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Tuesday , December 10, 2013

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

“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.

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