Many people dream of owning a business. They want freedom, cash, and a clear path to success. To get this, they often look at franchising. Buying a franchise feels safe because you buy a system that already works.
But some famous brands hide major traps.
A recent video from the Franchise Empire network sheds light on this dark side of business. Tariq Johnson, the host of Franchise Empire, shares a strong warning for new business buyers.
"Many people buy a franchise because they want a proven system. But some of these famous brands are just selling a dream that is not real," Johnson explains.
Before you invest your hard-earned cash, you must look past the famous logos. Let us look at three major franchise brands you should avoid.
Subway is one of the biggest fast-food chains in the entire world. For years, people thought opening a Subway was a safe bet. But a massive issue called "cannibalization" ruined the game for many owners.
Imagine a man named John. John saved his money for ten years to open a Subway on Main Street. His store did great at first. He made healthy food and regular profits.
Then, one day, corporate leaders allowed another person to open a Subway just two blocks away. Suddenly, John lost half of his customers. The brand did not care that John was losing money. They just wanted to collect fees from both stores.
Data from a Wilson K. Lee industry analysis shows that Subway closed around 7,000 stores due to these harsh practices. The company's corporate model made money from opening stores, even if individual owners failed.
Dickey’s Barbecue Pit seems like a great family business from the outside. Sadly, many people who bought this franchise ended up losing their shirts.
When you buy a food franchise, you must buy your meat and sides from the corporate supply chain. Dickey's corporate office forced owners to buy supplies at very high prices. At the same time, they forced owners to offer cheap discounts to customers online.
Owners were caught in a terrible trap. Their costs kept going up, but their prices had to stay low.
According to a report by Restaurant Business Magazine, a staggering 85 Dickey's locations shut down completely in a single fiscal year. Another 105 stores had to change owners just to survive. Many owners defaulted on big loans and lost their homes.
Quiznos used to be a massive rival to Subway. Their toasted sandwiches were a huge hit in the early 2000s. Today, it is very hard to find a Quiznos store anywhere.
The brand failed because the corporate office did not support the owners. They charged huge upfront fees. They also marked up the prices on basic items like paper napkins and bread. The owners could not make a profit, no matter how hard they worked.
"Brands like Quiznos and Dickey's represent systemic failures where the business model hurts the owner instead of helping them," says Tariq Johnson.
You must research deeply before you sign any franchise contract. Always look at Item 19 in the Franchise Disclosure Document (FDD). This section shows you how much money the stores actually make.
The U.S. Department of Labor also tracks legal issues with franchises. Checking public records will show you if a brand faces lawsuits from unhappy store owners. Do not let a famous logo blind you to bad math.
Brands like Quiznos, Dickey's Barbecue Pit, and Subway have experienced high numbers of store closures. Quiznos lost thousands of locations due to high supply costs. Dickey's saw dozens of stores close down in recent years because of low profit margins.
Subway owners often struggle due to corporate store crowding, also known as cannibalization. The corporate office allows new stores to open very close to existing ones. This practice splits the customer base and lowers the sales for older stores.
Hidden costs include mandatory advertising fees, high technology fees, and marked-up supply chain costs. Some brands force owners to buy ingredients only from approved corporate vendors at prices higher than the local market rate.
You can find real financial data by reading Item 19 of the Franchise Disclosure Document (FDD). This document is legally required and outlines the financial performance, earnings, and sales history of existing franchise locations.
If your franchise fails, you are still responsible for your business debts. If you used a Small Business Administration (SBA) loan, you likely signed a personal guarantee. This means the bank can take your personal assets, including your home, to pay back the loan.
Buying a franchise is only safer if the brand has a fair and supportive system. A franchise offers a recognized name and an established business plan. However, a flawed corporate system can cause a franchise to fail faster than a standard independent business.