracts to be provided by the franchising company. For example, accounts totaling monthly revenue of $3,000 could bring a franchise fee of $12,000. In addition to the intial franchise fee, the franchise company will normally charge an ongoing royalty of 15%.
This can be a great way for an individual to start a new business, and sometimes it is. However, because the individual typically pays his initial franchise fee before the franchising company has obtained the necessary accounts for him, he has no way to make a fair assessment of what he is buying (is it in the right area, is it profitable?). Instead, the individual relies on the promise of the franchising company that his accounts will be in his area, and that they will be profitable, even after they deduct their royalty from his monthly payment.
The franchising company can fulfill its commitment to the individual by simply offering accounts with monthly fees totaling the agreed upon amount, regardless of whether those accounts are actually priced fairly and profitably. As a result, franchise companies often under bid their customer accounts, putting the franchisee at a unique disadvantage. When this happens, it also puts you (the customer) at a disadvantage because the individual responsible for the cleaning of your building is severely underpaid. Most franchisees in this situation will either make the best of it by cleaning your building as quickly as possible, or simply quit. If the franchisee quits, the franchising company will then try to sell the account to another franchisee. Neither of these options are good for you if you want reliable service.