Is a Franchise Right for Me?

Is a Franchise Right for Me?

When thinking about whether a franchise is right for you, it’s essential to dig deep into your own psyche.  Make sure you are investing in a business for all the right reasons. You have to desire it! More than that, a franchise has to be a good fit.

Consider the pros and cons of franchising carefully. But most of all, understand your needs and motivations. Knowing whether a franchise is right for you depends on knowing yourself and what you want out of life. The right franchise opportunity can be rewarding, even life-changing.

Who Makes a Good Franchise Owner?

If you enjoy being in charge and making your own decisions, yet appreciate the advantages of partnering with an established brand, then owning a franchise could be right for you.

The people who make good franchise owners are those who rise to the challenge of being a business owner and are invigorated by taking on responsibility. Yet, they are pragmatic. They realize that having the ongoing support of a well-known brand and a proven franchise system gives them a head start in business.

10 Questions for Self Assessment

Franchisees are responsible for employing around 8 million people in America. You can find successful franchise owners on street corners all across the country — from quick service restaurants to pest control franchises. There are hundreds of thousands of happy franchise owners. However, owning a franchise doesn’t guarantee success.

When considering “is franchising right for me” it’s good to refer to a series of questions to ask yourself. Carefully think through and give yourself honest answers to these 10 questions:

1. Are you ready for the responsibility of owning a business?

Some people thrive on being in charge. Others, not so much. A franchise gives you a blueprint for a business, and franchisors are expected to provide ongoing support. However, the responsibility for success or failure falls on your shoulders. If you have never owned any business before, a franchise could require major changes in focus. How you spend your time will be different. You may have a wider range of responsibilities, some of which you may be confronting for the first time in your career.

You have to make snap decisions, often with less than complete information. If you’re wrong on a critical decision such as quality control, it could jeopardize the entire business.

Not only that, but being profitable is your responsibility. Your decisions and actions affect the livelihoods of your staff. If payroll is due and sales are down, you are the one who has to search for a way to get the money, fast.

2. Are you willing to do whatever it takes for success?

Owning a franchise can be extremely rewarding financially and emotionally, but it isn’t a walk in the park. You must be willing to work more than 40 hours a week. In fact, you might have to work 60 hours or more when first starting out.

For most entrepreneurs long hours aren’t a problem. Their business is a labor of love. Ask this question: will you still feel this way when you have to miss a child’s sports event, or work every weekend?

Also, you’ll probably have to do non-managerial or clerical tasks sometimes. If the trash needs emptying and your employees are busy, it’s up to you. If someone has to schedule customers, and your employee is sick that day, it may be you who does it.

Those who come from corporate backgrounds will not have other departments to ask for support or services. Even paying bills takes time and you won’t have a finance department to call like in the past.

3. Do you believe in the franchise brand?

The franchising business model involves a relationship designed to last at least 10 years. You will be “married” to a particular franchisor for the next decade. It’s essential to choose the right franchise. Here are three things to evaluate:

  • A good industry match — The industry must be one you are comfortable with. This is critically important if you are new to the industry and have no experience in it.
  • A brand you admire — The brand needs to be one you can get behind 100%, because you’ll be using the trademark and representing it as a franchisee. Does the brand have a track record of success? Your risk is higher if it’s a new unproven franchise. Plus, you’ll have to work with the franchise executives for a decade or more. You will get a chance to meet them during Franchise Discovery Day. Use that opportunity to ask insightful questions. See: Questions to Ask the Franchisor.
  • Happy franchisees — Will the brand live up to your expectations? You won’t know for sure until you work with them, but there’s a good way to judge. See how they treat existing franchisees. The Franchise Disclosure Document will list existing franchisees. Visit and talk with some of them. See: Questions to Ask Franchisees.

4. Do you have sufficient capital?

A franchise opportunity requires some money. The franchisor must disclose the estimated initial investment, including startup costs. However, make sure you also have funds to cover current operating costs until you start seeing a profit. In most startups this takes 6 months to a year after opening.

In addition, depending on your personal circumstances you may need funds to pay for living expenses. An emergency contingency fund is always wise. Read more: Franchise Financing.

5. Are you comfortable following a system?

The essence of the franchising business model is a system with rules. Franchises depend on consistency. Whether it comes to the design of your new business premises or the equipment you use, you will find many choices already made for you.

You will get an operations manual to follow. If you have new ideas, you may not be able to implement them. For many people, following a franchising system is fine. If this sounds like you, a franchise may be a perfect fit.

But there is a class of entrepreneurs who chafe at being told what to do. If you are the type of free-wheeling entrepreneur called “unemployable” due to your unorthodox creativity and willingness to break the rules, franchising could feel like jail. A franchise will not be right for you.

6. Are you good with a team?

Most franchises involve having staff, at least a couple of employees. To be successful in franchising you will need your team behind you all the way. Consider your ability to do the following:

  • Hiring and training — Your success will depend on your ability to spot great people, help them learn new skills, and bring out the best in them.
  • Leading and motivating — You will need to get your team fired up and buying into your vision and goals to move the business forward.
  • Coaching and firing — Occasionally you may have to have a firm talk with someone about performing better — or terminate them. It can be gut wrenching. Can you do it?

But, you say, you plan to hire a general manager to run the business. First, know that this is not the general rule in a franchise opportunity. Most people are owner-operators, which means they are hands on. But even with a general manager, everything still rides on choosing the right manager and getting the best out of him or her.

7. Do you like interacting with customers?

Customers are your lifeblood! You must be able to interact effectively with them. At times you will have to, even if simply to resolve the occasional customer complaint.

If you come from the corporate world, you may have been many steps removed from dealing with actual customers. Depending on your past work roles, it might have been rare to engage with a customer. However, with franchise opportunities, you can’t afford to be uncomfortable talking with customers. It’s essential to know what customers want and how to delight them.

8. Do you have the patience for legal matters?

Franchises are required to provide prospective buyers with a Franchise Disclosure Document. This is a lengthy document required by the Federal Trade Commission giving you important information.

You must also sign a franchise agreement governing the rights and obligations of both sides during the franchise relationship. Both documents are extremely important. Study both carefully. If you don’t have the patience to try to understand them, you could be rudely surprised later.

9. Are you running toward a franchise – or away from something?

Passion in business matters. You are going to be happiest if you pursue something you really want. If you are buying a franchise because you just want to get out of a job you hate, chances are you won’t last long in business.

10. Is your family supportive?

Last but most important of all — consider how your family feels about you buying a franchise. Does your spouse or partner even know you’re looking at franchise opportunities?

Most franchise opportunities will require a sizable chunk of your savings. You may have to get a loan, which could involve giving a personal guarantee and possibly pledging your home as collateral. You are going to need the support of your family. There’s enough stress starting and growing a business, without adding relationship stress. If you don’t have your family’s support, then a franchise may not be right for you.

Should Corporate Employees Pursue Franchising?

The answer is yes, provided you are excited — and not simply doing it because you can’t find a job. A franchising opportunity should be something you really want and can’t wait to start.

Many successful franchise owners come from the corporate world. Some are executives fed up with the 9-to-5 life who want a new challenge. Others are successful corporate professionals who buy franchises after being downsized.

Some people make the mistake of pursuing a dual track for too long.  They try to hedge their bets. They split their efforts, using some of their energy to look for a new job and the rest to evaluate franchise business ownership.

Some have an attitude of, ‘Well if I can’t find another job, I’ll just buy a franchise.’

But this is not the best approach, says franchising expert Joel Libava. “I generally don’t recommend this way of doing things. Decide on one approach or the other, quickly. You either want to be a franchise business owner, or you don’t. There is so much pressure when launching a business. Doing so merely because you can’t find a good job adds even more pressure.”

He goes on to add, “I have found that almost all of the people I have been able to help place into franchises have focused 80% of their time on finding opportunities in franchise ownership, from the start. They have pretty much made the decision to move away from a corporate career early on, and really want to do something on their own. They’re excited for the future.”

What Does a Franchise Owner Do?

A franchise business owner is someone who owns a business under the auspices of a franchise agreement. The other party to the relationship — the franchisor — provides the system which serves as the blueprint for success, and provides ongoing support such as advertising and marketing. Read more about the parties: Franchisor vs Franchisee.

Most franchise owners do whatever it takes. Meaning, each day they roll up their sleeves and do whatever is required to operate the business profitably. Owners spend time as strategic leaders, but step in as needed on tactical activities. Owners do the following:

  • get sufficient sales to be profitable (encourage word of mouth referrals, achieve positive reviews, engage in the community, etc.);
  • pay expenses and manage cash flow (banking, accounting, etc.);
  • manage staff (hire, train — and fill in when short-staffed);
  • oversee and, if necessary, perform daily operational activities (everything from changing the menu to changing a light bulb);
  • support customers as needed (wait on customers, resolve issues, etc.);
  • plan for the future (remodeling, expansion, etc.);
  • comply with responsibilities owed to the franchisor.

Summary

In the end, the question “is franchising right for me” depends on looking deep inside. It’s a journey of self discovery requiring you to identify trade-offs you are willing to make. For additional self-evaluation, take Joel Libava’s Franchise Quiz.

Image: DepositPhotos

This article, "Is a Franchise Right for Me?" was first published on Small Business Trends



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