Tag Archives: trendy 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.

Real Italian Water Ice: A Winner for Kuwait & the Region

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IMG_1614Rita’s Water Ice is one of my favorite American franchises. It’s headquartered in Philadelphia, the greatest city in the world, and it’s perfect for Kuwait and the Middle East. Rita’s serves authentic Italian water ice — cool and refreshing, a favorite treat for children and adults — it can be low-cal, too, but we usually don’t want it that way! I don’t know why it’s not already in Kuwait, given that this is a “hot” franchise market, but I was pleased to see Rita’s marketing itself and looking for prospects who want to buy franchises at the Abu Dhabi Franchise Conference. Can’t be long until we can enjoy Rita’s locally!

No Excuses! Get The Answers To These Three Questions Before You Buy A Franchise!

buy_franchise_excuses“Not long after I lost my job, a friend told me about this franchise. I looked into it and bought one.”

It may surprise you, but that’s how — and why — many people buy franchises!

Here are some other reasons that I’ve heard when I’ve asked people, “How’d you decide to buy a franchise?”

Crazy Excuses

“I decided I wanted to work for myself, not someone else.”

“A franchise broker showed me a half dozen concepts and I liked this one best.”

“It’s the ‘hottest’ business to be in right now and I wanted one.”

“My father told me it was a good business and he put up the money.”

“I had money in my 401k that I could rollover into my own business and I decided now was the time to do it.”

“One weekend I went to a franchise show, where they had many different businesses displayed, and I got to talking to a franchisee of this company and she told me that I should buy one. I did some research and decided she was right!”

And here’s the point

I could go on . . . but what’s the point?

Well, the obvious point to many readers is this: Those are all wrong reasons for buying a franchise. In fact, those aren’t reasons, they are crazy excuses. And they almost always lead to grave disappointments.

When people buy franchises for the wrong reasons — excuses or not — they usually live to regret it. Often times, it wasn’t the “hottest” business, and even if it was, the franchisee wasn’t cut out to own a business, with or without daddy’s money! Often times, these businesses fail and the franchisees lose their investments. Google will lead you to countless ugly stories about franchise failures!

3 questions you must answer

If you want to avoid becoming a sad statistic in franchise history, there are three questions you must positively answer even before you investigate a specific franchise concept. In fact, answering these three questions can keep you from spending time and resources looking at the wrong franchises, and they will ultimately help you invest in the right franchise, providing that buying a franchise is the best thing for you. (It’s not for everyone).

Frankly, it amazes me that so many people buy franchises without knowing these three points of information! But apparently, no one told them this information is important. (Or, maybe they’re okay with using crazy excuses!)

So here we go:

Know the success profile

1. Do you know the profile of a successful franchisee?

Do you know the values, skills and behaviors of successful franchisees? They’re not necessarily the same as the traits of a good employee, for example, or a good vice president or CEO. Just because you excelled in your Fortune 500 job, or you were Teacher of the Year, or a real estate tycoon, it doesn’t mean you’ve got what it takes to become a successful franchisee.

Oddly enough, many (and maybe most) franchisees can’t confidently explain the profile of a successful franchisee in their own franchise network! Some think they know it, but they’re not sure. Others say they know it, but they can’t prove it. Only those who are successful can be sure they’ve got it, but that doesn’t necessarily mean they can explain it!

Valuable advice: Even before you think about writing a check to pay a franchise fee, you need to be absolutely certain you can describe the profile of a successful franchisee in that specific franchise network.

Be sure you got it!

2. Do you possess the profile of a successful franchisee?

Do you have what it takes personality wise?

Do you have the values, skills and behaviors of successful franchisees?

Caution: Most people do not!

If you say you do, what makes you so sure? . . . And just to push the point — because, after all, we are talking about you risking tens of thousands of dollars when you buy a franchise — why should anyone believe you?

Better yet: Why should a lender believe you? (It wasn’t true a couple of years ago, but today your lender will want to be convinced of your chances of success before approving your loan).

And now the obvious question: Why should a franchisor believe you?

Obvious but, sadly, not necessarily part of the franchise buying process. Many franchisors won’t care about your profile. They won’t ask about it because they don’t know it’s important. Or, they just need to sell franchises — it doesn’t matter to whom. Even some franchisors are okay with crazy excuses.

Match it to the business

3.  Does your profile match the profile of the successful franchisees in the business you intend to buy?

This question is the most important of all. Let’s say you’ve identified the profile of a successful franchisee and you know you’ve got the same profile.

But for which franchise?

There are at least 2,000 — maybe 3,000 — franchise companies in North America. They’re all different. They don’t all require different profiles, but many do. For example, a successful franchisee in the hair salon industry, just to pick an industry, may fail in the hospitality industry, or the lawn care industry, just to pick two more. He may fail because he doesn’t have what it takes to succeed in that different industry. (Personality is by no means the only requisite to success — there are other considerations, including access to capital, location, and common sense, to mention a few).

Another ugly statistic

There are more than 75 different industries that use franchising as their method of distribution. So matching a success profile to an industry, and ultimately to one franchise company, is critical. Miss this and you’ll likely become one of those ugly franchise statistics.

Critical question: If you can’t define your own success profile and know that it matches the success profile for franchisees in a specific franchise company, why would you invest in that franchise?

I hope you said you wouldn’t!

Getting the answers you need

By now you may be asking: How do I find out which success profile matches which franchise company?

Answer: Ask the franchisor!

When you talk to a franchisor, and you’re about to make a buying decision, ask the franchisor to show you, or explain to you, the success profile for his or her top producing franchisees. Then, ask for the names and profiles of the top ten franchisees. You want to talk to them!

Ask the franchisor: What is the dominant personality profile of your top ten revenue-generating franchisees?

You’re not asking for an earning’s claim, so don’t let the franchisor duck your question. You’re not asking for revenue amounts, you’re just asking for a list of the top ten producers. You’re asking for non-financial information, which is absolutely essential for you to determine if you should invest your money in this franchise!

Reality: The franchisor may not be able (or may not want) to help you. As unlikely as this seems, many (maybe most) franchisors simply can’t provide the information you need! Some will tell you that profiles are not important, they don’t matter, and the company does not profile its franchisees. Others will say they’ve never profiled their franchisees and — they won’t tell you this — they don’t want (or they can’t afford) to invest the money to do so! Some won’t share the information with you because it’s not favorable to your buying decision!

Now what?

Ask those who know

Ask a company that profiles franchisees! Dynamic Performance Systems and Franchise Navigator are two that I suggest you check out. The latter features a new tool called Connect Me, which does the profile matching for you! Last I checked, more than 14,300 prospective franchisees had used this service!

More and more franchisors — especially those that care about the welfare of their franchisees (and the long-term viability of their brands) — are profiling their franchisees, and they will provide the answers to these critical questions because prospective franchisees, like you, are getting smarter. You’re demanding the answers. And you’re not going to settle for crazy excuses!

Demand to get what you need to make a good buying decision — the franchisors that want to sell franchises will comply with your requests.

Photo image by: Shmoomeema