Would You Make a Good Franchise Owner?

Gene Marks

Do you want to own a business? Be an entrepreneur? Leave a corporate job and be more in control of your life? It’s not as easy as it sounds. And it’s certainly not as romantic; but assuming you can find the right franchise company, opening your own store or restaurant franchise is a great option for would-be entrepreneurs.

As a long-time small business owner who works with a lot of small business owners (my company sells customer relationship software), I know starting a franchise has its risks and rewards. As a franchise owner, you’ll have the opportunity to build into a known brand and let the parent company do the marketing for you. You’ll have a deep pool of resources to draw from for advice and to help run your business. And, if you make the right choices and are willing to invest the time and effort, you can make a lot of money.

But like any business, there are risks. Big risks. Before we get into the rewards, here are three you should strongly consider when trying to decide if you’d make a good franchise owner.

The Risks of Starting a Franchise

1. You’re giving up control.

With franchises, as with any business, it’s never the idea, the product or the opportunity. It’s the people. You’re going to be asked to invest a lot of non-refundable money and time in your new venture and then hope and pray that the parent organization lives up to its promises. Sure, you can do all the work – you can make the sandwiches, clean the clients’ offices, drive the trucks. But you’re going to be relying on the home office to send you the business. They will be making the marketing and branding decisions on your behalf and although they may have more resources than you, let’s face it: rather than being a business owner, you’re more of a glorified super employee. When you own an independent business, all those decisions are left up to you. With a franchise, you will prosper or die as a result of others’ decisions.

Is there anything you can do? Not much. This means that, like every investment, you want to make sure you’re not betting the farm. If you’re taking all of your life savings and investing it in a venture where the major decisions are not in your control then you’re taking a big leap of faith. And you’re gambling your family’s future. Successful franchisees, like any smart investor, put a portion of their wealth in the business, not the entire amount. You want to make sure that if things really go south, you’ve got something left over.

2. You’re giving up your time.

Opening up a franchise is not cheap. You’ll be paying hefty franchise fees and startup costs. You’ll be committing to leases and buying capital equipment. You’ll be renting space, hiring employees and buying products. A good franchise company will make sure you’re aware of all of these costs before you move forward so you’re not operating in the dark. But it won’t just be the money.

It will be your time.

And by the way, this is true of any business you start, so franchising is no different. You’ll be spending many hours away from home. You’ll be cleaning floors, changing light bulbs, balancing your books and scrambling to find someone to replace the employee who called in sick that morning. Eventually, you’ll get it all in order, figure out a process and a balance and be able to build your empire. But initially, and even for the first few years, you’ll be pouring a lot of blood, sweat and tears into your little business. Expect that.

Make sure your family knows this. Really knows this. Talk with your significant other and even your kids if they’re old enough to understand. Make sure they fully comprehend the sacrifices you’ll be making. Make sure they truly realize how long you’ll be away from home and all the things you’re doing to make a better life for them. You have to have your family behind your efforts 100% because if they’re not, something’s going to fail – either your franchise or your home life. And it’ll be up to you to decide which one is more important.

3. Finally, you’re exposed to other people’s mistakes.

By other people, I mean other franchisees. One bad incident at one location on the other side of the country gets national news and all of a sudden the franchise gets a bad name. And you had nothing to do with it! When you buy into a franchise, you’re buying into the entire organization, for better or for worse.

How to mitigate this problem? You can’t be in control of what everyone does. All you can do is look at how the parent company handled other issues in the past and if they were able to successfully resolve them with minimal damage to the brand’s reputation. If you’ve got faith in management, that’s the best you can ask for.

The Rewards of Starting a Franchise

1. You take over a built-in brand.

For most companies it takes years, even decades, to build a reliable brand name. Coca-Cola spends billions each year on marketing, all to make sure that we’re associating their brand with the good things in our lives and reaching for a Coke whenever we’re thirsty. A good brand means name recognition, familiarity, credibility and more business. People tend to buy from brands they know.

When you open a franchise, particularly one that’s well known, you’re immediately benefiting from that name recognition. Yes, you’ll pay for that privilege. But in return, there will be customers choosing your store over someone else’s merely because they recognize the name. Your parent company will be the one spending money on marketing. Regardless of their size and reputation, it will always be their job to send business your way. Your job is to deliver the product or service their marketing promises. When both parties are doing their job, success is almost inevitable. Creating a brand is enormously expensive and often a gamble. Being a franchisee takes this gamble away.

2. You get plenty of support and help.

Running a small business is not easy. Like me, most of my clients complain that they have to wear too many hats and know about too many things. Everything is our responsibility and the devil is always in the details. We have to understand accounting, marketing, sales, and operations. We have to be up-to-date on employee management issues, taxes, and management best practices. To build something of value, we must build rules, processes and procedures into an organizational structure that can be sustained and managed by someone else. Just watch “Bar Rescue” or “Kitchen Nightmares” to get an understanding of just how hard that is to do.

But good companies provide these resources to their franchisees. McDonalds, for example, sends its newest owners to a “university” to learn everything there is to know about operating a successful McDonald’s restaurant. Other chains provide similar training, both at their corporate facilities and in the field. You’ll have people to help you understand the finances, the operations and the mechanics of running your restaurant, store or service. They’ve done it a bunch of times already and it’s in their best interest to teach you how to do it as well. Good companies usually sponsor events, conferences and workshops for their franchisees with business-building advice and mentorship from other franchisees. And franchisees often have their own internal organizations, too. The bottom line: you’re not alone. You have support. And as a novice business owner, you’ll want to take advantage of that support.

3. You can really make a lot of money.

I recently spoke at a Dunkin Donuts franchise event and my audience was made up of many successful people. Dunkin Donuts, you say? Sure, you may not strike oil running just one Dunkin Donuts location, but the people I spoke to owned multiple franchises — ten, twenty, even fifty locations! They took the opportunity and ran with it. They invested. And, like any successful business person, they took risks. Many of them are making a bundle. This is the same for any franchised organization. The true entrepreneurs make their money on volume. They leverage the company’s opportunities, make the most of them<what’s the difference between leveraging ops and taking advantage of ops> and then build their own mini-franchise empire.

Like any business, there are winners and losers among franchisees. The Winners take a concept and turn it into something bigger. They get it and they make the most of the opportunity. Like everything in life, success in franchising doesn’t come overnight. It takes years of hard work, many hours of sacrifice and a continual investment of both money and time. But if you want it, the opportunity is there. Good companies offer these opportunities to the most hardworking and industrious franchisees. And good franchisees recognize these opportunities and work hand in hand with their parent companies to build their own business kingdoms.

Franchising may not be for everyone. But for those willing to invest the time, effort and money, and who have good timing and a wee bit of good luck, it can be very profitable.


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