Is Franchising Right for You?
Adrienne Leigh has been a franchise coach since 2003 and has successfully worked with thousands of clients in helping them determine if the franchise or business ownership is right for them.
What Questions Should You Ask to Find Out?
Maybe you’ve been laid off and are contemplating your next options. Or maybe you just want to take more control over your own destiny. Statistically speaking, according to the International Franchise Association, 55% of all Americans at some time consider business ownership and franchise ownership in particular. But currently, only about 1 in 25 people open businesses meaning only about 4% actually take the plunge. So how do you determine if business ownership is right for you…and franchise ownership in particular?
Here are a few considerations on business ownership in general.
- Do you have the personal drive to be successful?
- Can you afford to start your own business?
- Do you have the support of your family?
- Can you handle stress, crisis situations, and deadlines?
- Can you manage others?
- Can you meet the needs of customers?
Those are some general considerations but let’s make a big distinction between starting an independent business and investing in a franchise: starting from the ground up is where you hear the horror stories of people investing all their money, working 100-hour work weeks…and still not making a go of it. Of course, you also hear the incredible success stories there as well! But franchising is very, very different. It’s sometimes called “business in a box” or “being in business for yourself but not by yourself,” and the good news is that you have great capability to do a tremendous amount of due diligence up front to make sure the business you are making an investment in really IS a good fit for you.
Let’s divide the Research Process into 2 parts:
- Is this particular franchise is a good fit for you?
- Is this a good franchise overall?
Is this franchise a good fit for YOU?
Just because your cousin was successful in a franchise doesn’t mean you can be! It all depends on different skillsets and in some cases locations. Here are some specific questions you need to ask other franchisees in the system:
- What was their background before they joined?
- What do they do on a daily basis?
- Have them walk you through their day.
- Would you enjoy those activities?
- Would you be good at them?
What kind of money are they making?
Yes…they will answer questions like that, particularly if you open by giving them what you are or were most recently making, i.e. “in my last job, I was making $100,000 and I’m hoping to make that in this franchise when it gets up and running, do you think I can do that?” Certainly, that’s much less rude than just asking, “How much do you make?”
As to whether this is a good franchise overall?
You probably won’t find many franchises that will get an A+ on all the following criteria, but it is well worth evaluating them:
- Financial – is there recurring revenue? Multiple revenue streams? Cash payments or no A/R?
- Competition – is competition fragmented? Or strong brand names in the market?
- Low Overhead?
- Product or service that
- Can’t be replicated by internet?
- Have barriers to entry?
- Can’t be outsourced overseas?
- Is not in danger of being taken over or changed by technology?
- Has the management team both industry experience and franchise experience?
- Franchisor support and training – what is provided upfront and ongoing?
- How inventory intensive? Perishable product?
- How labor intensive? Blue collar or white collar, skilled or teenagers?
Bonus: Does franchisor provides leads, or has a national accounts program?
A great franchise that isn’t a great fit for you can be just as big a disaster as an unsuccessful franchise overall. It is important to make sure you have done the research to make sure you know what your role will be and what support you will receive.