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Is There Really a Franchise for Me?

Written by : John McGavin
2007-02-15
Well, very often there is, but only you can really make that determination. The thing is, most people consider being self-employed, but most people don't do anything about it. Without a proper investigation of the industry as a whole, misconceptions become roadblocks, and what could be a promising new career in self employment never gets a chance. It's a shame, too.

I'm a consultant in the franchise industry, and I help people find the right franchise business for them. In a questionnaire and consultation process, we look at your background, interests, likes and dislikes, past history, and where you want to go in the future. Then we try to find the best business that can take you there. It's not quite as simple as it sounds, but it's not overly complicated, either.

So if a person can get help to identify their needs, skills, and goals within their budget to apply to a proven business concept, why don't more people become franchise owners? More often than not, they're stopped before they even start by fear of the unknown and fear of failure. Often, they feel that the risk is too high because of their misconceptions that they have about franchises in general. The sad part is, these misconceptions may be based on nothing more than myth. Without learning about the franchise industry, these myths can become insurmountable objects to what otherwise could be rewarding ventures into the world of self employment.

What are these franchise myths? Let's take a look at the more common misconceptions about franchises:
Franchises are only food related. When people think of franchises, they invariably think of the food industry. In every city and most towns, all along our highways, in fact almost everywhere we go today, there are franchised food establishments. We're all familiar with them, and we very often have our favourites. But there are actually five main industries, and food is only one of them. The others are Retail, Automotive, Business to Business Services, and Home/Personal Services. Each has qualities unique to its' own industry, and at the same time, there can be an overlap between industries. But the real question is, “Which one is right for you?"

Franchise ownership is too expensive. Make no mistake about it, there is a monetary cost to go into business. Any business. And as per the five franchise industries listed above, some are very expensive. It's a function of the industry that the franchise is in. Food, Retail, and a lot of Automotive franchises that require brick & mortar facilities in high cost and high traffic areas with personnel, furniture, fixtures, equipment, inventory, etc. can be very expensive to start, but they would be in an independent enterprise, too. All of these are things that drive the cost of the business up. Business to Business and Home/Personal Services can have widely different startup costs and don't necessarily rely on location, fixtures, etc., and so can have a lower startup cost.

But are franchises really more expensive than other forms of self employment? Franchises are designed to provide a system to follow to reduce the risk of failure, and in a franchise concept you pay for that system up front. Can you calculate the risk of failure in private business ownership in actual dollars vs the safety that a quality franchise concept will bring? Most private businesses are started on a lower investment amount because the owner feels that he can save money by doing may of the functions himself that a franchisor provides - functions in accounting, advertising, implementing business systems, etc. Trial and error costs money, and by following a system, franchising takes the trial and error out of the equation. Many independent businesses fail simply because the mistakes that they've made have cost money, and they are unable to recover from them.

Talk to successful independent business owners, and ask them the value of their time, then ask them how much time they spent developing formats for their businesses that are removed from the actual business function itself, and you'll find that there most certainly is a cost to developing these functions. Evenings, weekends, and taking time away from the actual business day when the owner should have been earning money all have value, and that's usually when these additional "cost saving" functions are done. The difference is there was no identifiable dollar amount associated with these up front. But rest assured, there was a cost involved, and only you can make the determination as to whether the franchise that you're looking at provides sufficient value for your dollars. Many independent businesses close after only a few years because the owner feels that it just isn't worth it anymore. The owner works day and night, six and seven days a week trying to continue to do everything, and when they look at their income at the end of the year it just isn't worth it anymore. If the thought is that franchising is too expensive, what is the cost of business failure?

You must have a "Passion" for the business. Well, passion is important, but you want to make sure that it's not “misplaced" passion. Do you want to work in the business, or do you want to work on the business. The difference is, in working in the business, you are performing the daily functions of the business itself. When you are working on the business, you are making it grow. Your passion should not be what the business does, but rather what it does for you. The business is a vehicle to bring you to your goals. These may have been money, freedom, independence, long term stability in a volatile job market, etc. Whatever your motivations were to go into business in the first place is what you should focus on in finding a business. Make sure that the business that you choose has a market, that it fits your skill set, that it's affordable, that the franchisor is financially sound and well managed, and that the business will bring you to your goals. Then, be passionate about what the business can do for you, not necessarily what the business does.

You must have industry experience. Finding a franchise business that can utilize your "transferable" skills is the key here. More often than not, when an individual starts an independent business, it is either an extension of his previous career, or it's a "hobby" that he or she wants to develop into a full time job. One way or another there is a familiarity with it and so he or she is more comfortable with starting up at the outset. They've done the work before, so feel that they can do it again. Franchising, though, can be different. With their system in place, chances are very good that the skills that you have already developed in your past career will work for many different concepts.

Sales experience? Service oriented? Strong HR skills? A financial expert? Executive management skill sets? Many different franchises may require some of these skills in varying degrees, and will be across all five of the franchise industries previously outlined. Some will have a heavier dependence on one or two of the skills over others, so finding the ones that best use your skill set is key. But most franchisors are looking for someone to help them grow their business. Someone that will work on the business to make it grow by performing management functions, and not necessarily someone working in the business by doing the actual daily work themselves.

Franchise business ownership is too risky. There are no guarantees, so there is going to be a certain amount of risk. By keeping the above four points in mind, you can help reduce the risk of franchise ownership. It all comes down to research. Knowing what information is available, where to get it, and how to use it. There are some very specific laws in place regarding the conduct of franchisors, and knowing how to apply them to your research will go a long way to reducing the risk to an acceptable level. Every franchisor in the United States and parts of Canada must provide a Disclosure Document (also known as a Uniform Franchise Offering Circular) that should be the backbone of your research.

Don't make a decision about going into a specific franchise business, one way or the other, without reviewing and utilizing the information that this document provides. This includes who owns the franchise company, what his experience has been, has he ever experienced a bankruptcy, what is the financial strength of the company, what legal actions has the franchisor been involved in and what was the outcome, a copy of the franchisee agreement, a comprehensive list of franchisees in the system along with where they are located and what their phone number is, and also a list of recent franchisees who have left the system. Research? Lots of phone calls! Lots of questions! Take the time to do the research, and do it right. The cost is time, and a few long distance phone calls. When you hit a roadblock, ask yourself if your concern is based on fact or on opinion. Opinions may or may not be accurate, so it's up to you to make the calls to verify the information you have.

Become your own expert and make your decisions on fact, not opinion. If you're serious about finding the right franchise for you, you won't let a “Myth" or misconception be your determining factor.

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