BUSINESS IN A BOX: IS FRANCHISING RIGHT FOR YOU?
So, you’ve decided you want to buy a franchise? Congratulations! You have just made the easiest choice of many complex decisions required in selecting the right franchising partner. Choose wisely – you could be married to your franchising partner for the next 10-20 years, assuming you keep your franchise for the duration of at least one franchise term.
Before reading further, think about your definition of success and your game or exit strategy as they relate to your franchise plans. Then, refer to your answers after reading the article. Define:
2) Your end game or exit strategy.
Is franchising right for you?
While group participation varies among franchise systems, most franchisees fit within my 30/30/30 rule:
- Group A: 30% follow the franchise model and work very closely with corporate;
- Group B: 30% mostly adhere to the franchise model and have a good working relationship with corporate;
- Group C: 30% believe they know more about their franchise than corporate and run the business on their own;
- Group D: 10% are proven leaders in the franchise system. They are entrepreneurial, have mastered the franchise model, positioned themselves to improve their business and are likely behind the growing number of sustainable competitive advantages adopted franchise wide.
Decide where you stand because being a good franchisee candidate requires a unique blend of entrepreneurial spirit and the understanding that while you may be smart and talented, you still have a lot to learn; especially relative to this franchise system’s policies, procedures and processes. Don’t get me wrong, I have seen my fair share of franchisors who know less about their business than prospective franchisees; however, the choice to become a franchisee means you should be able to sift through the pretenders and choose the right franchise partner. That said, if you are not NOT a member of Group A or B, please put this article down and don’t consider buying a franchise. Seriously, put the article down and reject calls from your franchise development contacts immediately! Let me explain…
The Leaders Vs. The Naysayers
There are always adversarial aspects of the relationship between Group D – the top 10% — and the franchisor. Group D continually challenges the status quo at corporate but HOW they do this is what sets them apart from others. While corporate staff members may get frustrated with this group because they are constantly pushing the bounds of the franchise, these franchisees aren’t yelling at corporate staff because the franchisee (or their staff) screwed something up or made a bad business decision. These franchisees own and share their successes and more importantly they own, learn from and share their failures.
Members of Group C, in my opinion, never should have bought a franchise. All too often, before the ink is dry on the franchise agreement, Group C franchisees are dictating to corporate how they will run their business and what they are going to change about the operating system in which they have just heavily invested. Group C franchisees tend to think they already know which processes are broken before they test them. If you know more than the franchisor, why would you buy a franchise from them in the first place? Surly, you have better ways to invest your $30K-$200K+ than on a franchisee fee? DO NOT INVEST IN A FRANCHISE! Rather, buy a business where you are the entrepreneur. The real entrepreneurs, in franchising, are:
1) At the corporate office, and;
2) VERY seasoned, respected and top performing franchisees who mastered the franchise system before concluding that innovation was the NEXT step, not the first step.
Choosing the Right Franchise Partner
Now that you have identified yourself as a member of Group A or B (preferably A), it is time to narrow down your prospective franchise systems and begin your due diligence. Remember, you are, for all intent and purposes, going to marry this franchisor. You are choosing your franchise partner just as much as they are “choosing” you. Take this opportunity to learn as much as you can about them.
The following questions will help you identify the right franchise partner, not the right franchise business. I suggest you ask these questions of at least four separate franchisor staff members (VP Operations, VP Marketing, Business Management Consultant and general franchise support staff member). You should juxtapose these interviews with follow-on franchisee interviews.
Questions for a Prospective Franchisor:
1) What makes your department staff uniquely qualified to support me and my staff’s operational needs? Describe how your department’s support is superior to Company X and Company Y (name two competitors you are analyzing).
2) If I were to ask a franchisee of Group A and Group C, how would they individually and uniquely describe your business ethics, support (operations, marketing, service, manufacturing, etc…) and organizational culture, what would they say?
3) How many corporate staff members do you believe fail to pull their own weight? (NOTE: Before asking this question, know how many corporate staff members exist so you can determine the percentage of “dead weight” they believe exists.)
4) How many corporate staff members have worked in this franchise at the operational level? How many were prior owners? If they were owners, were they successful as you earlier defined success?
5) Describe three professional failures since working here and what you have learned from them.
It is also very important to interview existing franchisees. Several months after I sold my franchise, I was at a three-person dinner meeting with the COO. During that meeting he indicated that while we often saw things differently, he recognized I always had good intentions. I learned a lot in that 90 seconds that I want to pass on to you, as a prospective franchisee. Take this opportunity to learn the “patterns” of the franchisor. Corporate staff will come and go, but what is their culture? Do they recognize and value franchisee input, or do they simply pay lip service like my franchisor often did? Try to dig deep enough to discover the outcomes rather than the symptoms of disagreements. It will go a long way toward understanding the culture of your franchise partner.
Questions for Existing Franchisees:
1) Define success relative to your franchise business. Have you achieved success? What is the timeframe to reach success?
2) What is your exit strategy? How has it changed?
3) How many corporate staff members do you believe fail to pull their own weight? Is one department more egregious than another?
4) Describe conversations you have with your franchise mentor. How does your mentor measure your progress?
5) Can you describe three failures of the franchisor and how they dealt with them? Can you describe how those failures affected your business and the recovery process?
These questions are not intended to be an end-all-be-all for your franchisor partner search. However, if you are satisfied with the outcome of franchise staff and franchisee conversations, are willing to learn from others and follow a proven system of success, then I congratulate you on your pending acquisition.
For additional interview questions and to learn more about franchise support, please visit my blog at www.loygen.com/blog.
Bryce Ebeling is the founder and CEO of LoyaltyGenerator, an automated cross-media marketing platform that offers franchisors and franchisees a single point of access to an email solution, direct mail printing, text message provider and customer data analysis. With more than 15 years of experience working in and around franchising, Bryce worked in support roles at two mature franchise systems, owned and operated a successful franchise ranked in the top 20% of more than 300 units and has consulted with hundreds of independent franchise and non-franchised owners on marketing and operational related challenges.