Many franchisors, especially small ones have very high failure rates and when they get into a pickle with regards to cash flow many of them will sell out the competition. This means they may leave their franchisees high and dry. It also means that the new franchisor may actually cut some of the franchisees because they compete with their existing units. Or they may make it so tough for them, and enforce the franchise agreement to the nth degree, that franchised outlets of the old franchisor cannot stay in business and turn a profit, and therefore fail, or are terminated for cause.

Franchise mergers happen more often than most people think. Many of the large corporate franchisors have bought up their weak franchising competition over the years. Many very large franchisors may have bought 10 to 20 of their competitors over just a couple decades. It allows them to grow faster and add co-branding opportunities in the marketplace to move their products and services. It is indeed a good growth strategy, but it can be very problematic for the acquired franchisees depending on the situation.

Sometimes being bought by a large corporate franchising company can be a blessing in disguise because the larger company has more support services and runs a much better marketing campaign, and the new brand name is so strong it actually adds to the customer base. But things will be different and it will no longer operate the same as before.

Plus when the franchise comes up for renewal they will have to sign the then current franchise disclosure documents and that might be an entirely different deal than they were used to under the old franchisor. How can you tell when a franchisor is going to merge?

Often, there are rumors within the company and they have a very high growth rate, but a decreasing profitability. This is a pretty good sign that they may have to take drastic actions in the future including selling the whole thing lock, stock, and barrel. Please consider all this.