Tag Archives: hot franchise

Understand That Franchising Is Not For Everyone; It May Not Be For You!

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Franchising works for everyone!
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Even though it’s wrong, it’s easy to get the idea that franchising works for everyone because the media say so. Newspapers, magazines, television news shows, websites, and other forms of media love a good franchise success story, and so do viewers, readers and visitors.

Know the Facts

What’s not to like? Franchising is one of the best ways to start and develop a successful business in America, or almost any place in the world. But this fact remains: Franchising is not for everyone, and it may not be for you!

People think that because it’s a franchise, someone else runs the business for you. Someone else (i.e. the franchisor) makes the decisions, builds the business, hires the people, attracts the customers, sells the products and services, and even collects the revenues, making sure to pay you, the franchisee, a profit. But it doesn’t work that way.

Who Creates Successful Franchises?

Franchising requires an active, thinking person (i.e. a franchisee) who can make decisions and who has the ability (with the franchisor’s training, ongoing support and guidance) to build and operate a business. It is never an autopilot business, although it’s not the same as starting an independent business from scratch. Independents do not get the training and guidance of a franchisor, and in most cases, it’s the training and guidance that produces successful franchisees who in turn produce successful businesses.

3 Reasons Franchising May Not Work For You

It sounds easy, and many franchisors and franchisees make it look easy, but there are good reasons why franchising may not work for you. Here are a few of those reasons for your consideration:

  1. You’re not in control. If you’ve got to be in control, don’t become a franchisee. While you do control many of the variables in your business, you do not ultimately contralto he business. The franchisor does. If you can’t follow directions, franchising is not for you.
  2. It’s not a democracy. You’re one of many in a franchise. You may get a vote, but you may get out-voted. And even if you’re in the majority, you may not get things your way because it’s not a democracy. It’s the franchisor’s business; and the franchisor must make decisions for the good of the entire franchise network, not just you, and not just the people who think like you.
  3. You can’t always do it your way. Got some unique product you’d like to sell in your franchise? You’re not allowed. Want to set your own opening/closing hours? You’re not allowed. Want to change the colors of the company logo? You’re not allowed. Get the idea? You will do most things the franchisor’s way, and not necessarily your way.

Did you notice that all three issues are related to the same theme? Control! Franchising works because first and foremost, good franchisors know how to build a successful business, and they know how to teach and guide franchisees to replicate their success. Franchising doesn’t work when franchisees are allowed to do what they want, when they want . . . so if you’re the type of person who must maintain control, then you must avoid franchising. It won’t work for you!

Understanding your personality, and matching it to a franchisor’s operating system and philosophy, is one good way to protect yourself before you invest in a franchise. And that’s why I lead all of my coaching students to the Franchise Navigator, a free assessment that tells you if franchising will work for you, and advises you as to the types of franchises that make sense for you. I am an affiliate of the Franchise Navigator, and if you invest in a franchise that the Franchise Navigator recommends to you, I will receive a commission.

 

What should you expect from a franchise company? Consider my 10 points.

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There are many reasons why people buy franchises, and of the dozens of franchises that open for business every day worldwide, there are many reasons why some of those new franchises do not live up to their owners’ expectations.

If you’d like to protect yourself from becoming a disappointed (possibly even a disgruntled) franchisee, it’s important to know what you expect of a franchise company before acquiring a franchise. So here’s a list of 10 items that you should investigate before you invest your money.

  1. Financially Sound. Will the franchisor be around in a year or three? It makes me nervous when a franchisor has to sell franchises just to meet the overhead.
  2. Leadership. Who’s behind the curtain at the franchisor? If the founder is still running the business, what happens when he/she decides to retire? Or dies? Does leadership actually exist within the company?
  3. Culture and Values. Has the franchisor actually created a team of disciplined and ethical people to develop the franchise? What’s the culture, what are the values, and do they meet your expectations?
  4. Five Year Plan. Where’s this company going? How’s it going to compete in the future? What’s the role for franchisees five to ten years from now?
  5. Return on Investment. If you invest $250,000, including your own cash and some borrowed money (which you must pay back), when will your investment pay off?
  6. Operating System. Few things are more important than the franchisor’s system for conducting business. Does the company have a good system?
  7. Training & Support. You’re going to need to know how to build the business and it won’t happen overnight. Does the franchisor actually provide skilled people who know how to train and support you?
  8. Brand Name Awareness. Will people know the name of your business and what it does? Is the franchisor investing in the brand?
  9. Attraction. What is it about the business that will attract customers? Will anything? What attracts you? Is it enough to keep you and customer attracted long term?
  10. Investment in Franchisees. What’s the company do with your franchise fee? Is it re-invested in you? Ongoing, does the company invest in its franchisees?

You’ll find insights (but not necessarily real answers) to all of these issues and many others when you read the franchisor’s disclosure document. You’ll need to do some investigating to get the real answers. To help you do the investigating, I’ve written Buy “Hot” Franchises Without Getting Burned, and 101 Questions to Ask Before You Invest in a Franchise.

Before you invest in a franchise, make sure you know what to expect. Otherwise, you’re likely to be disappointed.

7 Fun Things to Do at the International Franchise Expo

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 Headed to the International Franchise Expo at the Javits Center in New York City June 19-21? If so, here are some unusual ways to spend your visit:
  • Find out what it’s like to be part of an Apex Fun Run with tents, flags and cones, along with video streaming (Booth 1014).
  • Get in on free brain training demonstrations every 30 minutes at Learning Rx. See how long it takes you to break a mental sweat (Booth 1036).
  • Ever thought of eating pizza in a cone? Probably not, but now you can. Check out Kono Pizza’s full kitchen setup with menu boards, counter/prep area, and proprietary oven (Booth 922).
  • Got a spot on your carpet at home and you just can’t get rid of it? Chem-Dry wants you to test their World Famous Professional Spot Remover. It’s a natural cleaning product designed to destroy the bond between stains and carpet fibers. Better yet, here’s an example of how franchisees use a product to generate added income! (Booth 704).
  • Maui Wowi’s Ka’anapali Cart will introduce you to fresh Hawaiian coffee, as well as fresh, gluten-free, all-natural smoothies.
  • Young Engineers will host mini challenges at their booth so that you can get hands on with the various “edutainment” offered by franchisees. Can you win a prize?
  • Snap your selfie with a tricked-out Camaro as Line-X Protective Coatings.

 

 

These 3+ Reasons Will Motivate Franchisors To Negotiate With You

motivate franchisorNot so long ago, the Franchise Disclosure Document (FDD) was called the Uniform Franchise Offering Circular, and the word “uniform” was often used by franchisors to discourage negotiations with prospective franchisees.

“It’s a uniform offering,” the franchisors would say, “and we’re required to offer the same opportunity to every prospective franchisee.”

There’s always wiggle room

Yes, that’s essentially true, but in business there’s always some “wiggle” room. Essentially, every prospective franchisee is offered the same opportunity, but that doesn’t mean every franchisee gets the same deal. In more than 30 years of working with franchisors, I’ve never known one that did not occasionally negotiate – but always for a good reason.

Sometimes, negotiating is good business sense. For example, if you can bring value to the franchisor, you’ve got an advantage over other franchisees. All new franchisees bring value to a franchisor, but an experienced franchisee, i.e. someone who has operated competitive businesses for 20 years, or a franchisee who brings built-in business, i.e. royalty flow, to the franchisor – well, those are different scenarios that just might tempt a franchisor to negotiate.

Wanted: Proven Operators

Let’s say you’ve owned multiple franchise units in the past, and you’re a proven operator. You’re the type of prospect every franchisor wants to claim as a franchisee. In fact, the franchisor is wondering, “What’s it going to take to get this prospect to sign our franchise agreement?” Go ahead, tell the franchisor what it’s going to take!

Wanted: New Business

Say you’re converting your 10-year established business to a franchise brand and you’ll bring 1,000 new customers to the franchisor. That’s worth something! No harm in asking the franchisor what it’s worth!

Wanted: The Very First Franchisee

Another example: You’re considering buying a franchise that has no or only a few franchisees. In this case, the franchisor may need you more than you need the franchisor. You can be sure the franchisor is going to negotiate, especially if you’ve got all the business attributes that the franchisor seeks.

Contrary to what many people believe (and some say), negotiations occur every day in franchise sales. But they don’t occur without justification. And even then, some deal points will not be negotiated because the franchisor wants to keep the terms uniform among the franchisees. Otherwise, it’s difficult for a franchisor to explain why Franchisee A pays a 5% royalty and Franchisee B pays a 6% royalty. If there’s the slightest opportunity for Franchisee B to claim “discrimination” the franchisor is facing a lawsuit.

Show the franchisor a good reason

There’s never harm in asking a franchisor to negotiate. Territory, training, support, fees, and other points are open for discussion, depending on the circumstances. Franchisors are not going to refuse to sell you a franchise just because you asked to negotiate.

Franchisors negotiate for value

If you can demonstrate value for the franchisor, you may be able to negotiate successfully with the franchisor.