Can the American Dream Be Franchised?
The American dream for many people is to run their own company. As a result, they mistakenly pursue their hobby as their business idea. Unfortunately, very few people can make a living from their favorite interest. The worst reply when an entrepreneur is asked why they want to start a restaurant is “Well, I love to eat out and I always wanted to own one.” This is one reason why so many restaurants close within a year of opening. Liking an area of business and having the experience to run it is two different things.
Franchises are a good alternative for some people since they give a road map to run that business. There are more than 2,000 companies that franchise in the U.S., according to the International Franchise Association. Most startup costs are not cheap with entrepreneurs investing between $11,000 and $2 million to get started. Franchise advantages include skipping the writing of the business plan, no product development or branding, and an operations manual.
Michael Waller of The Entrepreneur’s Source helps entrepreneurs identify sound franchise opportunities. He believes that “franchising offers an attractive alternative for an individual to become their own boss while at the same time significantly reducing the risk and ultimately the fear factor. Statistically, better than 90 percent of franchise points are still operating at the 10-year mark.”
While buying a franchise does minimize some of the risk components, it doesn’t totally mitigate the biggest one: paying customers. Just because an entrepreneur opens a popular franchise does not mean that customers will call to buy the product. While the larger franchises do help the credibility gap inherent with new businesses, franchisees do need to find customers of their own.
Waller doesn’t believe that buying a franchise is for every person looking to start a business. “Although you may have some flexibility in tactical execution of the day-to-day activities of the business, the risk is reduced when you follow the system,” he said. “The business processes, procedures and tools that the franchiser provides are part of the value add that they bring to the table. For someone who prides themselves in being a ‘maverick,’ they may have significant difficulty conforming to the standards of their franchise agreement.”
Before making any decision to buy a franchise, work a few days on site with a franchisee at their location. Working at a Dunkin’ Donuts is a lot different than being a customer. Work the long hours of a manager and doing the job of a counter clerk will be an eye opener.
As with any new business venture, do the homework. Do not assume that just because there is a proven business model and a brand that it will automatically be successful.