Tag Archives: Buy a Franchise

Franchise & Business Owners: Don’t Worry About Passion

Notice that no where does it say passion equates success in anything.

“Your passion for your business is most critical because it will drive your eventual success.”

So said an “expert”.

Who comes up with this stuff? It reminds me of the “expert” who said that most businesses fail for lack of cash flow. Huh? Most businesses fail because the business operators had no clue (no system) about how to operate the business successfully. They had plenty of money, but they ran out because they didn’t know how to invest it.

But I bet they had loads of passion?

And what did that get them? A huge financial loss and the despair that follows.

First thing prospective franchisees and others who plan to start a business should know is to avoid and ignore the “experts”. At least some of them. Instead, seek the advice of people who actually worked in the trenches, who built businesses, who failed a time or two, who made a payroll over and over again, and who understand the basics of how to succeed in a business.

And understand that passion can lead to success . . . or failure. 

Early in my entrepreneurial career, I rented a small office from a guy who owned an insurance agency. Every so often as he was leaving the office at about 6 p.m. he would stop by and say, “If you continue working this hard for another year or two, you’re going to be a great success.”

I know he meant well; I know he was merely encouraging me, but he was clueless.

You may have loads of passion for what you want to do in your business, and you may work 7 days a week at it, but here’s the most important point: If you don’t know what you are doing, and why, and how to do it over and over again, you are not going to succeed. Work your tail off, tell everyone how passionately you love your business, your products, your service, but don’t for a moment think any of that bull translates to financial success.

You want to succeed? Buy a system for success. Or develop a system for success. Of course, there too, you must be careful because all systems are not created equal.

By the way, I’ve identified 12 successful systems in my forthcoming ebook: 12 Amazing Franchise Opportunities for 2015. You can still get a free copy just for asking (look at the top of the screen). 

Your Mistakes Will Cost More Than You Think

When you start your own independent (non-franchised) business, your mistakes will be more costly than you imagined. In fact, your mistakes will probably put you out of business.

I’m not writing this to scare you away from starting a business without a franchisor; I’m writing it because it’s factual . . . and scary.

Do indie businesses survive?
Have you looked at the statistics? How many independent start-up businesses survive in the USA? Rather than take my word for it do some research, or better yet, just ask a local business banker!

Of course, the more entrepreneurial you are, the more likely you are to say that you can avoid the mistakes, and maybe you can. However, the statistics say otherwise. Most independent startups fail.

Why mistakes occur
Many people think certain businesses are easy to start and operate. Let’s take pizza for example. Many people can make a “good” pizza? My Italian grandmother made the greatest pizza in the world, so it’s no surprise that many of my cousins can make great pizzas, too.

In fact, when people tasted my cousin Mary’s pizza, they told her that she needed to go into business. And she did! Mary and her entrepreneurial husband (also an Italian) opened a couple of pizza shops, and in a matter of years were dead broke.

How could that be? They made a “great” pizza.

Can you sell what you make?
I’ll tell you how. They knew how to make pizza; they didn’t know how to market and sell pizza. Franchising’s saving grace is that it knows how to distribute (sell) products and services.

It is simple to open a pizza shop. You get a good location, buy the equipment, bring in the supplies, get a recipe, put up a sign, do some marketing and . . . voila! . . . you’ve got a thriving business.

No, you don’t. You’ve got a money-sucking business, unless you avoid the mistakes.

What do customers want?
Mary’s first mistake was believing that consumers want a “great” or even “good” pizza. They don’t. Just look at what they buy everyday!

Mary thought she could build her business by advertising in the newspaper. Wrong. The pizza franchises would have saved her from that mistake.

Mary also thought she could build her business without delivery. Wrong. The pizza franchises would have saved her from that mistake, too.

Too many mistakes
There were numerous other mistakes . . . Mary didn’t know how many slices of pepperoni to place on a large pizza and still keep it profitable . . . and the pizza franchises would have saved her from that mistake as well.

After so many mistakes, Mary and her husband lost their business and much more.

It’s easy to make these mistakes . . . Mary and her husband had no idea they were making them. They would have done anything to avoid them . . . except buy a franchise. Because a franchise would not have allowed Mary to sell her “great” pizza.

Should you buy a franchise?
Look, you need to make some tough decisions before you start a business. What’s important to you? Your way? Or a franchisor’s way? Keep in mind that the franchisor may not sell what you consider to be a “great” or even “good” product – if that’s important, find another franchisor, or avoid franchising.

Of this you can be sure: If you buy a reputable franchise (and they’re not all reputable) the franchisor’s training will save you from making too many costly mistakes. You’re still going to make mistakes, but in a franchise, the mistakes probably won’t put you out of business. Ask your banker how many of his or her franchisee clients fail? It’s one of the reasons why bankers love franchising.

In fact, even though they won’t tell you, the bankers know you are going to make mistakes when you start an independent business, and even though you’ve accounted for mistakes in your business plan and cash flow estimates, the bankers know better. Your mistakes are going to cost more than you think.

Are You Talking To The “Best” Or The “Worst” Franchisees?

Best worst franchises

Be careful about who you talk to when you interview franchisees.

“After talking to your franchisees, I’ve decided this isn’t the right business for me.”

As a former franchisor, I occasionally heard that statement from prospective franchisees, and I always asked, “Who did you talk to?”

Sometimes the prospective franchisee wouldn’t say for fear that I might use the information against the franchisees, but often times I persuaded them to name names.

Why talk to the worst franchisees?

Then I would glance at my list of franchisees rank ordered from Best to Worst. The “best” were the franchisees that produced the highest numbers (and most money) monthly, and the “worst” were the struggling franchisees.

If they had talked to the “worst” franchisees, I would say, “Do you think it’s a good idea to make a decision based on information gathered from the worst franchisees in our network?”

 

Who are your best franchises

“The franchisees you spoke to are ranked in the bottom third of our network. I doubt that they can give you an objective review of our franchise. If you had spoken to our ‘best’ franchisees, do you think you might have come to a different conclusion?”

Of course the answer was always “Yes,” followed by, “Who are your best franchisees?”

Why didn’t you ask that question earlier?

You might be wondering why I didn’t give them the list of our best franchisees from the get-go. I didn’t because it might have been misconstrued. Franchisors must be careful not to appear as though they are “leading” a prospective franchisee. If I told you the names of my best franchisees, and you never talked to the worst franchisees, you might later accuse me of stacking the deck to convince you to buy a franchise.

However, had you asked me for the names of my best franchisees, I would have told you. Most prospective franchisees don’t know to ask that question – or, for that matter, most of the other questions that should be asked before buying a franchise.

You might even argue that talking to the best franchisees only makes sense. Yes, it does, because they are the franchisees that know what they’re doing. They are the franchisees that know how to operate the business successfully. The worst franchisees – and every franchisor has them – are looking for that “mutually beneficial relationship” that some franchisors promise!

By the way, you’ll find all the key questions to ask before buying a franchise in 101 Questions to Ask Before You Invest in a Franchise.

 

Does A “Mutually Beneficial Relationship” Appeal To You When Buying A Franchise?

beneficial-partnership

How do you feel about a franchisor that promises you a “mutually beneficial relationship”? Does it make you feel (choose only one):

  1. Warm, Fuzzy & Can’t Wait To Invest
  2. Ambivalent: What’s the franchisor really promising?
  3. Turned Off Because It’s Not Good Enough

If you selected “C”, I’m with you!

Franchise investments are expensive — many require your life savings, plus your signature on a note for money that you will owe even if your franchise fails, and your legally binding commitment to pay the franchisor even if your franchise falters or fails — so I’ll pass on anything that’s “mutually beneficial.” In fact, does that even sound like it’s “mutually beneficial”?

Instead, I want a franchisor who’s going to do everything possible to make my franchise business successful. Even more, I want a franchisor who has proven time after time that he or she knows how to turn franchisees into success stories, even in the worst of circumstances.

I know a franchisor will not and should not promise to make me a success, but I want the franchisor’s word for doing everything possible to help me. Beyond that, I want proof that the franchisor knows how to help me succeed. I don’t expect miracles — I’ll deliver on my end by meeting the franchisor’s requirements — but please, save the “mutually beneficial relationship” hype. That might attract neophyte franchise investors, but not me!

Am I asking for too much? You tell me.