Use these tips to help you do your franchise research with due diligence…
You already know that you are going to be a franchise owner. The franchise model itself is a potent economic force, generating more than $1 trillion in sales annually and employing over 6 million workers with a flowing payroll greater than $120 billion, according to Census. As impressive as those numbers are, your concerns are more specific and more personal.
Fortunately, if you zoom-in to the personal benefits of franchising, the view is just as formidable because you are granting yourself a way to own and run a business that is strengthened by brand recognition, a solid reputation and support at the corporate office and, in the best cases, even the local level. Also, unlike a risky, independent start-up venture, you don’t have to learn the hard way, by trial and error and can instead manage your business with the assurance of your franchisor’s expertise, knowing that the system they provide has been cultivated over time to give you the greatest chance to build prosperity and, even, legacy.
If you are a new entrepreneur with limited access to resources or particular industry experience, this kind of support removes barriers to entry and provides economies of scale advantages and capabilities while preserving important individual control over the management of your business. You get, in a real sense, the best of both worlds when you step up and take command of a well-suited franchise opportunity because you gain the benefits of a proven system as well as entrepreneurial benefits that include the independence that comes with a clean break from corporate employment replete with the charms of small business ownership.
Oh, there are choices! Franchises run in great numbers across numerous industries from restaurants to cleaning services to the latest trend, but which one suits you is a quest that only you can embark upon with an ultimate choice that only you can bring to complete fruition. There was a time in years past when a company wouldn’t go forward into franchising until it reached a respectable degree of success, but today, it isn’t hard to find new, greenhorn companies jumping into franchising with little more than a cluster of units in the same area. They cannot tell you how their system will work over the long term or in different parts of the world. At best, they are an unnecessary risk; t worst, it is a flat-out franchise rip off.
Five Things to Consider Before Buying a Franchise
1. Have you done your homework on the markets that you are going to operate in? Do you have a business plan?
2. Do you know how long you have to reach your goal(s) before you need to reassess your position?
3. Do you understand the important numbers, and do you have the systems in place to measure them?
4. Have you spoken to people who have been through this challenging and potentially rewarding path of business ownership?
5. Do you have a marketing strategy that will move you forward?
Put yourself in front of franchise representatives to research their system for your own benefit
Since you are investing in an established brand, it only makes sense that things will work best for you if you closely follow the system of operations that has been proven to work. In order to do that well, there needs to be ample support from the franchisor apparent as early as discovery day, when they should pull back the curtain on standard sales pitches and welcome your scrutiny with no-holds-barred questions. They should be as interested in your suitability for their franchise opportunity as you are in their suitability to gain your trust.
It should be a mutual discovery period and you should get a real sense that the franchise representatives sitting across from you are not too quick to have you sign anything. They should, first, make it their goal to help you determine if their offer is one that will line-up with your personal goals and determination to succeed. They should love their brand and have pride in each chance to open additional locations which should give them a high standard for the kind of entrepreneur they will welcome into their franchise family. Additionally, you should be welcomed to tour active franchise locations so you can meet with and learn the truth about the particular franchise that most interests you. Nothing will tell the tale of a franchisor’s worthiness better than a franchisee operating under their name because they will either offer high praise of the training, support and results or they will provide you with the personification of red flags.
Take a look at the FDD
When you look at the Franchise Disclosure Document (FDD), you will learn exactly what you’ll be paying to the franchisor prior to and after your grand opening as well as how much revenue will be going to the franchisor. Look very carefully at the fine-print in items 19 and 21, as they will give you a picture of how well the system is performing financially through financial performance representations and historical growth.
It is important to visit owners of new franchise locations as well as those for whom an underperforming franchise (resale) was just the ticket. Very often, franchises flounder because the owner fails to follow the system as outlined in training and provided in the operations manual, in spite of great support from the franchisor. In those cases, smart entrepreneurs see a brilliant chance to sweep in and grab that franchise for sale and apply their own business intelligence, determination and fresh training and properly align their efforts with corporate guidelines. The results are frequently impressive, so make it a point to ask the franchisor about franchise resale opportunities.
“When I met with the franchise representative for the first time, I did lots of my own research on Minuteman Press International, so that I was well informed about the franchisor. I also had a list of questions that I wanted answers to which they were well-able to satisfy.” – Pat Kittle, owner of Minuteman Press, North Conway, NH
Jack Panzer, Area Manager for Minuteman Press International in Colorado and Arizona engages countless numbers of excited entrepreneurs as they embark upon their discovery phase in the world of franchising. As the checklist that leads to a fist-pumping YES to sign a franchise agreement with a most-worthy franchisor draws near, Jack encourages people to project to the days immediately following their grand openings, when they are up and running and hoping to make great strides with their new ventures.
As you consider buying a franchise, Jack Panzer asks you to consider if you are ready to do the following absolutely necessary things in order to find success:
- Staff the store with the best of the best – With proper local support provided by your franchisor, you can make sure to start off with a winning team that will mesh with the culture you are expanding upon that stems from your trustworthy franchisor.
- Brand your store and marketing materials – Your local support representatives should be on board to help you set-up your location, from equipment to the proper display of the brand in your lobby. You should also be ready with just the right marketing materials in order to focus on the local promotion of your products and services.
- Wear and promote the brand – It goes without saying that you and your new staff become instant ambassadors for your brand, so wear your colors proudly and continually promote the brand while networking in person as well as online.
- Follow all the programs – This, above all, is an absolute must if you wish to make something truly special and potentially lucrative out of your franchise opportunity.
- Be organized, but have fun – Yes. You have a business to run and that is serious business. With a staff to manage and marketing at the top of your list of priorities, organization is paramount.
On the chance to own a B2B franchise:
It’s helpful to know that securing and developing working relationships with B2B clients can be delightfully easier than in the B2C realm. The truth is, once they find a reliable establishment with whom there is mutual trust and consistency of excellence, the majority of B2B clients will reward you with long-term repeat business.
Business clients tend to know exactly what they need and if you provide unmatched, personalized customer service and quality, they tend to give you their loyalty in a way that is not quite as simple when dealing directly with consumers as you would as a B2C franchise owner. Also, by selecting a respected B2B industry leader and establishing yourself as the source of products and services that other businesses depend upon, you will gain strength as you develop your reputation in the market. Bob Ylinen, Minuteman Press International Regional Vice-President in Northern California, shares another prized aspect of business to business services franchise opportunities, “B2B is attractive for obvious reasons, first of all the hours of operation are generally 9 to 5 Monday through Friday nights and weekends off. Your customers are other professional business people and decision makers. I believe that most entrepreneurs would prefer a B2B type of opportunity.”
After you have put extensive time and energy into the personal investigation of the dizzying number of franchise opportunities out there, your ultimate choice should be one that makes it easy to sign the dotted line on the franchise agreement, without hesitation. This is going to be a long-term partnership and one that will liberate you from the drudgery of working for someone else and the frightening possibility of corporate layoffs. Entrepreneurship is enhanced by franchise ownership as it contains invaluable training and support along with the hallmarks of independent business ownership, namely the chance to be your own boss and build your own legacy.
Bill Watters is gratified with his selection and is the successful owner of Minuteman Press in Kingston, PA. He encourages you to look for the most important element central to well-established franchisors and encourages you to ask yourself the following question to find it, “Does the franchisor really CARE about the franchisees? To find out, talk to current franchisees and learn what their experiences have been with the franchise. In this way, you can find the franchisor that will care the most about your own success.”