Be Your Own Boss By Owning a Franchise
I recently detailed the pro’s and con’s to owning a franchise, and Sebastien Page followed that post up to give us some tips on how to become a successful franchisee . In the final installment of the franchise discussion Larry Powell of Franchise Quest offers up some questions would be franchisees should ask themselves when deciding if a franchise is right path to business ownership for them, as well as gives us some statistics to consider on the world of franchising.
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By: Larry Powell
Self-Employment…Quality of Life…Control Your Destiny…By Owning a Franchise.
Studies have shown that 82% of Americans say they would like to own their own business? But, only 5% of Americans ever realize this dream. Perhaps your goal is to retire at an early age. Maybe you are ready for a change-ready to live life to its fullest-ready to take control of your future by CONTROLLING YOUR DESTINY, RATHER THAN HAVING IT DICTATED BY SOMEONE ELSE!
- Do you have a JOB…but, would prefer to have a LIFE? Can you continue to do what you are doing now, at the same intensity that you are doing it, for the next 10, 20, or 30 years? Do you really want to?
- Have you always wanted to own your business…do you have a strong desire for greater flexibility, better control of your future, financial success and more independence?
- Are you tired of working for someone else…are you ready to be your own boss?
- Do you feel “burned-out” from working in corporate America and having to deal with the bureaucracy, mergers, downsizing, right sizing, merged, acquired, transfers, outplacement, and organizational politics, etc.?
- Have you ever felt the urge to tell them all what they can do with that latest company policy? Then, your mind begins to race back and forth between the known reality of the uncertain life in corporate America, and the unknown aspects of how you can get independence through business ownership?
- Are you ready to leave the: “What have you done for me today” mantra of corporate America behind?
- Would you like to take “real” control of the future for you and your family?
- Would you like to infuse some excitement back into your work-life?
- Perhaps you have the perfect job, perfect life and everything you want. But, do you have a back-up plan if the unthinkable happens? What would you do if you unexpectedly lost your job? Is your job really that secure or safe? With companies downsizing, rightsizing and even capsizing, there is no security, except that which you create for yourself.
If you answered YES, to some or all of the above questions, owning a business may provide the opportunity for you to reach your goals. And, buying a franchise provides you the opportunity to be in a business for yourself, but not by yourself. Franchise businesses have an exceptionally high success rate of over 90% compared to only 18% for independent new businesses. A franchise already has a concept and an effective business model with a stable track record. You can acquire a successful business concept without having to “reinvent the wheel”.
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Franchises offer a number of advantages over non-franchised businesses. The Number 1 advantage is increased odds for success, because while you are in business for yourself, you are not by yourself. A franchise provides a complete system for operating the business, as well as access to the franchisor’s expertise, experience, training, name recognition, tested sales and marketing systems, simplicity of operation, on-going support and method of running the business. In addition to having access to the franchisor’s expertise, a franchisee has the opportunity to interact with other franchisees within the company. Many franchisees will tell you that having this avenue to network with and get feedback from other successful franchisees is invaluable and one of the most widely acclaimed benefits of franchising.
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A 1999 study by The United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business. A study conducted from 1971 to 1997 by the U.S. Department of Commerce showed that during that time less than 5% of franchise businesses were closed each year. Additionally, landlords love franchises because of their stable track record, a proven system, and an effective business model. Even with the tight credit markets we are experiencing today, financial institutions for the same reasons as landlords, will be more favorably inclined to make a loan to an individual buying a franchise than to a person starting a non-franchised business.
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Franchises are everywhere today. In spite of our tough economic conditions, consumers must still buy goods and services. As the economy improves, and it will, businesses in operation today, will have a golden opportunity to increase their market share. In fact, financial experts believe that franchising is the “wave of the future”. During the next 10 years, franchises could comprise over 50% of the retail and service sectors. This tremendous growth should be expected based on the underlying concept-Franchises offer aspiring business owners the greatest potential for success, with the least amount of risk. Franchises will provide thousands of individuals the opportunity to realize their dream of successful business ownership and financial independence. Within both the U.S. and world economies, franchising is continuing to evolve. This evolution will create even greater avenues for wealth accumulation among both franchisees and franchisors. The existing franchise systems will become more successful and continue to grow, while new franchises will be developed and introduced to the market.
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Franchises exist in over 75 industries. While most people think of a “franchise” as a fast food restaurant, those are only a small segment of available franchises. Today, franchising is being applied successfully to more and more industries and types of businesses. There are thousands of franchise opportunities available today and cover just about everything from advertising to laundry / dry cleaning, maid services to printing / copy services, real estate to weight control. And, since the franchisor knows the business, they aren’t looking for prospective franchisees with industry experience. They want franchisees who possess customer service, business and management skills, not technical expertise. Thus, buying a franchise has proven to be a great vehicle for thousands of people to effectively transition into a new industry and self-employment with an improved quality of life, while becoming the master of their destiny.
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Larry S. Powell is President of Franchise Quest, a franchise search consulting firm that recruits candidates for a wide variety of franchise opportunities from small to large and startups to nationally recognized. Mr. Powell has over 30 years experience encompassing both the corporate and franchise worlds. Prior to Franchise Quest, Mr. Powell was the original owner and operator of a home improvement franchise in San Antonio, TX from 2001 to 2008. Formerly, Mr. Powell was the Vice President, Human Resources for The Psychological Corporation / Harcourt Educational Assessment head-quartered in San Antonio, TX. Mr. Powell is a graduate of The University of Texas at Austin with a BBA degree in Management.
In addition to his 25 years in corporate America, Mr. Powell’s experience has taken him through the “life-cycle” of business / franchise ownership:
· Involvement with franchise search firm
· Determining business and lifestyle goals
· Reviewing various franchises
· Performing due diligence
· Selecting and buying a franchise
· Successfully owning and operating a franchise for 6+ years, and growing the business to about $1M annual revenue
· Exiting the business through a franchise re-sale
How to Be a Successful Franchisee
As a follow up to a recent article we ran, Is a Small Business Franchise the Answer?, Sebastien Page of WorldFranchising.com submitted this guest post on steps you can take to ensure your small business franchise is successful.
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By: Sebastian Page
A franchise can be a good option if you are thinking about starting your own business. Franchises are considerably less likely to fail than independent businesses because they benefit from name recognition and a proven business model. But if you are thinking about buying a franchise, remember that it is not foolproof. There are things you will have to do to be a successful franchisee.
The most important step to being successful in buying a franchise happens before you even purchase the franchise. This stage involves a great deal of self-assessment. First, you need to figure out if buying any franchise is right for you at all. Franchises are less risky than independent businesses, but they also require you to follow rules and run your business within certain parameters. You will be your own boss, but you also have to answer to the franchisor, and follow their rules. Furthermore, do some self-assessment to figure out what kind of franchise you want. You need to pick a franchise concept that you can believe in. If you cannot commit to the product or service your franchise offers, you will not be as successful.
Once you have bought the franchise, there is more work to be done. Stay organized, keep within the parameters of the franchisor, and communicate with them if there are any problems. Remember, if you become a franchisee, you may have to deal with things like hiring and training employees, buying supplies, and working long hours. If you are not committed to doing these things when you purchase your franchise, you are unlikely to be as successful.
Even if you pick a franchise you really believe in, follow all the rules, and work hard, there are still some things that can cause a franchise to fail that would be completely out of your control. Even if your franchise is successful, if your franchisor runs into trouble, you could be in trouble too. Franchisors can have financial difficulty for a variety of reasons.
If the franchisor is relatively new to franchising their company and doesn’t have a track record of franchised businesses, they might have a flawed franchise structure. To avoid this affecting you, as a franchisee, look for franchisors that have been franchising for a long time or at least make sure that they have done sufficient testing so that you can be sure that their model is sound.
Another thing that could cause problems for your franchisor is poor performance on the part of other franchisees. Even if you are working hard and are successful at your franchise, your fellow franchisees may not be so lucky, or may not be doing a good job, which can put the franchisor in financial difficulty. A franchisor should have a rigorous selection process to avoid acquiring franchisees who are not very competent. If it seems too easy to sign up for a franchise with a company, consider avoiding that company – their other franchisees could be a big problem for them and for you.
Sebastien Page is Vice-President of Marketing for WorldFranchising.com, a website that provides franchise opportunities information to potential franchise buyers.
Is a Small Business Franchise The Answer?
Ever thought about starting your own business, but can’t decide what business to start? Buying a small business franchise could be the answer. But before you jump head long into franchise ownership, you’ll want to carefully weigh the pros and cons of buying this kind of business. Below is a short list to get you thinking about the positives and negatives of buying a franchise.
Immediate Brand Name
- A definite benefit of buying a franchise is the brand name that goes along with it. Most likely you will not have to build awareness of your product or service with the target market as the franchiser will have built that over time for you.
Support Structure in Place
- Usually the franchiser has support available for the new franchisee. This support could be help with hiring, daily business operations, coaching, mentoring, training, or a host of other support functions to help you be successful running the business.
Established Customer Base
- Most franchises are business that have been operating successfully for some time. They have a time tested product or service and have an established customer base. When you buy a franchise you leverage the businesses hard work in acquiring a customer base so that you do not have to build up clients from scratch.
Leveraged Marketing
- When you buy a franchise you’ll also be getting all of the marketing benefits of the franchiser. There is usually a fee for this, but it is much less than you would expect to pay if you were initiating the marketing campaign yourself. For example, if you buy a Subway sandwich shop all of those advertisements on national TV will be bringing business your way.
Reduced Risk
- Your risk is reduced due to the many pros listed above. When starting a business on your own you need to build everything from the ground up, establish your support networks, do your own advertising, and hope to capture a customer base…when you buy a franchise many of those things are already in place, and your chance of failure is reduced.
Less Freedom
- You will certainly have a set of rules to live by when you buy a franchise. You may not be able to offer sales, incentives, or do your own marketing. Your actions with your business will be governed by the rules set forth in your franchisee contract that you sign prior to taking ownership.
Large Startup Cost
- Buying a franchise can be expensive, and can require a large amount of capital up front to purchase. The stronger the brand name of the franchise you want to purchase, the more cash you’re going to have to come up with. Franchises can run anywhere from $10,00 to hundreds of thousands depending on the brand and strength of the franchise. Also you may be required to show a certain level of financial stability personally before you are able to purchase the business.
Dependent on Franchise Success
- Your success as a business owner largely depends on the success of the franchise. Their actions, or poor business decisions will have a trickle down effect on your business. If a Subway in New York has and e. coli breakout , your business in Los Angeles will be affected. Same can be said if Subway decides to stop advertising, or begins to make questionable corporate decisions that affects public sentiment.
Locked in by Contracts
- You will contracted to some extent by the franchiser. This could include a long term operational contract where you will be, in essence, required to remain in business even if you find out the business isn’t right for you.
Franchise Expense
- Not only do you have the up front cost to buy a franchise, you will have many ongoing cost as a result of being a franchisee. Royalty, or a percentage of your profit, is usually paid to the franchiser. Advertising, and marketing expenses are usually passed along to the franchise owners, and other operational expenses could make their way into being your responsibility.
Do Your Homework
There are a host of resources on the internet for those of you interested in buying a franchise. A simple Google search returns a myriad of information, on any franchise you can think of. Be sure to do your homework on what it takes to start a franchise, franchising options avaialble, and have an understanding of the pros and cons of buying a franchise before you jump in.
Seek Advice
When buying a franchise you need to fully understand the contracts and agreements that go along with it. If there is anything in the process you don’t understand, be sure to seek legal advice from a trusted source before you sign anything.
Make Sure the Franchise Fits You
Buying a franchise, or any business for that matter, is not much different than deciding to start your own company. Making sure the franchise fits your interest, personality, and is something you can be passionate about. This will go a long way in ensuring your continued success after you’ve signed the final papers.
Have any pros or cons of buying a franchise? Please share them with us in the comments section!
