SITE SELECTION AND SPOTTING WARNING SIGNS

Tue, Jan 11, 2011

NEW YEAR’S RESOLUTIONS STARTING ON A NEW PATH

Beginning a new year gets most of us evaluating our lives and making plans for improvement. We often suggest the Ben Franklin Method of evaluating opportunities: Grab a pad of paper and write “Pro” on the top left corner and “Con” on the top right. Then list the positives and negatives in their appropriate columns.

If “earning what you’re worth,” “building an equity,” and “taking charge of your financial future” are on your list; if your “job security has evaporated,” you’ve been “passed over for promotions,” “feel your pay or bonus are below par,” or find it impossible to “break through the glass ceiling,” we hope you’ll aggressively pursue your ability to improve your life and career through franchise ownership.

As you review options, you’ll discover that today’s down-sizing craze leaves too few job opportunities for the thousands of people over 45 looking for a new employer.

Starting a new business is very risky with government statistics showing that over 55% close their doors within two years. Those who have never started a business before are well advised to look for a partner or a franchisor who has!

Set goals today! Look for industries that interest you, research their future stability, then look for franchisors that service that niche. The January issue of Entrepreneur Magazine is perfect for beginning your search since they publish their rating of the Top 500 Franchises and list another 400+ who are newer, less-established companies.

Call for marketing materials and start doing your homework. (Emphasis on “work”). It’s not easy making a smooth transition–but it will be less stressful and more successful if you cover your bases. For more steps to take on your road to success, review the Franchise Doctor’s web site.

A PRESCRIPTION FOR YOU

Are you ready to be a winning franchisee?

There are hundreds of aspects of a business that must be addressed in order to succeed. The great strength in franchising is that a good franchisor has encountered these many times before and is ready to help you make the right choices.

One of the most critical is site selection. If you choose the wrong location for a business requires your customers to come to you, you’ll quickly discover that they won’t “beat a path to your door” and you’ll suffer. Signing the franchise license and paying your licensing fees will open the educational process on how to choose the best location. In most systems, the franchisor will give you guidelines and then ask you to research your town and submit your favorite 2 or 3 sites for acceptance. Then the final choice will be yours.

Even before signing an agreement, most franchisors will give you general guidelines so that you may begin the search. Do they suggest a stand-alone building? A strip center? A mall? What about traffic patterns? Near homes? schools? Office buildings? Near competitors?

Check now with local departments of transportation and determine who offers traffic counts in your area. Talk to commercial Realtors and mall managers to get a feel for the availability of space in you town and its cost.

The Dr. is IN.

{In this section we answer questions commonly posed by franchise buyers. To submit a Query, please E-Mail us.}

Q.What are some of the most common “red flags” that should warn one away from a particular franchise system?

A.While the Franchise Doctor believes that buying a franchise is the best business decision for most aspiring entrepreneurs, there are some systems that seem to disregard the needs of their franchisees.

A quick check of their “corporate culture” can be as simple as measuring the time needed to respond to your inquiries. If calls from a buyer are not returned promptly and courteously, you may have discovered a lack of attention to their franchisees.

Another way to analyze their culture is the system’s approach to their fee structure. Some systems charge very high licensing fees (up to $50,000!), then “pile on” fees for using their proprietary computer software (to $15,000 per year) and then demand 8 to 10% royalties on every dollar you produce. While their salesman may provide a great pitch that these fees will not slow your growth, we’ve found that most franchisees feel these fees are a heavy burden 2 or 3 years after opening.

A very critical concern is called infringement. When a franchisor sells many franchisees the rights to open within a small geographic area, customers will typically frequent each unit equally and therefor reduce sales in each. Some food franchises now grant a license to operate “within these walls”–clearly warning that another unit may be placed across the street. Some food franchises today sell their products through grocery stores. If a consumer can buy frozen tacos or gourmet ice cream at the store, will they frequent your unit more or less often? The franchisees of Taco Bell and Ben & Jerry’s Ice Cream seem divided on the benefit/liability of these alternative distribution systems.

Franchisees will usually share their experiences with you if you call and explain your interest in joining their system. If many say they would consider selling their operation at low prices (compared to the start-up investment), you may have discovered a problem. You’ll find an extensive list of suggested questions on our Home Page in the article “How Should You Evaluate a Franchise Opportunity?”. The clincher is, “If you knew then, what you know now, would you still buy this franchise? Why or why not?”

Do your homework and be sure you’re joining a network where franchisees are seen as very valuable partners in the system.