Buying a Franchise
Choosing and Operating a Franchise
As author of two editions of Tips & Traps When Buying a Franchise I have interviewed many successful and not-so-successful franchisees along the way.
Because of this I feel qualified to give you some ideas on how to start a franchise and how you might approach sorting through franchises for sale to select a Franchise System to buy into.
If you’re new to looking into the selection of a franchise you are probably overwhelmed by the sheer numbers and variety of choices of franchises for sale.
Today, there are probably over 1,000 reputable franchises and another hundred or two that haven’t hit our radar yet. So, yes, you do have some work in front of you.
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Setting Priorities
There are many considerations to make when you are considering how to start a franchise. Don’t attempt to start talking with a number of franchisors until you have gone through the exercise of analyzing your needs, capabilities and limitations in relation to a franchise business.
You will need to ask yourself questions like: Where will the business be located? Is there a specific industry that I would like to work in? Am I more attracted to a product or a service business? How much can I invest in the franchise business? How much should the total investment be?
Large vs Medium or Small
Owning a large, older franchise systems can be looked upon as lower risk investments. Most likely the franchisor is well capitalized, has a demonstrated track record, and an experienced management staff. But, probably most important to a franchisee is the powerful advertising reach and good name and brand recognition.
The downside of the big, well-known franchises for sale is primarily the large entry cost, and often the scarcity of good locations available.
Starting a newer, smaller franchise systems are more prevalent than the big stars. So, you will have a greater number to choose from. The pluses of these systems are that the up-and-coming franchisor tends to be in an uncrowded industry that is not overrun with competitors. More good locations will be available.
Newer franchise ownership pose a somewhat higher risk than the established one. There is no demonstrated track record. All the bugs in the system may not be worked out and you’ll have to experiment right along with them.
Operating Your Franchise
- Choose the legal business form
- Negotiate real estate leases and rents
- Buy equipment and inventory
- Supervise structural changes and the “build-out”
- Recruit and select employees
- Plan local promotions and advertising
Will You Make a Good Franchisee?
When I wrote the book Tips & Traps When Buying a Franchise, one of the franchisees I interviewed told me the following: “A good candidate for a franchise is a person who worked hard at a previous position. Someone who is “dead-wood” in a job will fail at a franchise.” I agree that the ability and willingness to work hard is a must-have quality in order to succeed as a franchisee.
But hard work is only a part of the franchisee picture. Not everyone is a suitable candidate for a franchise. I look at franchisees as occupying the middle ground between “employees” and “entrepreneurs”. The vast majority of the population falls into and will be most successful as an employee.
Franchisees are in- between the employees and the entrepreneurs. They take a tried and proven concept which a franchisor has developed and then must be able to follow the established procedures and run the business. Franchisees must possess certain characteristics in order to be truly happy and successful.
Do you have the necessary qualities to succeed as a franchisee? Answering this question requires a great deal of soul searching. To help your analysis, answer the following questions and then see how you measure up to “the Ideal franchisee.”
Be honest with your responses. Remember the objective of the analysis is not to buy a franchise but to avoid making a mistake.
Answer all questions with an A, B, or C response.
1. I need to control everything and like to make all the decisions myself. How true is this statement for you?
A. Partially True
B. Completely True
C. Completely Untrue
2. Are you able to handle the day-to-day operation of a franchise business, which often includes taking over the duties of an absent employee?
A. Yes, definitely.
B. Not sure, but I would give it a try.
C. No, it would be too difficult.
3. How strong is your motivation and drive to achieve success?
A. Extremely strong
B. Strong, but other things in life are also important.
C. Success in business isn’t one of my goals.
4. Do you equate buying a franchise with “buying a job”?
A. No, not at all.
B. Yes, in some ways.
C; Yes, definitely, I’m unemployed.
5. Are you prepared to work long hours to make the business succeed?
A. Yes
B. Maybe
C. No
6. Are you able to work without supervision and a support staff?
A. Yes, definitely.
B. I would give it a try. C. No, I’m too used to working with a boss and other staff.
7. Are you able to organize your time and set priorities?
A. Yes. It’s the way I operate.
B. Yes, sometimes.
C. No, I’m always behind the eight-ball time-wise.
8. Have you had 5 years or better of managerial or teaching experience?
A. Yes.
B. Less than 5 years experience
C. No, never had managerial or teaching experience.
9. Have you ever hired and fired personnel?
A. Yes.
B; Yes, but I hate it, especially firing employees.
C. No
10. Have you ever trained personnel?
A. Yes, and I’m good at it.
B. Yes, but I don’t do a great job.
C. No
11. How do you feel about performing a sales function?
A. I like making sales and like to convince people to buy my product or service.
B. I’m not crazy about making sales but I know it’s an important function.
C. I hate to make sales and would not expect to be involved in any sales making function.
12. Do you presently have sufficient capital (through personal funds or loans) to get through the start-up phase of a business?
A. Yes, I’ve been planning for it.
B. I don’t have it now but I have a pretty good idea where I can get it.
C. No, I hope to start making money immediately.
13. Franchisees often sign documents with investors and lending institutions and maybe leasing companies and others. Are you mentally prepared for financial risk?
A. Yes, I understand and accept the risk.
B. Yes, but I would be shattered mentally and emotionally if I lost money.
C. No, I worked too hard for my money to put it at any kind of risk.
14. Is your spouse or partner supportive of you starting a business?
A. Yes, very.
B. Don’t know.
C. No, not at all.
15. Do you give up easily if things don’t go as well as planned?
A. No, I am persistent.
B. Sometimes I give up pretty easily, but other times I persist.
C. Yes, I rather not waste my energy.
SCORING
Give yourself 3 points for every A answer, 2 points for every B answer, and 1 point for every C answer. Total up all the points.
HOW DID YOU SCORE?
45-40 points: Good news, if you’ve been thinking about owning a franchise. You have the basic qualities and experience to succeed.
39-30 points: Be very careful. Think through your responses to the questions and re-assess whether franchising will work for you.
32 points and below: Could be trouble! Your responses indicate that either you won’t be very happy or won’t be successful as a franchise owner.
WHERE DO I GO FROM HERE?
If you scored well on the self-analysis questions and want to continue with the process, there’s some more hard work ahead of you. Selection of the “right franchise for you” will entail hours of research and discussion with franchisor management.
PureFranchise can help you to speed up the process.
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