Issue Date: November 2009, Posted On: 11/3/2009

Is franchising right for you? Don't be fooled by myths

By Nigel Mayne

Nigel Mayne

A franchise opens every eight minutes in the United States and provides an excellent opportunity for someone to be in business for themselves but not by themselves. Is franchising the right fit for you? Find out before you sign on the dotted line by reviewing the following tips, tricks and myths about this $1.53 trillion industry. Planning and Investigation

• Consider your motivation. Are you running toward something or away from something and are you acting on inspiration as opposed to desperation? If you're considering buying a franchise solely because you cannot find another job, you are not ready to take on this new venture; while franchising is a wonderful way to take control over your future, you need to be committed 110 percent in order to succeed.
• Evaluate your skill set. Think about your strengths, weaknesses, interests and overall goals. Most franchisors don't require their franchisees to possess industry experience but managerial experience is extremely beneficial. For example, the owner of a home painting franchise is seldom the one holding a brush but is instead handling billing, marketing, staffing and sales.
• Don't be fooled by trends. Some businesses explode onto the scene and dominate the headlines but can seldom keep up that buzz. Instead of selecting a concept that's trendy or "hot," choose one that will withstand the test of time.
• If the past year has taught us anything, it's that people are quicker to cut back on luxuries but not necessities like dry cleaners and handyman services.
• Do your due diligence. Don't settle on the first concept you find — do your research. The Internet, franchise consultants and seminars are great ways to gather information but consider talking to an existing franchisee or two as well. Since they've literally been there and done that, they will be able to offer personal anecdotes and advice that won't be found in any company brochure.
• Be cautious who you ask for advice. Family and friends may appear to be your best supporters but unfortunately, they are not privileged to the same intense information you have received and oftentimes will discourage rather than encourage because they don't have all the facts. It could also be that they would never see themselves in the position to take the risk and feel you should have their same mode of thinking.

Challenges

• Working within the system. Franchises have a proven system in place but many give franchisees a certain amount of flexibility to personalize their operations. Know, however, that the system is in place for a reason; those who follow the system succeed and those who do not struggle. If you are someone who likes to blaze their own path, make all decisions and have complete control, that's great, but franchising is not for you.
• Organizing your finances. All franchises require an up-front investment but the monetary commitment doesn't end there. There are a lot of factors — rent, equipment, transportation and staffing, to name a few — that are not included in your initial fee so be sure to account for these extras when planning your budget. Also, since businesses take time to ramp up and become profitable, check that you have enough savings to live on for at least six months.
• Managing your expectations. No business — even a franchise — is without risks so understand what you're getting yourself into before you sign the agreement. Unlike businesses started from scratch, a franchise has a built-in support network to help you through the rough patches but you are responsible for keeping your expectations in check. Franchising has an extremely high success rate but each business is different; if you're patient and work hard, however, success will ultimately follow.
• Letting your ambition get the best of you. Having confidence is great but having too much confidence can sideline your business early on. Oftentimes, franchisors will give you the opportunity to purchase multiple territories or sign a development agreement before your business is even open. Unless you are an experienced business owner or are sure the opportunity will not exist in the future, resist the urge. As you become comfortable operating one business in one territory, you will be better equipped to expand your operation gradually instead of biting off more than you can chew at the beginning.
• Underestimating your abilities. Many people are uncomfortable marketing and selling their business so they just don't do it. Big mistake: When you don't do sales, sales don't come in and business will suffer so choose a business that fits your sales aptitude. If you aren't comfortable with sales then you need to hire someone who is. Sales are the life line to any business and you have to plan and prepare for it. Remember there are many different ways to market and sell your business, you just need to find the right model for you.

Myths

• Franchising is all about restaurants. While many of the best-known are restaurants, there are actually 3,500 franchise concepts in 75 industries.
• The more you spend, the more you'll make. There is no correlation between how much money a franchise costs and how much money it makes.
• You must have experience in the field. Experience isn't necessary; in fact, many franchisors prefer their new franchisees to have backgrounds outside the industry.
• All franchises are created equal. Some franchisors will take on every franchisee that can sign a check, which makes for a weaker organization overall. The franchises that vet prospective franchisees just as much as the franchisees vet them get the best candidates and have the strongest system.
• A franchise will run itself. Just because you have the support of a larger organization and ongoing training programs, owning and operating a franchise is still a huge responsibility and takes a lot of work — especially at the beginning — to make it successful.

Nigel Mayne is the founder and president of MatchPoint Franchise Consulting Network. He can be contacted at (416) 644-1040 x233 or nmayne@matchpointnetwork.com.