How To Buy a Franchise

I’ve Got Questions For The Twitter Franchise “Victim” And Anyone Who Views His Video

So this “Franchise Victim” showed up on Twitter asking the question, “Think a franchise is still a lucrative business model?”

Think again and then join my online business!

He answers his own question by suggesting you “Think again.” And he provides a link to a video where he tells you his “story” and invites you to request information about his fantastic online business where he’s making at least $10,000 a week.

I watched the video — a couple of times — because I’m fascinated by what goes through the minds of folks like this. Here’s this young man claiming that he lost more than $250,000 in a franchise (and it’s likely that he did) and blaming it all on the franchisor and franchising (which may, in fact, be accurate, but I’m doubtful).

Do you gain by damning franchising?

What will he gain by damning franchising when it has an outstanding record of success? If he wants to promote his fabulous online money-making business, why not do that without taking a stab at franchising? Why damn what’s obviously a good thing for many other people? But I’m getting ahead of myself — I’ve got lots of questions!

Here’s the “story”

The “victim” explains in his video that a couple of years ago he saved money to invest in a franchise because he was “interested in taking on a business that was a proven successful model.” He claims that he invested $50,000 of his own savings and borrowed another 250k from a bank. Less than nine months later, according to the victim, his store closed and “I was left holding the bag on a $250,000 bank loan.”

He then makes this claim: “Having been through (the franchise experience) I can now tell you that franchising is a phenomenal business model for the franchisor. They transfer all the risk to the franchisees — I’m the one that got a $250,000 bank loan — and they take money off the top, so they make money even if you don’t make money.”

Here are my questions for the victim

All of which leads me to a series of questions that I’d like to ask the victim and anyone who watched his video.

First, to the victim: Why didn’t you invest your money in a proven business, especially since that was your goal? If you had done so, you wouldn’t be a victim now. You may, in fact, happily be on your way to the status of multi-unit franchisee, generating a tidy sum of profit for yourself.

You didn’t invest in a proven business — why not? There are plenty of them! Did you overlook them? Did someone twist your arm to buy an unsuccessful, unproven franchise? Or did you simply make a mistake?

Do you realize there are, in fact, thousands of successful franchisees in the United States and thousands more worldwide? And are we to believe there’s something wrong with all of them, too? Their lucrative businesses really don’t work?

How did they manage to succeed while you didn’t? What’s different about them and you? They took the same approach you did — except they actually did invest in a proven system. How did you miss out?

Questions for viewers of this “story”

Second, to viewers of the video: How much credibility do you give this young man and his story? Do you believe his story?

Do you believe him when he says that “franchising is a phenomenal business model for the franchisor”? Is that an accurate summation of franchising?

Do you believe him when he claims franchisors “make money even if you don’t make money”?

Do you believe him when he says franchisors “transfer all the risk to the franchisees”?

Post your comments publicly, or if you’d prefer, send them to me privately. I’ve got answers to my questions, but I’ll consider what you have to say, too. I’d like your perspective. If you’re okay with me quoting you, please give me your name and your permission. There’s a chance we can actually help the victim by giving him some insight to his Twitter promotion.

Victim gives good advice

One thing about the victim that I liked: He advises you to “think long and hard” before you invest in a franchise. Well, duh! We wish he hadn’t missed that advice himself. Franchising is not for everyone; it’s not for most folks. Clearly it wasn’t for him.

Interesting how he jumps to the conclusion that franchising isn’t for you, but his online business is!

Meanwhile, how interested are you in getting information about this young man’s online business where he claims you can make at least $10,000 a week working from anywhere in the world without dealing with employees, insurance, rent or 90-hour work weeks?

He says it’s “almost pure profit.”

You ready to get into business with him?

Photo image by: jdnx

The Most Important Question To Ask Before You Say “Yes” To A Franchisor

“If you had the chance to buy the franchise all over again, would you?”

That’s the single most important question to ask franchisees before you invest your money in a franchise.

It’s not the only important question

Granted, there are other “important” questions,and I tell you what they are in my free report: 92+ Questions To Ask Before You Invest In A Franchise, which you get automatically when you subscribe to this blog.

But asking franchisees if they’d do it all over again, knowing what they know, provides some of the best insight to help you make a decision before you invest your money.

Not all franchisors want you to ask it

To be sure, some franchisors don’t like it when you ask that question! If most of the franchisees answer, “No,” I can’t imagine too many of you saying “Yes” to that franchisor. On the other hand, people invest in franchises for all kinds of reasons — common sense doesn’t always prevail!

Also to be sure, some franchisors hope and pray you’ll ask that question because they know their franchisees will answer enthusiastically, “Yes!” And when that happens, your franchise sale is imminent. Of course, that doesn’t mean the sale should occur — but franchisee validation is one of the most convincing variables in franchise sales. If the existing franchisees say they’d buy it all over again, what could be wrong with the franchise?

Do franchisees like to prospects?

Prospects often ask me if I think franchisees lie. “Will they say Yes even when they really mean No?”

My response: “Of course!” That’s why it’s so important for you to talk to at least several franchisees before you invest your money. I think it’s a good idea to speak to at least a dozen franchisees.

How many franchisees should you talk to?

What if the franchisor only has a dozen franchisees?

Easy! Talk to all of them!

Six steps to help you question franchisees

Here are six steps to follow when you question franchisees:

1. Ask them all the same questions. Don’t ask different questions because then you won’t be able to compare answers.
2. You probably won’t have time to ask more than a couple dozen questions. Franchisees are busy people and may only speak to you by phone. Select your questions wisely. Make the questions pertinent to you and your situation.
3. Talk to franchisees who come from a background similar to yours. If you’re a teacher, talk to franchisees who used to be teachers. If you’re investing in an urban location, talk to franchisees in urban locations.
4. Don’t be afraid to talk about money. I know it’s not polite to ask people how much money they make, but the franchisees know that’s one of the reasons you’re questioning them. Tell the franchisees what you expect to earn and in what time frame. Ask them if that’s realistic. (My free report, mentioned above, provides more guidance on this topic).
5. Visit at least one franchisee. Go to work for a franchisee for a couple of weeks or in the evenings or weekends. Experience for yourself what it’s really like to operate the franchise. You might discover there are aspects of the business that don’t appeal to you!
6. In addition to franchisees, talk to vendors who provide products and services to the franchisees. How do they see the business? Growing? Declining? Of course, you’ll also question the franchisor and then discuss all the details with your accountant and franchise attorney.

Shopping for a franchise is hard work. But it’s much easier when you know which questions to ask. Begin with the most important question!

Photo image by:  Marco Bellucci

Getting Info About Franchises Without Giving Info About Yourself. Appeal To You? Then Read This!

What bugs you about shopping online for a franchise opportunity?

Before giving up specific company information the Web site requires that I enter my:

• name?
• address?
• phone number?
• financial information?
• then later sells my information to other franchises? (actually that could be a good thing and I’ll tell you why in a future blog)
• All of the above?

Thousands of prospects provide information daily

Chances are none of the above bugs you all that much because thousands of people provide that data and more to franchise Web portals that are designed to generate (and share) leads for franchise sales. All and all, these sites are good deals for franchisors, consumers and the franchise community at large. They disseminate valuable information to people who qualify to receive it, and that’s not a bad thing.

And yet, some folks just don’t like to give up personal info until they’re ready to give it up, which is usually not until they’re about to sign a franchise agreement, which actually means they’ll never, ever buy a franchise cause it doesn’t work that way in the world of franchising, and that’s precisely why the franchisor knows that you’ll give up your info to get their info!

Whew.

You quickly learn to do it their way

If you won’t do it their way before you buy the franchise you probably won’t do it their way after you buy the franchise and that doesn’t work for either party! If you don’t know what I’m talking about, please read this: It’s Not A Democracy!

Introducing a different kind of opportunity seeking site 

But now there’s a site that appeals to non-data providers and data providers alike. It’s not a big site, not yet at least, but it’s growing, and it’s different enough that you must visit it and use it if you’re going to buy a franchise.

Look at that, a screen of logos

It’s called 1001franchises.com . . . which means what it says: You can (eventually) find 1,001 different franchise opportunities on the site! Right now there are only about 250, but given the fact that you’re only going to buy one, (or maybe several of the same one) this is a good site to visit now!

Go take a look (even if you’ve been there before, the site has changed) and you’ll discover a screen of logos.

I know that one, and that one

Some you’ll recognize immediately: PostNet, Blimpie, Mr. Electric, Glass Doctor, Action Coach, Sterling, Maaco, Oreck, Arby’s . . . they all stand out, along with Great Clips, American Leak Detection, Cold Stone, Molly Maid, Ace, Rita’s, Pillar to Post, etc.

Don’t know that one, or that one

Other brands will be unfamiliar and may, in fact, be new to franchising. All the more reason to visit this site! Because if you don’t know to look for what you’re looking for how will you find it unless it just happens to be there, as it may very well be at 1001franchises.com!

No data entry will put a smile on your face

And you’ll love this! You can instantly get info about all the advertised brands without entering any data about yourself! 1001franchises.com is not in the data gathering business (imagine how many lies that’s going to save from prospects who invent names and phone numbers just to “fool” these sites). Now, that’s different for a franchise sales portal!

No lead sharing, either

You might also appreciate that the Web site will not sell or share your information — because the site doesn’t collect any information from you. In fact, once you click on a brand, your browser moves immediately to that brand’s Web site! So you connect immediately and directly with the franchisor of your choice — because there’s no middleman collecting data!

Somehow this just doesn’t seem real! You gotta give to get, but not at 1001franchises.com. Go take a look!

Webinar: How To Capture & Keep The Right Customers

Interested in learning How To Capture & Keep The Right Customers? That’s been my most popular live seminar through the years and while I’m still teaching it at franchise conventions, the economy has discouraged me from scheduling a public seminar. That’s why I’m turning the seminar into a Webinar. In the near future I’ll post a date and time when you can get this valuable information live, online, when you join my Webinar. Interested? Franchisors: Line up your entire network of franchisees for this important information! Franchisees and Suppliers: Invite your most valuable customers to join the Webinar — in fact, pay for their registration as part of your customer retention plan! If you want the details sent directly to you, click here. Be sure to let me know that you want info about the HTC&K Customers Webinar.

Why You Can’t Have It ‘Your Way’ When You Buy A Franchise. Get This: It’s Not A Democracy!

“Why are franchisors so specific and stringent?” she asked. “It seems they want to control everything!”

At last, Isabel (previous Isabel blogs are listed at the end of this article) is getting down to the nitty gritty about franchising, and the question she asked today was so important that I’m rushing to my blog to tell you about it.

Critical components of franchising

“I’m so glad you asked that question,” I told Isabel, “because it shows me that you are paying attention to what franchising is really all about, or at least you are noticing some critical components.”

So let’s get right to it: Franchisors are “specific” and “stringent” because they need to be, they should be, and they must be if they want to succeed as franchisors, which also means they want their franchisees to succeed.

Critics of franchising won’t like this

Now some critics would jump on that statement and eloquently and heatedly tell you that I’m wrong, that I’m just defending franchisors and franchising in general, and that franchisors are “specific” and “stringent” because they want to take your money and keep it after you fail without having to do battle in a courtroom.

God bless the critics: they keep us on our toes! Mostly they keep us thinking. Happily, on this point, they are wrong.

Willy nilly franchises do not succeed

In my 30-year career, working with more than 100 franchise companies, I’ve never seen a willy nilly franchise concept succeed. Furthermore, the franchisors with the greatest problems, and the weakest balance sheets, are most lenient with their franchisees.

Somehow, some way, some critics got the idea that franchising is a democracy, and that just because this is the United States of America, where freedom rings, you should be able to buy a franchise and do what you want with it.

Franchising, even in America, is not a democracy

Wrong!

Franchising is not a democracy and perhaps that’s the most important principle to understand about it. You cannot do things your way!

Period.

End of story.

It has nothing to do with freedom. Or rights. It’s business. It’s do-it-my-way or don’t-do-it-at-all business. And it’s protected by the United States of America, where freedom rings!

The franchisor sets the parameters

Fact is, if I create a franchise, so long as I don’t violate any laws of the land, I have the right to do it my way, and do it when I want, where I want, and with whom I want.

You don’t like that?

Not a problem for me. And not a problem for you, so long as you don’t buy my franchise! So long as I don’t allow you to buy my franchise.

Franchisors test the business and create a success system

However, if you’re going to join me as a franchisee, then I know how the business works best. I’ve tested it. I’ve improved it through the years. I’ve created a marketing plan, an operations plan, a sales plan, etc. I know what needs to be done, how much of it needs to be done, by whom and when, to make it all work.

I also know that if you deviate from any of my plans, it won’t work, or it won’t work as well. It won’t work for you and it won’t work for me.

Reasons why franchisors want franchising to succeed

As the franchisor, I want it to work. Why? Lots of reasons:

• I love money! And franchising is a great way for a franchisor to get fabulously wealthy.
• I love helping people. And in business, there’s no better means of doing so than to teach people how to succeed with a franchise.
• I’ve got a huge ego and I want the world to know me and my business. Fastest way to do that is via franchising.
• I want to change the world. There really are franchisors who are do-gooders.
• It’s a combination of all of the above!

At a minimum, I want it to work because if it stops working I’ve got to go do something else!

The goal is a satisfying and profitable business

And since all of this is important to me as a franchisor, I’m going to make sure that my franchisees do things my way, the way I know that’s necessary to build a satisfying and profitable business.

“Is that unreasonable?” I asked Isabel.

“No, but that doesn’t make me feel better about the franchise agreements that I’m reviewing,” she said.

“I understand,” I told her. “Let’s continue.” I really couldn’t do much about her feelings.

“You’ll wear this funny hat and this is what you’ll say to customers . . . “

As a franchisor, I’m going to be “specific” with franchisees:

• here’s when you must open the business
• here’s when you must close the business
• here’s where the business can be located
• here’s the list of items you can sell in the franchise
• here are the marketing materials you can use
• this is what you will say when you greet a customer
• here’s how you will dress every day in the business 
• . . . and so on

I’m specific not because I suffer from OCD (though I might, and what if I do?) but because I know this is how the business works! It’s how it works for me and how it will work for each of my franchisees.

Rigorously binding, exacting and constraining, that’s franchising

I’m going to be “stringent” as a franchisor for the same reasons that I’m going to be specific. Stringent as in “rigorously binding or exacting, compelling and constraining.”

“Can I interrupt?” asked Isabel.

“Of course you can. You’re the client!”

It’s so offensive, said Isabel

“What you just said, that binding, exacting, compelling crap, is what’s so offensive about franchising.”

“I understand,” I said. “And I agree. I don’t know that the word is ‘offensive’ but I understand. It’s controlling for sure, and most people, especially those who are entrepreneurial, don’t want to be controlled. But all I can tell you is that ’stringent’ is absolutely necessary in franchising. In fact, if you find a franchisor that’s not stringent, run! That business is not going to work. Eventually it’s going to become a mish mash and not a franchise.”

Franchising thrives on uniformity

Remember, too, that a franchise stands for uniformity. If you go to McDonald’s, you know the drill, right down to how your food product of choice is going to taste! I haven’t eaten French Fries at McDonald’s for a year or more — I’m a McDonald’s patron only when my grandkids insist — but I remember how I love those French Fries. Haven’t had a chocolate milkshake at Burger King for several years (too fattening for me, I’m afraid) but I still crave one! I had a vanilla cone at Dairy Queen as recently as 72 hours ago, and if I get a chance, I’ll buy one again today, because I love that product (see My Secret Love Affair).

“What would happen, Isabel, if these products changed, or worse, what would happen if you visited your favorite franchise, but in this unit they did things their way?”

Different isn’t always satisfying

“You’d be disappointed if you didn’t get what you expected,” she said. ”I get the point, John.”  

“I’m glad, Izz. Because that’s why franchisors are specific and stringent. You can’t do things your way in a franchise. You’ve got to work the business the way the franchisor means it to be worked. That’s how you succeed in franchising.”

“But don’t some franchises fail?” Isabel asked.

Not all do it the franchisor’s way

“Absolutely,” I said. “And in the failures that I’ve seen, almost always they occurred because the franchisee didn’t follow the system and/or because the franchisor wasn’t specific and stringent. In other words, the franchisor let people do things their way. And that does not work.”

Isabel asked, “Should I expect every franchisor to be specific and stringent?”

“Yes,” I said. “But the keyword is ‘expect’. If you had asked, ‘Is every franchisor specific and stringent?’ I would have answered: Only the good franchisors!”

Only the good franchisors do it their way

You’ll find franchisors who are lenient, who do not invoke controls, who do not watch their franchisees, who do not train and follow up and support their franchisees — in fact, there are a lot of them! And some of them manage to succeed. Until there’s a crisis. Or until a group of franchisees decides to do battle with the franchisor — that franchisor is likely to lose because the franchisor permitted the franchisees to do things their way. They set the precedent for failure.

Is there a formula for success?

“Isabel, the best franchisors will tell you upfront that they have a formula for success and once they share it with you they will expect you to follow it to the T. If you have a problem with that — and many people do — do not buy a franchise.”

Isabel was uncharacteristically silent for a moment. Then she said, “You’ve given me a lot to think about, John. Thank you.”

“No, thank you, Isabel. You asked the perfect question, one that every franchise prospect needs to consider.”

Previous Isabel Blogs:

1. Is Franchising Indentured Servitude?
2. Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You
3. Figuring OUt What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You — Part II
4. The Franchisor Spelled It All Out And Isabel Was Furious! She Screamed: “Do They Think Franchisees Are Robots?”

Photo image by: fotographix.ca

The QEC On Franchising Explains Why Some Franchisees Fail . . . Here’s How You Can Excel

Enjoyed breakfast this morning with a smart, corporate America type-of-guy, a young man who would excel in franchising, and he told me something about franchising that I had not heard before.

Looking for quick-easy-cheap

Turns out a couple of his closest friends had purchased franchises and neither one worked out successfully. One friend’s franchise continues “to do okay,” but the other friend has failed. I expected he’d then tell me that franchising doesn’t work — he is, after all, a successful corporate America guy — but instead he said the problem for his friends was that “they were looking for quick, easy and cheap.”

That’s why these franchise ventures didn’t work, he said.

How do you define franchising?

It’s an interesting point - the QEC on franchising, I thought.

My breakfast companion pointed out that many people — some whom he identified as  “lazy” — think they can buy a franchise, start it up quickly, operate it with ease (i.e. delegate it to a manager), and do it cheap! For many people, that defines franchising.

Hmmm.

As I said, I hadn’t heard this before. And I’ve never thought of franchising as quick-easy-cheap.

You could buy one in 15 days–that’s quick

But, of course, it’s fairly quick to start up a franchise. You could find one today and buy it 15 days from now (there’s a 14 day requisite disclosure period). If training lasted only a week and you opened the business in your home, you might be up and operating within 30 days max! That’s quick!

Follow the system–that’s easy

It also can be easy. After all, a franchise is designed for easy. A franchisor invented the operating system, dressed it up with a brand, identified vendors, and worked out the kinks, so it should be easy to learn how to operate the business. The franchisee’s job is to follow the system. That’s easy!

Cheap is a relative term

Cheap isn’t always true, depending on your perspective. Many people complain that they can’t buy a franchise because it’s too expensive. By the time they pay a $40,000 franchise fee, and spend another $150,000 on the build out, plus supplies, advertising, and various other start-up costs, it’s not cheap.

On the other hand, if you’re buying a home-based franchise, or a service franchise that’s mobile, or one that you can operate from a small office, you may be all in for less than $50,000. That’s cheap!

So while I hadn’t thought of it, franchising is (or can be) quick-easy-cheap.

That’s not good

And, as my friend pointed out while I spooned at my oatmeal, that’s not good!

However, it’s not good only because it may give some people the wrong impression. Turns out that my companion’s friends misinterpreted QEC to mean: Absentee Ownership. Because their franchises were QEC, they thought they wouldn’t personally need to be on-the-spot to build their businesses. In fact, one of the friends bought a franchise to hedge his bet against his corporate job. If he lost his well-paying position, the franchise was his fall back.

Speaking from experience

“If you’re not willing to eat, drink, sleep, dream and worry about your business,” my companion explained, speaking from experience, “you’re not going to build a successful business. And my friends didn’t do that because they didn’t think they had to. They were looking for quick, easy and cheap.”

Don’t be misled by QEC

By the end of our meal I understood the point, and it’s a good one. It’s okay that franchises are QEC. But don’t be misled! Most of the successful franchisees I’ve interviewed in the last 30 years, including those who left corporate America, have told me, “I’ve never worked harder in my life,” when speaking about their franchise experiences. Of course, they also said they didn’t mind the hard work and long hours because they loved that they owned the business!

Your franchise may be QEC, but it will also require your personal involvement, day-to-day, initially at least, to make it successful. Eventually — if you invested in a good one and you follow the system — you may be able to turn over your franchise to managers and let them operate it for you.

But until it’s successful, you’re the one who needs to make it happen. My companion understood that, which is one of the reasons why he’ll excel if he becomes a franchisee, QEC or not!

Photo image by: SantiMB

Beware Of “Experts” Who Trash Franchising While Selling You Their Business Opportunity

Where do these “experts” come up with this stuff?

What are they really selling?

Ah, wait a minute, they’ve got something else to sell. Like this one who wrote an article about the “high risk” of buying a franchise in “this recession.”

This “expert” gives you five reasons why you should not buy a franchise and then, finally, at the end of her article we discover what she’s really selling. She’s not selling you protection from franchises. She wants you to buy a home-based business “in an Industry which is booming during this recession” — that’s your ticket, she claims, to financial freedom! Interestingly, she sells this particular home-based business!

Give me a break.

Your ticket to financial paradise?

Surely any interested reader can see through that message: Don’t buy a franchise, cause it’s risky, but buy my home-based business cause that will lead to your financial paradise!

I don’t underestimate the intelligence of my readers

Fortunately for readers of this blog, I’m not selling franchises or business opportunities, which, by the way, fail more often than do franchises, according to the U.S. Small Business Administration.

Fortunately for readers of this blog, I tell you over and over again that franchising is not for everyone, and it may not be for you! In fact, starting and operating a business of any kind may not be for you, and it’s not for most people!

Fortunately for readers of this blog, I talk about the facts — not scare-tactic nonsense contrived by “experts.” 

This is nonsense

Let me give you some examples from the above “expert’s” article:

1. She wrote: “If you are buying a franchise that requires a shop front, especially a franchise in the food/cafe/restaurant industry, the set up costs can be enormous. Up to a million dollars is the usual.” . . . She was okay until that last sentence. It’s patently false. The “usual” is not up to a million dollars. The average franchisee doesn’t invest a million dollars. Now, she wrote “up to” and perhaps that means $250,000 to $400,000, which is more than likely the “usual.” Fact is, she doesn’t know! Because the number varies from concept to concept and from market to market. But it’s not $1-million, which is what she implies. Good scare tactic, but false information.
2. She wrote: Under the sub-heading “You could loose (sic) it all” she claimed: “You will most probably lose your house.” Really? Where’s the proof of that? In my 30 years in franchising I’ve talked to dozens of failed franchisees — and never one that lost their house. Have some lost their house as a result of failing in a franchise. No doubt. But I haven’t met them, and if it’s an almost “sure thing,” as this “expert” implies, I would have talked to at least one in 30 years. More nonsense. And yes, it always makes me a little suspicious when an “expert” confuses “loose” with “lose” — but hey, it’s an honest and easy mistake to make.
3. She wrote: Under the sub-heading “Paying more than once” she thinks it’s intolerable to pay a royalty to a franchisor. Quite amazingly, she wrote: “There is no hiding anything!” . . . Wow! In other words, if you can hide something, if you can cheat, if you can lie, if you can deceive, you should. But you won’t be able to as a franchisee! My sick sense of humor suggests that you should buy her home-based business where surely you will be able to hide things and not pay her what she’s due! On the other hand, by cheating her maybe she’s getting what she’s due?

Selfishly written to promote her own business

I could go on and shoot holes in more of her article, but I know I don’t need to. This is a selfish article that tears down franchising in an attempt to make the author’s business appear less risky and of greater value. That’s a disservice to readers and it makes a mockery of journalism.

There may be good reasons for not buying a franchise in a recession, but you’re not going to find them in this “expert’s” article.

. . . I did not provide a link to the article because I don’t want to embarrass the “expert” — but if you want to read the “expert’s” article, send me a note and I’ll forward the link to you. 

Photo image by: urban_data

The Franchisor Spelled It All Out And Isabel Was Furious! She Screamed: “Do They Think Franchisees Are Robots?”

I guess she hadn’t ever read a Franchise Disclosure Document until this week. And she wasn’t happy!

I’m talking about Isabel. Crazy Isabel! She’s back. (Previous Isabel articles are posted at the end of this blog).

The franchisor spelled it all out

“Everything is in the franchisor’s favor!” she screamed, like she had just come through a nightmare.

“They tell you everything you have to do! It’s all spelled out: When you have to work. How much you have to work. How much you have to produce. What you have to wear. Where you can operate the business. What you can sell. How you can advertise. Who you can sell the business to . . . does it ever end?”

And the problem is?

I said nothing for a moment, giving the air time to clear.

Finally, I dared to speak.

“Do you really want it to end, Isabel?

“What?” she snapped.

No time to be sympathetic

I knew she expected me to be sympathetic — or at least hoped so. But come on. Really? We’re talking about franchising.

Business.

Money.

Risk.

This is serious stuff.

No one is forced to become a franchisee

“I said, ‘do you really want it to end?’” and I gave her no time to answer because, frankly, I didn’t care and I needed to make a point.

“Look, it’s called a franchise. It means: license. It means someone is going to license you to operate their business in a specific manner for a specific period of time, and possibly in a specific location. They’re going to license you the opportunity to use their brand, their trade dress, their marketing plan — you’re going to represent them, Isabel. And they have the right to tell you what you will and won’t do. Because they grant the license!”

You can always do it on your own

“But I want to be able to make decisions. . . .”

I cut her off.

“They know what’s needed to operate their business successfully. And if they don’t, then why are you talking to them? . . . We can assume, Isabel, that you don’t know how to operate their business successfully or — you’d go do it! . . . You can’t! Or you won’t! Or you don’t want to!

This isn’t about your right to make decisions

“Meanwhile, they don’t want to license people who are going to make decisions and take the chance those decisions will turn into costly mistakes . . . and then into failures. They don’t want failures . . . they want successes, and it’s a huge challenge for them to find people who will be successful — even when they have spelled it all out for them!”

I paused even though I didn’t want to. But I remembered that Isabel is the client and while I can get as excited as she can get about these issues, I didn’t want her to think that I was a raving nutcase, simply spewing franchisor gunk.

Why do you want to make decisions?

“Do I get to make any decisions as a franchisee?” she asked.

“Izz,” I started again, calmly this time, “do you really want to make decisions? Is that your goal? To make decisions?”

“No, of course not. My goal is to be a successful franchisee, operating a business that I find — in your words — both satisfying and profitable.”

Better that the franchisor make all the decisions for you

“Very good,” I said. “You’re a terrific student. So why are you hung up on making decisions? In fact, why aren’t you looking for the franchisor to make all the important decisions for you, assuring you of your success?”

“Because I don’t want to be a robot. I want to participate in the business. I want to make it mine,” she said, starting to get excited again.

Review basic franchise facts again

“I don’t want you to be a robot, either. Neither does the franchisor. But Isabel, let’s just get down to the basics. You don’t know how to build a satisfying and profitable business — at least not the type of business that you’re looking for. Is that fair to say?”

“Yes, that’s fair. If I knew how, I’d go do it on my own,” she said.

The franchisor invents the wheel

“Very good. . . . Meanwhile, there’s a franchisor who has figured it out, or at least claims to have figured it out. They’ve already built the business. They’ve made mistakes. They’ve lost money. They’ve invented the wheel. They’ve recruited and trained franchisees, some of whom are doing very well. So far so good?”

“Yes,” she said, “that’s all true. I think they’re a good franchisor, too. I like them.”

The franchisee spins the wheel

“And I bet they love their business. In fact, they love it so much that they want to protect it. They don’t want to trash it. They don’t want start-ups that quickly fizzle into failures. They want franchisees who will succeed. And they’ve learned that they need to spell it out, they need to teach and train and support the franchisees and show them what to do, when to do it, who to do it with, etc., in order for the franchisees to succeed.”

“I get it,” she said. “But it seems so oppressive.”

Success or oppression?

“Well, it may be. But if it’s also successful, you may be able to live with the oppression, if it’s really oppressive, and I don’t know that it is. The most successful franchisees I know never tell me that they feel oppressed! But they do feel grateful that the franchisor figured it all out for them, made and paid for the mistakes in advance of them, and gave them a Cheat Sheet, so to speak, that helped them make good decisions — the decisions that eventually led to their success and satisfaction.”

Suddenly it was quiet again. Isabel was letting it sink in.

Are they all like this?

“Are all franchise agreements like this?” she asked. “Do they all spell out what the franchisee must do?”

“Only the good ones,” I told her. “I would not encourage you to buy a franchise if they only gave you part of the formula for success. . . . And again, Izz, I’ve got to go back to this point: Maybe it’s not for you. Maybe you don’t really want to be a franchisee as much as you want to be a business owner who makes her own decisions, win or lose. That’s what you need to think about. . . .

Reasons why you should buy a franchise

“I thought we had covered that ground — the fact that a franchisor has the absolute right to decide what franchisees will do, when and with whom, and all the rest of it . . . and the franchisee’s job is to listen and respond and follow — never to re-invent the wheel. . . . If you think you can’t do that, or don’t want to do that, if you think that turns you into a robot, if it’s oppression, for cryin’ out loud, then do not buy a franchise.”

“I understand,” she said. “I do want to be a franchisee. I realize I don’t have the answers and I don’t have enough money to make costly mistakes.”

Only the franchisor’s reality counts

“But you may not be willing to trade off your reality for the franchisor’s reality. And Isabel,” I concluded, “the franchisor’s reality is the only reality that counts in franchising. Think about it . . . and we’ll talk again . . . if you’re still willing.”

“Of course I am,” she said. “You don’t scare me!”

For More Franchising With Isabel Blogs, Read:

Is Franchising Indentured Servitude?

Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You

Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You — Part II

Photo image by: striatic

If You Don’t Want Or Need A Safety Net, You Don’t Want Or Need To Buy A Franchise

“So, maybe you don’t really want a safety net, Isabel.”

She’s back! (The previous Isabel post will lead you to even earlier posts that chronicle her buying journey as a prospective franchisee). And once more, she’s not ecstatic. 

“Am I giving up my soul?”

“I don’t want to give up my soul,” she said. “I just want to own and operate my own successful business.”

Oh boy. Here we go again, I thought, back to the indentured servitude nonsense, when I first started chronicling Isabel’s adventures. 

“We’re not going there again,” I said. “I know you’re the client, but we’re not going there again.”

“No, no, I agree,” she assured me. “This isn’t about that. This is about my ability to make decisions relative to how I operate my business. Can we talk about that?”

Franchising always includes controls

“Certainly we can,” I said, “but don’t expect too much. You’re talking about buying a franchise, Isabel. By definition there will be controls. Controls mean limitations.”

“But there are some things that I just want to do my way, at least once in a while. I want to test my ideas! What if I come up with the next greatest product for the franchise, something they wouldn’t have thought of without me?”

Controls are limiting to franchisors, too

“That’s a risk the franchisor is willing to take,” I explained. “People think only franchisees take the risks in franchising. Franchisors do, too, but in different ways. Their controls sometimes limit their ability to expand and grow and develop new products and services, but that’s a risk they are willing to take. You’ve got to take that risk, too, or don’t buy a franchise.”

“But it shouldn’t be that way,” she protested. “I’m a reasonable person, in spite of my excited personality. I have ideas. If it’s a good idea, I don’t plan to keep it to myself. I’ll share it with the franchise. I just want to be able to test my ideas.”

Do it your way, test your ideas

“Then start your own business!”

“I can’t do that,” she said. “First, I don’t have the money, and you know that.”

Uh-oh.

Suddenly that excited personality was kicking into gear and I was going to take the brunt of it. Rather than tell her to “Go get the money!” which is what an entrepreneur would do, I bit my tongue. Plus, she’d need a lot more than just start-up money if she intended to “test” her ideas.

Testing ideas is a risk

It’s in the testing that businesses fail. It costs money to test ideas! That’s why franchisors don’t want franchisees to do it. Franchisees only have so much money, and they generally don’t like to raise more money. They need to invest their money wisely as they open and build their businesses. Investing it in tests isn’t always wise, and in fact, usually doesn’t work out.

That’s why there are controls!

But rather than explain all that now, I calmly said to Isabel, “This isn’t my fault. I’m not forcing you to buy a franchise or even to start a business. So before you get too excited, let’s stay grounded. Is there a second reason why you can’t start your own business?”

Franchising also comes with know-how

“Yes,” she said. “I don’t know how. I know I don’t have all the answers to the issues that I’ll face in starting up my own business. I don’t know enough about location, for example. I don’t know how to deal with landlords. I need some equipment and I don’t know what to buy without someone’s guidance. I don’t know enough about marketing, and I’ve never really liked to sell. That’s why I’m interested in a franchise. They’ll help me with all of that.”

It’s called a safety net

“Indeed, a good one will. That’s the safety net they throw out to their franchisees. They provide training, guidance, support, know-how, along with a brand name! But not everyone wants a safety net, Isabel, because it also comes with a price. Controls! Some people are bent on doing it themselves. If you’re one of them, please don’t buy a franchise. Get off this merry-go-round of shopping for a franchise. Save yourself the aggravation.”

“You mean save you from my excited personality, don’t you!”

I enjoy this fringe benefit

“I didn’t say that. I enjoy your excited personality. I consider it a fringe benefit to my fee!”

She laughed.

“Look, Isabel, don’t beat yourself up on this issue,” I continued. “Either you should or you shouldn’t buy a franchise. I don’t expect you to make that decision overnight, but eventually you have to. There’s nothing wrong with saying you want to do it on your own. It just creates a different set of issues for you. And, there won’t be a safety net. So think about that and . . .”

Do you want a safety net?

We’ll catch up again with Isabel in the near future. Meanwhile, a safety net may or may not be for you. If you don’t need one or want one, then you don’t need or want to buy a franchise.

Because a good franchisor always provides a safety net and insists on doing so!

You’ll Also Enjoy Reading:

Find A Franchise System That Helps You Capture & Keep The “Right” Customers. Nothing More Important Now! 

Figuring Out What You’ll Earn As A Franchisee Even When The Franchisor Doesn’t Tell You

Whose Opinion Counts When You Interview Franchisees? 5 Steps To Help You Decide!

Photo image by: divemasterking2000

The E-Myth Author, Michael Gerber: Who Buys Franchises, Why And What To Look For

Spent an enlightening Monday (yesterday) with Michael E. Gerber, author of The E-Myth, as well as numerous other best-selling business books, and we discussed franchising — why people buy them, why people sell them, why some work, why some don’t work, and (of special interest to me) what we might say and do collaboratively to help improve franchising for all parties. 

The E-Myth is our starting point

At 73, Gerber has more to offer than you or I can absorb in a day! If you’ve read The E-Myth then you know what I’m talking about. If you haven’t read The E-Myth I really don’t know what to say to you, other than, “Stupid, stupid, stupid!” (You’ll have to read it to get the chuckle that the rest of us just enjoyed).

If you haven’t read The E-Myth, just stop right now, go over to Amazon.com and buy it — let me check for you. Here you go: Click here. There are 369 used and new copies starting at $2.88! I assure you, once you read it, you’ll send me a check purely out of gratitude!

Stupid to buy a franchise without reading the book

The E-Myth is the most compelling, business-changing book you can ever possibly read. Don’t buy a franchise until you read it!

Back to my story. Driving to my hotel after lunch, Gerber says to me, “Do the people who buy franchises realize they are not entrepreneurs and that, in fact, they should not be entrepreneurs, and that, furthermore, no franchisor wants to sell a franchise to an entrepreneur.” It was really a statement, not a question. And, of course, I agreed with him.

Entrepreneurs don’t buy franchises

Entrepreneurs invent businesses, they don’t buy someone else’s idea, he continued to lecture me (and I’m attentive in his presence). That’s an important point. I know many franchisees who think they are entrepreneurs, and they’re not.

And thank God they’re not! It may make them feel better to think they are, but thank God they’re not!

‘Cause entrepreneurs screw up even more often than franchisees!

But that’s another story for another blog.

Here’s your mission when buying a franchise

Here’s my point today. It comes from Gerber through me.

Your Mission: As you’re in the hunt for a franchise to buy, look for one that has already solved the problems that an entrepreneur has to solve when starting up a business.

Avoid having to do the work of an entrepreneur

You don’t want to do the work of an entrepreneur! Not if you’re buying a franchise.

You want to find a business system that works. A series of systems, really. There should be a working operating system, a marketing system, a sales system, a system for hiring and firing people, a system for serving customers, a system for working with vendors, a system for inventory, a system for merchandising . . . . All kinds of systems.

Not all are created equal

Now here’s the thing: Many franchisors have yet to develop their systems. They may have one or two systems, but they won’t have all the systems you will need to succeed as a franchisee. Or they may have multiple systems, but the systems don’t work. Remember: All franchises are not created equal. Some are better than others!

McDonald’s — Gerber writes a lot about McDonald’s — works superbly because it is a series of systems. Look for a McDonald’s when you purchase a franchise.

And there’s more. (I told you, you can’t just spend a day with Gerber and absorb it all).

You must do it the franchisor’s way, thank God!

While you’re due-diligencing your way through franchise opportunities, look for the one that enforces compliance. You probably won’t like that — the more entrepreneurial you are, in fact, the less you will like that. But compliance is absolutely essential to the success of a franchise and to your success as a franchisee.

If only all franchisors enforced the rules!

There are franchisors who have systems, good systems, and the franchisees ignore the systems. That’s not entirely the franchisee’s fault. It’s mostly the franchisor’s fault. Sometimes the franchisor doesn’t understand that it’s a mistake not to insist that franchisees comply with the systems. Sometimes they don’t know any better. Sometimes they are too timid. Sometimes they are just gutless. Sometimes (quite often) they are managers and not leaders! It’s always, always, always a mistake to ignore compliance.

Enough for now. I’ll pick up with compliance at a later time and tell you why you should get on your knees and thank God that a franchisor insists that its franchisees comply with its systems.

For now, just find a franchise that has working, productive, satisfying, money-making systems. That’s the one to buy!

Gerber Is Seeking E-Myth Partners

. . . Know an entrepreneur who wants to dominate their industry the way Gerber has dominated small business development and coaching? He’s looking for E-Myth Partners! They will join him as co-authors on future E-Myth books. Soon there will be The E-Myth Attorney, The E-Myth Optometrist, and others to follow. Looking for The E-Myth Accountant, The E-Myth Bartender, The E-Myth Undertaker, The E-Myth Auto Dealer, The E-Myth Carpet Cleaner, The E-Myth Consultant, The E-Myth Broker, etc. Know someone who’s interested? Send them to me and I’ll make the introduction to Gerber. 

Read Another Blog About My Day With Gerber:
The F-Myth: Michael Gerber Explains Why Franchising Doesn’t Work For Entrepreneurs 

Photo image by: StevenGroves

Find A Franchise System That Helps You Capture & Keep The “Right” Customers. Nothing More Important Now!

Nowadays it’s important to buy a franchise that teaches you the importance of capturing and keeping the “right” customers.

Well, actually, that’s always been an important consideration, but you’ll have to work hard to find a franchise system that provides this critical consideration. Most franchisors do not do a good job of teaching franchisees how to capture and keep the “right” customers . . . nor do they support systems that will help achieve same.

Not all franchise systems are created equal

But remember, all franchisors are not created equal. Some are better than others. You’ve got to look for the world-class performers! Be confident: They’re out there.

Franchisors (and as a result, their franchisees) generally do not understand the value of a customer. (I’ve written about customer value at FranchiseMastermind.com and I urge you to review those articles. You should also view my videos on this topic).

Budgeting to retain customers

Business owners in general will spend a considerable sum of money annually to attract new customers, but they’ll spend very little — maybe nothing — to retain customers. Of course, whether they capture the “right” customers or the “wrong” customers is a whole ‘nother story that we’ll tackle at another time.

This is why you buy a franchise

As a franchisee, you’re not expected to know everything. You’re not expected to be an expert. And you’re probably not a customer acquisition and retention expert (though you will need to be). And that’s part of the reason why you buy a franchise.

You’re buying the franchisor’s system. That system better be a good one for identifying the right customer for your business, then capturing the right customer, and then (and this is so important, especially today) keeping the right customer. If you don’t keep ‘em you’ll go out of business, or spend your profit on finding new customers. Ouch!

Evaluate the franchisor’s customer retention system

As you evaluate a franchisor’s operating system, keep this information in mind. If the system can’t help you capture and keep the right customers, move on. Find another system! Because economically, nothing is more important than the right customers . . . get the wrong customers and you’re going to be a very dissatisfied franchisee.

And a franchisor that doesn’t know the difference can’t come to your rescue. Save yourself the agony: avoid that franchisor. 

Photo image by: roland