3 Companies Franchisees Should Be Cautious Of

The company was also resistant to changing the business model as market demographics changed. Between the oversaturation of locations and the economy putting a crimp on consumers' wallets, membership was falling.

Curves didn't embrace the round-the-clock access for members without supervision that many other fitness chains implemented. Founder Gary Heavin argued that having locations open 24/7 didn't fit with the company's strategy. "Curves is about providing a supportive environment for women, and an empty room filled with machines in the night is not my idea of a supportive environment," he told the WSJ in the August article.

But the company is reinventing itself with "a new weight-loss program, improved training for franchisees and their staffs, and an online 'university' to teach nutrition and more," the article said.

In December, the company launched Curves Complete, a weight-loss program that combines "diet, exercise and motivation," according to the press release.

Curves' troubling unit economics is what concerns Segreto. "They oversaturated the market. There [are] a lot of stores closing. They've got a very unfavorable non-compete and termination clause and a lot of legal issues. Even if a franchisee has lost their money and closed their doors," they are still liable for financial issues that can't be negotiated, Segreto says.

Curves representatives did not respond to requests for comment.

3. Cold Stone Creamery
Scottsdale, Ariz.

Litigation is what is plaguing Cold Stone Creamery , the premium ice cream chain bought by Kahala in 2007.

According to the Cold Stone Creamery website, the company has 1,500 franchises in 20 countries.

Doing a simple Google search on "Cold Stone Creamery" and "franchisees" pulled up the website, Unhappy Franchisee , which doesn't exactly paint Cold Stone or Kahala in a positive light.

Like the other two companies on this list, Cold Stone was also subject to an extremely rapid expansion right before a downturn. Many franchisees have closed over the years due to high operations costs and a recession in which consumers tightened the purse strings. Add in the fro-yo craze and a general transition toward healthy eating and the growth prospects don't look as exciting for Cold Stone Creamery.

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