On July 20, 2011, I wrote an article suggesting a franchise as a viable process for acquiring a business. It is estimated that less than 12 percent of the businesses in the United States are franchises but franchises account for approximately 50 percent of retail sales revenues.
When compared to starting a business from scratch or buying an existing business, a franchise provides a proven system; business management, marketing and sales support from the franchiser; and benchmarking opportunities with other franchisees. Plus, franchises are typically attractive to lenders. A prospective franchisee must understand that the model is rigid and few, if any, changes are permitted.
There are many factors that will enhance success. These three are key:
Drive determination — How strong is your desire and drive to own a franchise? The desire to own a business is perhaps the most important element in starting a business. Having career flexibility, control of your future and expecting financial success may be motivating factors but will not replace the hard work and drive needed for success.
Business system — How good is the franchise system and support offered by the franchiser? A business system is the total package for running the business and includes: location, marketing tools, sales process, management oversight and training.
Fit — Will the business maximize your strengths, passions and experience? It’s tough to be objective, especially if you have the drive, there appears to be a great product or service and the franchiser has a proven business system. The business system will not run the business: You are vital to implementation, so there needs to be a “fit.” If you don’t like cleaning your home it may be difficult for you to get committed to a residential or commercial cleaning franchise.
Listed below are six questions used by FranNet to help clients assess whether to acquire a franchise:
1. Do you understand and accept the responsibilities of owning a business?
Franchisees must implement the systems and manage the business. That means long hours and hard work.
2. Will you enjoy the business?
Make a list of what you expect to gain and if those gains provide the personal satisfaction to sustain your commitment.
3. Are you willing to follow the franchiser’s system and rules?
The franchise provides a brand and standards to assure your customers will experience the same high standards from every unit of the franchise. Make sure you are willing to follow the procedures.
4. Do you have the personal attributes to be successful?
The franchiser will provide a list of existing franchise owners. Contact them and discuss their experiences. Take the pulse of their personality. It’s a clue if your personality doesn’t match theirs. The business may be dependent on organizational skills and great attention to detail. Be objective: Is that really you?
5. Do you have the funds to afford the franchise?
The laws and regulations dealing with franchise disclosure should provide good information about startup and operating costs. Discussions with other franchise owners will allow you to verify the estimates you receive from the franchiser. As with most businesses, don’t expect profits at month one. It may take 12 months or more to reach break-even. How long can you survive without personal income to replace the wages you’ve given up? Think carefully about reserves and make sure they are included in your funding summary.
6. Do you have the support of your family?
In almost every case, you are making a family decision. Family members must know and accept the demands of business ownership. Keep them involved and knowledgeable in the decision process.
Help is available. FranNet (www.frannet.com) and FranChoice (www.FranChoice.com) are available, at no cost, to assist parties interested in exploring franchise ownership.