“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?”
“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!
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.