Should You Buy a Franchise If You’re One of the First Franchisees to Join the Network?

A question franchise buyers frequently ask at my How to Buy a Franchise seminars goes like this: “If I buy a franchise where I’m one of the first franchisees in the system, is that the kind of franchise to buy? Should I be concerned about owning a franchise when there aren’t many other franchisees connected to the brand?”

It’s an important question relative to how to buy a franchise and I answer it with this true story.

True Story

One Monday afternoon a new franchisee in Kansas telephoned his franchisor in Dallas and said, “I need help. Either your franchise doesn’t work, or I’ve got a problem. I cannot close any deals and I am ready to quit.”

“What are you doing Thursday morning?” the franchisor asked. He was also the founder of the franchise company.

“I’ve got sales appointments set for that day, but I don’t know that I’ll be able to do any good with them. . . . Why?”

How many franchisors will do this?

“Can you pick me up at the airport at 9 in the morning? I’ll go on those sales appointments with you and we’ll figure out what’s going on.”

“Wait a minute,” said the franchisee. “Are you saying you are flying here to see me?”

“Why, you don’t want me to?” asked the franchisor.

“Sure. But I didn’t expect you to do that. I thought maybe you could tell me over the phone how to solve my problem. Or maybe I should just sell the franchise.”

The franchisor laughed. “If you’ve got a problem, it’s my problem, too. I’ll send you an email in about an hour to give you my itinerary. In the meantime, don’t sell the franchise and don’t worry. Oh, one other thing. See if you can set up several more appointments.”

Small Franchise Advantage

That story explains what may be the greatest advantage of buying a franchise from a franchisor who has sold only a small number (under 50) of franchises. That kind of franchisor, providing he or she is honest (they’re not all honest), remains accessible to franchisees and will help solve problems even if it means visiting the franchisee.

I can vouch for this story because the franchisor was my client (the late Ken D’Angelo, founder of HomeVestors, which was one of America’s most viable franchise ventures until the real estate bubble burst several years ago. I was CEO of the company at that time.) Ken invited me to join him on this journey to Kansas City and I watched as the master worked.

The master at work

Once we landed in Kansas we didn’t stop until early evening. The franchisee had set up six sales calls – his goal was to buy houses at a discount – and we accompanied him on each call. For the first two calls, we watched. Then we went to lunch and Ken evaluated the franchisee’s performance. He recalled each question that the sellers had asked the franchisee and reminded the franchisee of how he responded to each question. And then Ken reconstructed the calls and showed the franchisee what he would have done had they been his sales calls.

He bought two houses!

We went on the next two sales calls and Ken bought two houses. The franchisee was amazed (I was, too), but Ken didn’t seem surprised. (On our way home the next morning he told me he got lucky, but Ken was one of the most humble franchisors ever). The franchisee handled the next two calls on his own and didn’t buy a house, but he demonstrated greater confidence. As it turned out, one of the sellers called him three days later and he got the sale. I don’t remember what happened to the other opportunity and it didn’t matter. By this time, this franchisee was re-energized and he became a productive member of the HomeVestors’ network.

Of course, it wouldn’t have happened had Ken not picked up his phone that Monday. That’s one of the other good things about small-network franchisors. They have more time than money, and Ken couldn’t afford to hire someone to answer his phone for him! He also couldn’t afford to send a field trainer in his place. Ken was eager to go on these calls himself because he always wanted to know how he could improve his franchise system.

A franchise to buy

Yes, you should be concerned about buying a franchise that not many other franchisees have purchased . . . on the other hand, if you can find a franchise concept that you love, one that may even be “hot,” and a franchisor who you know will place your best interests before his own, you can be a little less concerned.

Dr. John Hayes