Franchises
Is franchising the "right" way for you to go to become an entrepreneur?
How do you choose the franchise?
Read And God Created The Franchise by Jim Blasingame
Read The Dos and Don'ts of Buying a Franchise: Checklist to Buying a Franchise by Bill Bradley
And God Created The Franchise by Jim Blasingame
One of the questions I am asked most is, "What business should I go into?"
Or another variation, "I know I want to do my own thing, but I don't know what."
These folks have the passion to be a small business owner, but are
not passionate about anything in particular.
God understood that there would be people like this, which is why he created franchises.
Purchasing and operating a franchise is entrepreneurial coloring inside
of the lines. You get the rush of working without a net, without having to come up with all of the answers.
Starting from scratch; digging it out of the dirt; creating something
from nothing, is not for everyone. In truth, those of us who operate
this way know that propensity is often more of a curse than something
to be desired. But we can't help it. We are wired to operate on the
unassigned frequency of raw entrepreneurialism, which truly is NOT for everyone.
If you want to set out on your own, and don't have a problem playing
in a sandbox someone else built, you might want to consider buying a
franchise. There literally are thousands. Maybe tens of thousands;
from auto repair to air filtering; from carpet cleaning to car rental;
from hamburgers to home improvement. You get the picture.
If you have decided that you aren't ready for the "doing your own thing"
high wire act, congratulations. You are probably a good
candidate for owning a franchise.
The bad news is that the franchise universe is very broad
and can be quite intimidating. The good news is that the
fundamentals you should apply to conduct your research, regardless
of the franchise you may choose, are basically the same.
To help us understand these fundamentals I call on Andrew Sherman,
an attorney, an expert in franchising and intellectual property, and
the author of, Franchising and Licensing, which is the bible on this topic.
Andrew identifies a number of key components in any relationship
between a franchisor, the developer of the franchise, and a franchisee,
the purchaser of the franchise. Andrew says that by following these
fundamental keys, you will establish a strong foundation upon which
you can build a successful franchise operation. Below are four
of Andrew's fundamentals, followed by my thoughts..
1. A Proven Prototype
One of the things you should expect to get when you lay your money
down for a franchise is a model that works. Period. Not only must
the product be something you can sell, but you must be able to
replicate that product over and over again without having to
reinvent and modify as you go along. Indeed, the essence of the
benefit of a franchise is that consumers seek out a franchise product
because it is a known quantity. McDonalds may not have the best
hamburger in the world, but whether you're in Moline or Moscow, you
know it will taste just like the one you had in Meridian.
2. A Strong Management Team
Not yours. Theirs. Yeah, the folks to whom you will be writing the checks.
You can't possibly imagine how much support you're going to need.
A thousand questions -- and that's just the first day. Check out
the management team's credentials. Also, check out how long the key
folks have been with the franchisor.
Not only do you need to know that you can reach out and touch someone
at your franchisor's office, but you need to believe that person can
answer your questions. There should be virtually nothing you can ask
that they haven't experienced and anticipated. Here's a tip: If you
aren't getting overwhelmed with support and answers during the due
diligence process of qualifying each other (their franchise and your
ability to pay and produce), how much support do you think you are
going to get once they have your money? Don't forget, franchises are
like buses, if you miss one, another one will be along in six minutes.
3. Sufficient Capitalization
Franchisors are just like all other businesses, they must have working capital to:
Grow. The best thing for you is
for someone driving by your franchise location to have seen
one just like it in the place they just left.
Innovate. You can't sell the
same stuff forever. And since you're a franchisee, you can't
introduce your own ideas. Andrew likes to tell the story about
McDonalds franchisees in the south who were selling grits,
without permission. Not any more, because it wasn't in the
contract. But your franchisor must be able to provide the
"grits" that your customers want.
Market penetration. You're going
to be required to pay your franchisor some percentage of sales
which, among other things, is to pay for brand development --
advertising and marketing. You don't want that money being used to keep the lights on.
Weather the storms. Into everyone's
life a little rain must fall. There will be storms, competitive
threats, deflation, product obsolescence, cultural and demographic
changes, etc., etc. Ask your franchisor prospect how they've
handled past storms and prepared for the ones that are surely
around the corner.
You have a right to know exactly how financially strong your franchise
prospect is. ASK!!! Remember, they're going to be asking you the same questions.
4. Comprehensive Training Program
In order to make that "hamburger" look and taste just like the last one
your customer ate, you must be able to learn how to do it yourself, and
teach your people how. That training MUST come from the franchisor. You must
call others who are already operating a franchise like the one you are
considering. One of the most important questions to ask them is,
"How is their training program?"
These are just a few of the critical areas to pay attention to as you
select a franchise that fits you. There are many very important elements,
each giving rise to a thousand questions. You should ask ALL of them,
and if you don't get good answers, simply say, "Thank you for your time.
Have a good life. I'm outahere."
Whatever you do, it's OK to get excited about a franchise, but don't
fall in love with one until you've FULLY investigated it,
and actually written the check.
Write this on a rock - When the
entrepreneurial sap starts rising in your bark, don't get
frustrated or intimidated if you don't KNOW what you want
your business to be when it grows up. Check out
the world of franchising.
You can read hundreds of articles by Jim Blasingame and the
Brain Trust members from The Small Business Advocate Newsletter by clicking here.
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Advocate Show, M-F, from 7-9am Eastern, or a REPLAY of the most
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Check it out.SmallBusinessAdvocate.com
There are also over 1,000 Advocate Archives of interviews Jim Blasingame has
conducted with over 200 small business experts in 30 categories, available
from this page at http://www.SmallBusinessAdvocate.com.
Don't forget to use our really cool search engine.SmallBusinessAdvocate.com
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The Dos and Don'ts of Buying a Franchise:
Checklist to Buying a Franchise by Bill Bradley
Suddenly for whatever reason, the idea of being your own boss,
taking control of your own future, has become obsessively
irresistible. You feel like your life is passing you by.
You're stuck. You're in a quandary. You're hungry for success
and you're not sure what to do. You know your success depends
on making smart choices. Most important decisions you'll make
in your life are tough and complex. You dread making these
decisions because they almost always come with a degree of risk.
Buying a Franchise is certainly a life changing decision involving
complex considerations that will require you to focus on what
you want your life to look like. What's important to you?
With that in mind, below is a check list to buying a franchise.
The checklist is not exhaustive, but provides a good basis for a
good decision that will increase the odds of your success in franchising.
CHECKLIST TO BUYING A FRANCHISE
DO use a franchise consultant.
Franchise consulting services are free. Your decision should get
you where you want to go. A good franchise consultant will help
you specify your objectives. What do you want to accomplish and
which of your interests, values, concerns, fears, and aspirations
are most relevant to achieving your goal. A franchise expert will
help you think through your objectives and give direction to your decision making.
DO establish a franchise business development plan.
This is the foundation of your franchise. Most successful franchisees
follow the franchise system. Nevertheless, you should have a vision
of what you want your franchise to look like. How are you going to
promote your franchise? What's your sales strategy? How do you
monitor and maintain excellent customer service? What's your policy
for hiring and retaining excellent employees?
DO an audit of your franchise compatibility and suitability.
Franchising, owning your own business is hard work. Are you, your
spouse and your family supportive of the decision and are you ready
to make the sacrifices in the way of money and time in order to fully
commit to a franchise business? Do you and your spouse have the business
skill sets compatible to the franchise business you want to own?
DO a financial audit to assess your financial resources.
Get a clear understanding of your risk tolerance. What is your comfort
level for your investment? How do you intend to fund your franchise? Home
Equity Loan or a Small Business Loan? Do you have enough liquid cash resources?
Do you have enough savings to fall back on while your franchise business develops?
DO research and evaluate your franchises options.
A franchise consultant will help you ask all the right questions and get
the answers you need. Does the product or service you propose to sell
have a market in your area? Franchise owners know their industry.
What's the market's potential? What are your margins? Who are my
competitors? Most important, who is my customer?
DO hire an experienced franchise attorney.
He should be familiar with industry franchise agreements.
DON'T make your decision too quickly, or too slowly, or too arbitrarily.
Remember most of us don't get trained to make decisions. It's not what
you decide, it's how you decide.
DON'T assume anything.
Take control and be proactive in seeking what you want. Stick to your
core values and beliefs and the needs of your family. Don't just sit
back and watch what comes your way. Think about your long-range goals.
DON'T ignore your current situation.
What is it about your day to day life you don't like? Why are you
considering a change? Will buying a franchise solve the problem?
DON'T ignore the tradeoffs of your decision.
Will the loss of company benefits, including retirement plans, be
outweighed by the upside potential and self-pride rewards that
would come from owning your own franchise business?
DON'T obsess over your decision.
Know when to quit looking. The perfect franchise solution seldom exists.
It's important to be careful and thorough in laying out your objectives.
Once you've made your decision apply your energies to developing your franchise.
Lastly, work hard to build a good relationship with the franchiser.
The franchiser is an asset to your business. Successful franchise
owners trust the franchise model and implement current and future
business strategies. Your success is a collaborative effort between
you, Your Franchise Consultant, and the franchiser. Take charge of your own destiny.
Bill Bradley is the senior founding member of Your Franchise Consultant.
If you're looking for free franchise consulting where the total focus is
on your goals and aspirations visit www.YourFranchiseConsultant.com
or contact Bill directly at bbradley@YourFranchiseConsultant.com .
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