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Franchise Fact or Fiction

How to tell which franchise is for you.

So you’ve decided to join a franchise group, but you’re not sure which one is for you? You’ve looked at so many that you’re starting to go crazy trying to decide. Black is now white and grey is now the only color that seems to make sense.

SO…… what IS the best group to be part of?

I reckon I would have this question asked of me at last a half dozen times a week. ‘You’ve been in this game a long time Troy, which ones are the best to be part of, what should I buy, why should I buy, and what makes them good.’

Well there are a few things that make a franchise group special. I will give you what I see as being the real reasons you should join a franchise group.

First and foremost, does your potential franchisor have vision.

As you move between opportunities, look at the group and ask yourself this simple question, does the managing director, franchisor or CEO of the group know what the group looks like when it grows up. Without their vision it will be difficult for you to have any vision in your business as you will not be able to grow with them.

Here are some key things to look for that will help you establish if your potential franchisor has vision:

1. Do they have a one, two, five and ten year business plan?

2. Do they have an exit plan for the business i.e. do they know what THEY are going to do when they want to get out of the business. And how will that exit affect you, should you still be part of the group.

3. Do they have a structure or a template for YOU to use to help you create the same business plan for your new franchise? And have they talked to you about your lifecycle as a franchisee in the business.

4. Have they asked what YOUR drivers are, what you want to be when you grow up and how they are going to help you achieve that?

5. Do they talk like the group is going to be a force in the category? Do you believe they can deliver on their promises of business development in the months and years to come? (And don’t be fooled sometimes business development does not necessarily mean more outlets, simply better outlets in the system.)

Does your potential franchisor have leadership?

It’s an age old fact, people join companies and leave leaders. Poor leadership is the Achilles heal in any business, and there is a fine line between a leader who truly leads and one that threatens everyone to follow them.

There are some tell tale signs that will show the real leaders.

1. Look at how the franchisor, managing director or CEO conducts themselves with their staff, do the staff have a solid culture of caring for each other, the business, the shareholders and their customers? After all YOU are about to become the customer in their eyes.

2. Will they treat you with respect, while offering you direction and development you would like to see as an individual and a business person?

3. Are the current franchisees following the leader? This is easy to spot as solid leadership will mean that they are all following the system, and believe in it.

4. Are they all disciples of the business and feel like ‘were all in this together’. At the end of the day you need be able to sit in a room and look at all of your fellow franchisees and say to yourself, ‘yes these guys are protectors of the brand and followers of the faith’. Otherwise, you may as well all be independents as your brand value is out the window.

5. Do you feel comfortable that as the leader of the business the decisions he or she will be making daily will be the best for the business, and for your business.

Do you REALLY want to be doing that all day?

It’s a bit of a romance really. You see a business that you really, really believe you can make a bunch of money from, mainly because you’ve heard about someone who ‘made a killing out of it’. Human nature kicks in, ‘yeah I can do that, I can see myself making that kind of money’.

At the end of the day, there is no use being a dog washing franchisee if you don’t like animals, or a fast food franchisee if you have no affinity with preparing food. Or if you have a bad back or bad knees then you certainly wont be good on your feet all day in a retail franchise.

It’s simply not a fit.

Look for something you think you could and would like to do 8 hours a day, 6 or 7 days a week, 50 weeks of the year.

If you’re in it just for the money you’re already in a bad space because as soon as the money is not there (and there could well be times that you’ll hit a lean patch) then you will become the franchisee from hell and cause both your business and that of your franchisors a lot of financial heartache, as you focus on the negatives and not the positives.

Love what you do and your customers will love you. The money is a bi-product of your passion for the business.

If it is to be, IT’S UP TO ME.

Here’s a classic question, how much can I make out of this franchise?

The first hurdle here is that your potential franchisor is not really able to offer you any financial projections, they have not run your new business and in many cases your new business does not even exist yet. What they can give you is historical figures from other franchisees in the system and let YOU make your decisions on what your new business is going to be worth to you.

Of course you’re going to look at the best performing franchise and think, ‘sure I can do that’, but the question you need to ask yourself is, are you prepared to work as hard as that successful franchisee, follow the system as diligently as that franchisee, and be as consistent as that franchisee?… If not, then expect your outcome, and figures to be different.

The franchising model provides a great support system for your business but at the end of the day, it’s like any small business really. It’s HARD WORK, and the harder you work it the better your returns will be. Simple as that!

Ok so that’s great, but how do I put that all together and make the RIGHT decision when selecting my franchise group.

Grab a piece of paper, and do a simple SWOT analysis on the franchisor and on your potential business. This will help you see the Strengths, Weaknesses, Opportunities and Threats and it gives you an measuring stick on all the systems you are about to look at.

It sounds simple but there are some rules you need to follow when constructing your analysis.

1. Be objective, take the emotion out of the analysis, you’ve already asked yourself the question, ‘will I love what I do in this business’ so you can tick the emotional box. Now focus on the business of the business and treat this process as a business transaction. No emotion, just deal with the facts.

2. Take your time. Make sure you’ve done a detailed analysis on each of the opportunities you’re looking at and don’t cut any corners. It’s a big thing you are about to do, so give it the respects of a decent once over to make sure you’ve looked under every rock.

3. Get some advisors involved in the process, your accountant, your solicitor and maybe an external consultant for another objective professional and qualified opinion. Don’t rely on family and friends to help you with this process, in many cases their opinions will be based on the romance of you being in that business rather than a true perspective of your financial future, after all, it’s not their money. And the only interest they have is an emotional one in you.

4. Dial in your spouse or life partner. They’re coming for the ride too, even if they are not going to work in the business, so they need to be on board.

5. Write a draft business plan before you sign up for the ride. This will help you get all of the above in perspective and put your thoughts in order so you are clear on what it is you want from your business, your future and your life.

Research proves that a small business working under the umbrella of a franchise system has more chance of survival than a small business working on its own. So franchising works, no doubt about that. Just take your time to work out which of them will work best for YOU! Good luck!

About the Author

Troy Hazard is the former Global President of the elite Entrepreneurs’ Organization, http://www.eonetwork.org , and has owned, managed and run ten companies in the last two decades. He is an international speaker and author of ‘The Naked Entrepreneur’

FrAMchise Day 2009 – United Franchise Group Services, Tony Foley