Tag Archives: trendy franchise

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.

 

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.

 

“You don’t think I should buy a franchise?”

buy-a-frenchise

“No, I don’t think you should buy a franchise . . . here’s why . . .”

That’s how I began to sum up a recent meeting with a husband and wife who met with me to explore the option of buying a franchise. In this case, the wife already operates a successful business in a “personal care” industry.

She bought the business about four years ago, keeps it open 7 days a week, 10 hours a day, and is essentially maxed out. “Some days,” she said, “customers are standing in line even when I close the salon.” Recently, she was contacted by a franchisor in Dubai who suggested that she convert her business to his franchise network.

My question: Why?

Chances are, she knows as much as the franchisor knows. Why would she “convert” her independent shop to a franchise and start paying a royalty on her gross sales?

  • For brand identity? Well, yea, that’s a good reason to buy a franchise, but she doesn’t need brand identity. Her business is maxed out!
  • For the franchisor’s system? Well, yea, that’s a good reason to buy a franchise, but her system already works. As she told me, “It took me about eighteen months to figure out how to succeed at the business, but now it’s going great.” Why does she need a new system?
  • For buying power? Well, yea, maybe, because a franchise network should be able to buy products and equipment for less money than can an independent, but even so, is it worth converting her independent salon to a franchise that will require her to pay a royalty, and perhaps incur other costs? First she’d have to figure out how much money she’d save with the franchisor’s buying power. My guess: Not enough to offset the royalty.

My suggestion: Franchise!

“I want to expand my business, and that’s why I thought it would be a good idea to buy the franchise for Kuwait,” the lady explained.

I replied, “But you may already have a better system than the franchisor’s. Why not franchise your system? Or why not simply open more salons using your system? You would own the salons 100 percent and not pay royalties, or any other fees.”

She was surprised because, after all, I promote franchising. But actually, I promote the development of satisfying and profitable businesses, franchised or not.

I think this lady could make a good franchisee, but given her background and experience, and given her desires, I think she also could make a good franchisor. “If you had a few days, could you write an operations manual for your salon? In other words, could you write down everything that needs to be done daily or weekly, monthly or quarterly to operate your business successfully? And could you also identify how to advertise to bring in customers, and how to treat customers?”

“Yes,” she said.

“Okay, that’s still not enough. A franchisor has numerous other challenges to overcome, but you’re off to a good start. It’s also important that you have the right personality to be a franchisor. Is it more important to you to operate your salon, or more important to replicate your business and train and support others to operate your franchises?”

Well, she hadn’t thought about all of that and we parted with me giving her a laundry list of things to consider. Sometimes, it just doesn’t make sense to buy a franchise, and I think this is one such case.