Tag Archives: Buy a Franchise

What To Do Before Buying A Franchise

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Where to begin? That’s the problem for so many people when they think about starting a business, or buying a franchise.

The crazy thing is that it almost doesn’t matter where you begin, as long as you do!

And I don’t mean “as long as you do” as a way of saying it’s a mistake not to start a business, or buy a franchise. I mean “as long as you do” as a way of saying it’s better to find out if business or franchise ownership is for you than to continue wondering about the possibilities until it’s too late.

BEGIN HERE

Should you or should you not start a business or buy a franchise? Why not begin there? It’s as good a place as any, and thinking it through won’t cost you any money!

People seem to assume that they can start a business or buy a franchise. It’s easy enough to do either, but that doesn’t mean you should. Even if you have the money, and even if you have a great education, it doesn’t mean you’re cut out for business ownership.

WHAT ARE THE QUALIFIERS?

Some of the wealthiest people have failed at owning a franchise; and some of the smartest people have done some of the dumbest things while owning a franchise. So money and education are not necessarily qualifiers.

What is?

Skills!

That’s another good place to begin. Do you have the skills to start a business or to operate a franchise? Let me tell you: Most people do not!

CAN’T TEACH THIS

Of course, (most) skills can be learned, and (some) franchisors teach franchisees the skills they need, but there’s one skill in particular that can’t be taught. I’ll tell you about that in a future article.

Is a Franchise an Investment or a Job?

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In response to this article: Is a Subway Franchise a Good Investment?, a reader on Linkedin asked if buying a franchise is “truly an investment” or “is it simply buying a job?”

My initial reaction was to strike back – I get the job question all the time – and I was about to reply: “Tell me a job that allows you, upon your resignation or retirement, to sell the assets that you developed while you worked the job.”

But something told me that the commenter was not being sarcastic. I think the investment question is honest, and I’ve thought about it this last week.

Is a franchise an investment?

Officially an investment is “the action or process of investing money for profit or material result.” My Linkedin commenter would agree: “The term investment suggests your capital contribution is working for you.”

So let’s see. Is building new highways an “investment”? Or is that a way for politicians to make us feel better about our taxes? Is a college education an “investment”? Or is that how educators make us feel guilty if we don’t get one?

Is a franchise a job?

I think most people would say yes, we “invest” in roads and education. But wait. My Linkedin commenter said “If someone buys the franchise, then works 16 hours a day keeping the doors open and paying the bills, is it truly an investment? Or is it simply buying a job?”

In other words, so long as you use your money, and not your time, it’s an investment. But when you contribute sweat equity then it’s . . . a job?

Technically, yes. But does it matter? Would we all feel better if we said that a college education is not an “investment” because it requires sweat equity (i.e. studying, analyzing, writing, etc.)?

Would it make a difference if we said that a franchise is not an “investment” because it requires sweat equity? Even if you like it, it’s still a job, so don’t call it an investment! God forbid, don’t buy one because you’ll have to work in it, and even if you like it and sell it for a fortune — well, it’s just a job!

Can you invest sweat equity?

Or is sweat equity an asset that can be invested? Hmmm. Ultimately, you’ll have to decide.

Meanwhile, I know a guy who owned six muffler shop franchises. He sold them for several million dollars when he was in his 80s. He happily worked in one of the shops every day for about 40 years. His initial “investment” was less than $40,000 to get the first shop. If I told him that all he had all those years was a job, he’d just look at me and . . .  laugh!

 

 

 

 

 

Is a Subway Franchise a Good Investment?

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It’s one of the most popular questions for every experienced franchise author/speaker. Perhaps because it’s the largest franchise in the world (in terms of units, not retail sales), people want to know if a Subway franchise is a good investment.

And because many of my readers and seminar attendees know that I wrote Start Small, Finish Big with Subway’s co-founder, and I sold a major franchise business to him, they think I have special insights about Subway. Really, I don’t.

“Is Subway a good franchise investment? . . . Can you help me get one?”

While those are important questions to ask about Subway, they are important questions to ask about any franchise that you think you might want to buy.

In answering the questions, here’s what I tell people.

Subway must be a good franchise investment for some people because many of the franchisees have been with the company since almost its inception, and (now answering the second question) it seems impossible to “get one” in the USA.

Of course, neither answer is really what you want to know, but you’re not asking the right person!

If you really want to know if Subway is a good investment, franchisees are the people to ask. They can also tell you how to “get one”!

You can easily find Subway franchisees either by looking into the company’s disclosure document (where you’ll find their contact information), or simply stopping at a Subway and talking to a franchisee.

Franchisees are usually willing to discuss their experiences with prospective franchisees, and if they have insights as to how to “get one” they’ll tell you. However, it seems to me that few Subway franchisees own just one unit — they own multiple units (it would be a good idea to ask them why) and so they may not be too eager to help someone buy a unit unless it’s far from where they’d like to own another one.

For those of you (and there are many) who would like to skip the start-up phase of business and buy an established franchise, that may be easier to do with Subway, except that the existing franchisees get first dibs on available units. And that’s because a franchisor would rather sell a unit to an experienced franchisee than to one who knows nothing about the business.

Meanwhile, you’re asking the right questions, and keep in mind that there are at least 2,500 franchise concepts in North America alone looking for new franchisees . . . don’t limit your questioning to Subway. Ask the same questions of other viable concepts such as those included in my most recent eBook: 12 Amazing Franchise Opportunities for 2015.

4+ Questions To Help You Buy A Franchise With Confidence

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Some prospective franchisees admit they do not know what to ask existing franchisees, and others say they know what they’d like to ask, but they don’t know how. Don’t let either scenario stop you from thoroughly investigating a franchise opportunity. Here are 4+ questions to ask, worded in a way to help you get the information you need.

#1 “As an existing franchisee, knowing what you now know, would you buy this same franchise again?”

Some experts will tell you never to ask Yes/No questions, but in this case you must because you want a definitive answer. If you ask ten franchisees of the same brand that same question you want to add up the “yeses” and “nos” at the end of your interrogation and decide if this is a franchise you should buy. If the majority of existing franchisees tell you “no” then you probably need to look for another opportunity. There could be exceptions, but you’ll want to understand what they are before you go ahead.

The answers to Question #1 logically lead to other questions. Whether the franchisee says yes or no, ask: “Why” If the franchisee answers no, ask “Under what circumstances would you change your answer to a yes?”

The answers to Question #1 logically lead to other questions. Whether the franchisee says yes or no, ask: “Why” If the franchisee answers no, ask “Under what circumstances would you change your answer to a yes?”

#2 “Do you find the business as satisfying today as you did when you first got started?”

Satisfaction is an important consideration in the life of a franchisee. In fact, many people explore franchise opportunities to get away from an unsatisfying job. But in this case, you’ll pay a fee to go to work. Do you really want to work at something that you don’t find satisfying after a year or two?

It’s another Yes/No question, but again the answers lead to other questions: “What happened to change your degree of satisfaction?” . . . “What could you or the franchisor do to make the business more satisfying?”

#3 “What’s the secret to the success of the top franchisees?”

It’s an open-ended question that can reveal important facts for you to consider. For example, if the franchisee answers, “Location!” you need to zero in on where to open your franchise. If the answer is “sales skills” or “management skills” or “accounting skills” you need to evaluate your own skills, or your ability to hire those skills.

Of course, if you’re not questioning a top franchisee, you may get the wrong answer! That’s why you should always ask the franchisor to give you a list of the top performing franchisees, i.e. the franchisees who won awards at the last three annual conventions. (A franchisor that won’t do that or can’t do that may not be worthy of your consideration).

#4 “If I invest the money the way the franchisor suggests (i.e. in training, advertising, location, etc.) and I work the business as well as you have, how much money can I expect to earn my first year as a franchisee? The third year? The fifth year?”

That’s what you really want to know, isn’t it? “How much money will I make?” The franchisor probably won’t tell you, but the franchisees will if you ask in a non-invasive manner. If you’re expecting to earn six figures annually, but no franchisee ever has with this brand, you need to know that upfront. It may mean you’ll have to buy more than one unit to meet your financial goals.

While these are some of the questions you should ask existing franchisees, you’ll find more in my book 101 Questions to Ask Before You Invest in a Franchise.