Don't Buy A Christmas Light Franchise!

Posted by Doug Topham on 9/1/2015
Don't Buy A Christmas Light Franchise!

I have owned Christmas Light Decorators for 14 years and operate in the Arizona market as the largest commercial decorator in the state.  

Two years later, I bought a small importing company and split that company into two main companies, one Sugarloaf Lighting that is geared towards the residential market more and this company, Commercial Christmas Decorations, that is geared more for installers and wholesale customers.  

We have worked very hard to become leaders in our market and to bring our customers the best quality and variety of products possible without it costing them a small fortune. We have been asked to bid on jobs such as Disneyland in California. 

We install Christmas lighting and decorations for nearly every city in the state of Arizona that does a holiday lighting program, as well as for the majority of the malls and shopping centers (and we have a lot of them around town, just ask tourists what they remember most about visiting the area, we have heat and shopping centers in Phoenix!). 

bath and body works Christmas Decorations

During the time I have owned these companies I have seen numerous attempts to franchise the holiday lighting industry. 

Six years ago now, I was approached to use my business as a model for a new holiday lighting Franchise Company that was going to “go national and revolutionize the holiday lighting industry”.  

Why did they want to partner with our company? Because we have been extremely successful in our market. 

When I refused to join them, they told me “they would bury me”.  Four franchises opened that year in our market.  One year later, the franchisor was gone, and the franchisees were all out of a lot of money.   (The company franchised under the name of St Nick’s in about 2010 in the Phoenix market.)   

I have seen numerous other attempts, and they usually end the same way.  There seems to be a new one or two each year.

I am not saying there are not reasons to own a franchise.  There are many that make good sense.  

If you purchase a McDonald’s franchise, you have instant name recognition, national advertising, training, support, etc.  Every person that drives past your store, will know instantly what you sell, and the quality of your product.

That is not the case in the holiday lighting world.  The big question is - what are you paying for?  

Here are the major reasons that paying for a holiday lighting franchise makes no sense.

There is no name recognition with your purchase.

Everyone knows what a Taco Bell sells.  They have no idea what your lighting company sells.  You get absolutely no name value at all.

The training they promise is not worth much. 

Hanging holiday lights is not a hard process.  Google holiday light “how to” videos and you will be amazed what comes up.  Most of these videos are as good, or better than the training you will get from the franchisor.  We also have training videos and how to guides on our site.  They are free (although you can send me what you would have paid as a franchise fee if you like).

There is no value in the support they offer you. 

If you have questions, just ask us.  We have been selling supplies to decorators for 10 years.  WE USE WHAT WE SELL.  We have the product knowledge that the franchisor usually doesn’t. We won't charge you a fee to ask us a question about a product you want to purchase from us. Doesn't make sense does it? So why would you pay a franchise a fee in order to then be required to purchase from them?

The marketing the franchisor will provide for you is worth almost zero. 

IF you are in a large city, there are already several competitors.  Do you think the franchisor has some magic way to advertise that nobody else has ever thought of?  Business comes the old fashioned way.  You have to contact business owners and sell yourself.

Your costs with a franchise company will be higher than your competitor’s costs! 

Not only do you have a franchise fee, but they are in the business to make money selling you products.  They will promise you that they can save you money.  Send us their price list, and we will beat it.  Run from any franchisor that requires you to buy ONLY from them.  This is a huge red flag.  We compete on product quality and cost.  They should also.

There are many regional differences that your franchisor does not understand.  

We don’t do many icicle lights in Phoenix, where it rarely freezes while they are common in the Midwest.  The market in Texas is different from the market in Michigan.  Cold weather markets have different weather challenges than warm weather markets.  The customers want a different look, and the installation is different due to other factors such as weather.

They may claim they have products that you cannot get anywhere else. 

I doubt that could ever be true.  If a product is popular, several suppliers will import that product.  I saw on one franchisors’ web site that claimed that they attended several trade shows including the Frankfurt’s Christmasworld.  According to Christmasworld’s website, there are more than 32,000 attendees every year.   There is no “secret new product” there.  You can visit the websites of the suppliers that do attend the tradeshows and see what new products they have. We are one of them and we stay current with the market by attending. Very few franchises are attending.

You will have a limited area.  If you want to grow, they will make you pay for another franchise area.

You do the work - they take the money.  And franchisors are notorious for changing the rules as you go.  If you are successful, they will sell another franchise in your area (or very close to it).  Just ask all the Subway Sandwich franchisees who often have other Subway franchisees very close.

There are no barriers to entry for your competitors. 

You need a truck and a ladder to install Christmas lights and so does your competitor.  But if you pay a franchise fee, everyone else starts at a lower cost than you.

A franchise actually makes you less competitive. 

When I compete against a franchise, I know he has to pay a franchise fee to the franchisor on all of his work.  That means he must pay a higher cost than I do since I have no franchise fee.  And if they are required to purchase product from their franchisor, I know what those cost are (and what product they don’t carry).  Also, do you really want to pay a franchise fee on all the work you do for the rest of your business life?

Franchisors are notorious for changing the fees and geographic areas as you go. 

Think again of Subway.  They are everywhere.

You have to live with the decisions of the franchisor. 

What is best for the franchisor is not always best for you.  These management decisions can hurt you.  What if they decide to discontinue a product that is your top seller? What if they overbought a certain bad selling product and they are now trying to cram it down the line to you? There are many examples of this, but one of the more famous ones is Coldstone.  See the following stories including the last from the Wall Street Journal:

http://www.unhappyfranchisee.com/category/franchisor/cold-stone-creamery/

http://www.franchiseknowhow.com/legal_corner/coldstone.htm

http://online.wsj.com/news/articles/SB10001424052970204136404577211391192172770?mg=reno64-wsj

Remember, whatever management decision the franchisor makes, you have to abide by your agreement.  Again, there is a place for franchises.  They can often help build brand awareness, and provide critical support in your business.  I just can’t see where that fits in Holiday decorating. 

If you feel differently about Christmas Franchises or want more information on starting your own Christmas light decorating business without the hassle of franchises, we would like to hear from you.  We are always just a phone call or email away with real, tried and true advice for our customers.

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