PREPARING FOR YOUR ROLE AS A FRANCHISE OWNER
This week my phone rang with a call from a sharp lady from one of Atlanta’s upper income suburbs. She is interested in buying a new or existing franchise so that she can reduce the time she spends on the road. Last year she logged 40,000 total miles making sales calls on local companies. Two suggestions were offered and both met her investment capability, her earning needs and her skill set. Surprisingly, she quickly rejected both because they were too far from her residence. Each of these opportunities is approximately 20 miles from her home. Since both are site-based companies, I noted that 40 miles a day seemed far better than the 160 per day average necessary to reach 40,000 per year.
Her response was that she’d only consider a business “no more than five or six miles distant!”
I’m afraid I failed this prospect by not making her understand that it is not a perfect world. If it were, she might have had the $200,000 needed for a 10-year-old company in her home town. But, with $50 to $60,000, she will probably hunt for a year and then abandon her plans of entrepreneurship.
Are your expectations reasonable?? Have you acknowledged to yourself that we live in an imperfect world? Are you ready to “pay the price” for the success you desire? Few franchisees earn $50,000 in their first year. That may cause some belt-tightening at home as you begin your business. Most businesses cannot be run from your spare bedroom, so commuting will not end the day you begin working for yourself.
Don’t set your expectations so high that achievement is impossible. It’s time to begin strengthening your family’s finances today. Don’t make the solution impossible to find by placing self-imposed barriers in the way.
YOU CAN GET THERE FROM HERE
As you look forward to franchise ownership, it may seem almost impossible that all the necessary steps can be completed in 90 days.
If you are ready to accept responsibility for the process, it can happen!!
Here’s a short list of the critical steps to take. (For further insight, you may want to review the section on The Franchise Doctor’s site called “How to Evaluate a Franchise?”
1. Research the Industry
2. Submit the Franchisor’s Qualification Sheet
3. Review the Disclosure Documents
4. Quiz the Franchisor about details
5. Call/Visit Franchisees
6. Meet with the Franchisor
7. Evaluate your town’s suitability
8. MAKE A DECISION
9. Sign the Agreement
10. Attend training
11. Grand Opening
Like riding a bicycle–you can learn how by focusing on the basic steps.
A PRESCRIPTION FOR YOU.
Are you ready to be a winning franchisee?On our Web Site, we recommended a number of books for your review. Have you taken entrepreneurship seriously enough to begin making improvements in you? Check Our Reading List Recommendations
There are a number of areas of critical importance to any franchisee–many of these are not well taught in most schools. Accounting-the ability to review a group of numbers and determine the health of a business–is of paramount importance. Unless you can analyze a Balance Sheet, a Profit & Loss Statement, a Cash Flow Report and the Changes in Shareholder’s Equity and clearly understand what stories they tell, you need to improve yourself. Our home page suggests a book but today many colleges have courses that will teach you how to understand financial reports. You do not need to become an accountant, but when your money is at stake, you must be capable of making the right decisions.
THE DOCTOR IS IN.
{In this section we answer questions commonly posed by franchise buyers. To submit a Query, please E-Mail us.}
Q. Does it really make sense to pay licensing fees and royalties to a franchisor versus starting a new business independently?
A. Studies show that almost 40% of all consumer purchases are made through franchisees. Less than 5% of all US businesses are franchisees. That reflects an 8 to 1 ratio!! Obviously, franchised companies are outperforming their independent competitors. Given the fact that many franchisors arrange group discounts for inventory, equipment, and advertising, it seems obvious that the amount of money available to the franchise owner (even after royalty payments) exceeds the dollars available to independents in the same industry. Naturally, the savvy buyer must verify that these statistics apply in the system you’re evaluating.
If you had taken the great risk encountered by the Franchisor and made the costly errors most start-ups encounter, you could avoid the expenses involved with franchising. Yet the dollars lost by experimenting without a proven business plan may well exceed the fees franchisors charge. Don’t get caught in the “perfect world” syndrome, wishing that you could enjoy the high sales, low risks, and reduced costs of franchisees, yet not having to pay for these benefits.
WHAT ARE THE STEPS TO FRANCHISE OWNERSHIP?
Finding the franchise that’s right for you is a difficult task–just as time consuming as finding a job. When you uncover a company that sounds intriguing, ask for their marketing package. If what you read, spurs your interest or raises questions, call the franchisor or fill in the qualification sheet. Often a buyer will draw an incorrect conclusion about some aspect of the venture and therefore reject the opportunity. Every franchisor will be happy to explain their operation–if you call or write. Don’t fear a “high-pressure” salesman. If you simply say “I’m no longer interested in your company,” they will stop calling.
Your business venture will not find you! If you truly want to succeed, you must take the initiative and do your homework diligently, until you’ve found the company that meets your needs.
Please feel free to E-Mail any Questions or Comments.
The Franchise Doctor welcomes your comments: Click Here to Send us an Email or Call: 800-220-8256
