The difference between success and failure typically begins with the quality of the questions you ask and the decisions you make. Picking the best franchise for you to buy often comes down to following a process that has been proven to surface differences between what you are trying to achieve and the skills you bring to the table from what the franchise concept appears to be on the surface.
Why is a good process important to success?
There are over 3,000 franchises available in roughly 75 categories. A new franchised business is opened every eight minutes of every business day. One out of every twelve businesses is a franchised business, and the total sales by those franchises are projected to reach over two trillion dollars this year. It is a very large playing field.
So here is a simplified version of a process I have used for years:
Step One: Understand the Potential Owner (you)
It may sound obvious but, as I advise candidates looking for franchises, we begin with the most clearly definable part of the equation for the candidates search, the candidate themselves. We construct their model; a definition of skills, strengths, likes/dislikes, goals, and how they want to approach the operation of the business. This model gives us a starting point to compare all possible matching companies to. Whether a first time owner operator candidate or the most seasoned investment fund or restaurant group CEO, everyone goes through this step.
Whether you build your model yourself or with an advisor, you will want to be very open in what you allow to be put into it for consideration. You are looking for the clearest possible definition of what you bring to the table and how you want to work. In the most basic version of a model factor in your sales acumen/interest, management style, accounting and financial experience, marketing skills, networking style, community connections, days and hours you want to work the business, Full time or absentee ownership, etc. Write this all down where you can reference it. You can even format it like a checklist. If a franchise does not fit your model then it does not fit you.
Step Two: Sort the Market and Avoid Potential Fads
As you look at the overall franchise landscape you will see companies ranging from outstanding business systems to those that are challenged. Well before you try to pick the product or service you want to sell, identify the top operators. There is a reason they are successful.
Now, by top operators I don’t necessarily mean the brands that have sold the most units. Their franchise sales acumen does not directly relate to your success. You are looking for those companies that have a strong ability to build a brand locally, a proven executive team, top tier training and support, as well as the other resources you will need to get up and running to operate the business. You can only sort for these things by taking the time to investigate companies, or relying on the advice of someone that has already done extensive company investigations and sorting. The quality of a franchise system can often be measured by the satisfaction, stability and success of the existing franchisees.
We all get excited with new concepts, especially food related brands. Remember, though, you will be signing a long term agreement so you need a concept that can operate for many years, not just the next few. There are very identifiable trends in many sectors of the restaurant business, if you are not familiar with them spend time with someone who is to see if your favorite food concept is one that falls into the fad category or not. Look for long-term performers.
Step Three: Compare Your Model to the Top Concepts
Once you have identified those top concepts it is time to compare your model to their top franchisees. Do you have a similar skill set, background, and work practices as their top operators? Would you feel the need to reinvent the system after buying it?
As you compare your model to the concept you should feel comfortable that you are a fit and that, generally, the system is one that makes sense to you before you buy and may make even more sense after training and some time operating the concept.
Step Four: Build Your Financial Plan
I’m not just talking about “Can franchisees make money with this concept?” but also make sure that the projected costs make sense in general (are not under or over projected), and that your funding plan is solid given those projected costs. Depending on the concept you are looking at and where you are located you may find that you can begin working on this financial planning before you have selected a brand to buy. My preference is often to double the franchisors minimums (cash and net worth requirements) when planning an acquisition to make sure the franchise buyer will have comfort making the proper investment.
You will want to have comfortable plan in place that will not require going back for more money if you run a little over your projections.
Step Five: Complete a Full Investigation of the Top Two Choices
Don’t skip steps in your, or the franchisor’s, process here. It is a mutual investigation, an exchange of information where the end result may be that you are offered a franchise and then you make the call whether or not to move forward. They have a file of information they will want to convey to you, take advantage of that and any other insights they can provide.
Bring your notes and questions to calls and meetings so that you can engage them as well. Once the investigations are completed then your opportunity comes to make a sound decision.
A well done franchise investigation can be a rewarding, informative and confidence building process to go through.
Follow the steps and go build your empire!
Mr. Knauf is a highly sought after trusted advisor to many companies; Public, Independent and Franchised of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.