Finding the Right Franchise for You
There are many ingredients that need to come together to create a successful franchised business. When researching the right concept to invest in, a potential franchisee needs to consider a variety of factors to find the franchise that's right for them. But getting down to the key details that determine which franchised business is the right fit can be a big challenge.
Any franchised business that's worth considering is going to have a presentation designed to impress—success rates, growth statistics, and rosy financial projections are common selling points for legitimate franchises. Even if all of these things are true, a potential franchisee still needs to find the concept that best fits their skills, interests, and experiences before they invest in a business.
To find a franchise that not only exhibits strong indicators of future success, but also one that fits a potential franchisee's personality, can be a challenge. While considering franchise opportunities, there are a handful of factors they should focus on to find the right concept for them.
Like any business, a franchise can only thrive under the direction of strong leadership. It starts at the top with those who form the executive team. Strong leadership is often the difference between a franchise that thrives and one that stagnates—or worse, fizzles out. Strong leadership usually comes from experience and a thorough understanding of the business, from top to bottom. If you're looking at a franchise in the fast-casual restaurant industry, you should seek one with a CEO who has a food service background. To fully understand the challenges a franchisee faces, the leadership team has to understand the day-to-day challenges an individual unit may be up against. It’s important to consider what makes each franchise work well, what can cause operations to go awry, and what it takes at the point of sale. A strong franchise needs leadership that is actively involved in the business and is a proven success.
For any business to succeed as a franchise, the concept should be easy to execute, especially in food service. The old adage advises that 10 percent of the menu drives 90 percent of the sales. A strong franchise has a short list of key pieces they perform exceptionally well. For our Pancheros restaurants, we aim to make a killer burrito using a small menu of quality, fresh ingredients. The simplicity of the concept allows a franchisee to keep the focus on serving the customers rather than managing complex operations. Additionally, keeping operations from getting complicated allows our franchisees to train their employees to be great at a few, key elements—rather than becoming overwhelmed and being ‘just okay’ at many things.
While all growing franchises will have a presentation that shows you can succeed with their concept, it's important to dig deep and ask the right questions. Consider how many years they've been in business and if their financials are trending in the right direction. Look closely to learn how same-store sales are trending and be sure they indicate positive growth. Find out what the challenges a franchisee is likely to experience in the first year and how quickly a new franchisee is expected to recoup their investment and begin to see a profit. It can sometimes take 18 months or more before you truly know how the market is responding to your franchise, so you’ll need to be realistic about your financial situation and how the business is positioned for the years ahead. Using my experience within the restaurant business, I recommend opening a second unit within six months of opening the first—helping the franchise build brand exposure, market penetration, and investment in the community.
Even if everything looks right on paper, you need to evaluate how well the franchise fits with your personal interests and experience. It has to be a business you're willing to learn and eager to dedicate yourself to for the long haul. You have to believe in the system you're buying into—from the point of sale all the way up to top levels of the company's leadership. You're going to spend a lot of your time and energy steering this business to success, especially in the beginning. Be sure you're motivated to put in long hours when necessary and to guide the business over the long-term.
Try and meet other franchisees who have invested in the concept, both single-store and multi-unit franchisees. Ask, “what sets the top performers in the system apart?” And ask yourself if you have what it takes to push your business in the right direction. You have to understand the good, the bad, and the ugly, and you can't find all that out just by analyzing spreadsheets.
Investing in a franchised business can be the best financial decision you've ever made. And, if you do your homework, you'll be giving yourself the best chance to succeed. Take a comprehensive look at your options and find one excites you from both a financial and personal perspective. When you find the right combination of factors, and commit to operating at a high level, you can succeed.
Gary Matusiak is the vice president of Franchise Development Pancheros, where's he's been responsible for all franchise sales activity related to the development of new and existing stores since 2010. He has a 25 years' experience in the food and beverage industry, primarily in franchise sales and multi-unit franchising.