WHERE DO FRANCHISORS COME FROM?

Wed, Dec 16, 2009

WHERE DO FRANCHISORS COME FROM?

If this sounds like a question from your five-year-old, you know how the Doctor feels. However, I think this is a very good question when asked by a prospective franchise buyer. The answers are as diverse as you might expect. Colonel Sanders ran a successful restaurant for many years and was regularly complemented on his fried chicken, thus began Kentucky Fried Chicken. Ray Kroc sold milkshake machines to a couple of brothers named McDonald in California. When they started ordering them by the dozen, he went to investigate and eventually asked them to sell their operation to him. When they refused, he suggested they franchise the concept. When they responded negatively, he bought the rights to franchise under the McDonald’s name, returned to his home in Illinois and began franchising.

Some of today’s franchisors seem to be skating on much thinner ice. I talked to a company selling web page development franchises last year who admitted that they’d closed down their prototype after only three months “to concentrate on selling franchises.” I’m convinced they hadn’t encountered 20% as many problems as new franchisees will experience and I doubt that they’ll come up with the best solutions. I bet they’re not in business next year.

Because the Doctor regularly helps successful companies become franchisors, our phone often brings a plea like this: “I’ve got this great idea that I know is franchisable. Do you have anyone who will invest in my idea and we’ll both get rich!” Obviously, I must explain that any operation trying to sell franchises without a year or two experience in a prototype will have major credibility trouble and probably should save my fees and their headaches.

As you search for your best franchise, don’t be afraid to ask how many years the franchisor ran a prototype to develop the system they’re now teaching their owners. What in the management team’s background qualifies them to coach you in your new venture? How many units to they plan to sell this year? How many on their staff will support this growth?

A PRESCRIPTION FOR YOU

Finding the right franchise is time consuming and making the decision is often gut-wrenching. Self doubt often clouds your thinking and may cause you to freeze just when you should be reaching for your checkbook and your signing pen. The better prepared you are, the easier it will be to move confidently toward your dream of entrepreneurship.

Reading and taking courses to offset areas of weakness should begin the day you decide to own your own business. If you have never made your living in a sales or marketing position, you should work on that deficiency now. As we mentioned on the web site (How Can I Learn More about Franchising?) No Bull Selling by Hank Trisler and Guerrilla Marketing by Jay Conrad Levinson are two of our favorites. Read these, practice their tips in your current position and blend them with the techniques you learn at franchise training school to be sure your new franchise gets off to a quick start. Every entrepreneur needs to promote his business and sell his ideas to customers, employees and bankers. Get prepared now for your future.

THE FUTURE OF FRANCHISE SHOWS

The Doctor recently visited several franchise and small business expos. What I discovered was that there were only about a dozen true franchisors exhibiting. There was also a hodge-podge of unlicensed business opportunities and multi-level marketing ventures. In addition, there were leasing companies, office suppliers, phone services, copier companies and other vendors seeking business from businesses.

Also present was a large display of “Start Your Own Business” manuals from Entrepreneur Magazine. For $69.95 they claim they’ll tell you everything you need to know to start your own company in any of 50 or so industries. The Franchise Doctor has reviewed many of these manuals and you can rest assured that they all leave a lot missing, when compared to a true franchise. Most of the sections, while of value to a neophyte, gloss over most concepts with generalities of little value. “Marketing through local newspapers and coupon mailing companies will soon have your phone ringing,” is typical advice. Trust the Doctor, the devil is in the details. What demographic areas should be targeted, what type of offer works best, how do you price your Grand Opening special? A franchisor will have firm, proven answers. These manuals are an amalgam of several people who claim to have the answers but seldom live up to their own credits. One manual claimed the owner’s successful company had earned over $100,000 during the preceding year. Just a little probing determined that Sales were over $100,000 but the owner only kept (or earned) about $25,000 to $30,000!! Buyer beware.

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