Monday, March 30, 2009

Part 2 - Buying a business? Franchise or Start-Up? Where do I go?

Part 2 - Buying a business? Franchise or Start-Up? Where do I go?

6 things to expect when you buy a franchise;

Systems – a Franchisor should give you Systems in the 4 core functions of business, Marketing, Finance, Operations and Management. Funny thing about a franchise, you don’t get to see ANY of the systems until you are legally a FRANCHISEE. It is not like buying a car where you get to take it for a test drive.

National Name Recognition – We tend to think that just because a business is a Franchise, they must be known all over the World. When you are buying a franchise that claims national recognition, just ask yourself when is the last time you saw a commercial on prime time TV for this franchise? Oh, you haven’t? You better run the other way.

Home office support – The people that run a franchise must be the smartest and best in the business. There are great people running franchises, but remember they get paid no matter what. If you don’t understand what a royalty is, get very familiar with it, especially “minimum” royalty.

Mentoring – Each Franchisor should have a local or regional mentor to help them get their business started. This is a very good thing if your mentor is someone you can get along with and match personalities. Hopefully, they are smarter than you! If not, good luck.

Franchise lives up to what they say they will do – If a Franchisor tells you your business will be successful if you do this and this and follow the system. What if the system doesn’t work in your market, your area? You will only find this out AFTER you have signed the paperwork and start working your business.

Instant success – It’s a franchise; we should break even much faster than a normal non-franchised concept. Let’s be very clear here and one of the most important lessons of starting a franchise. If there are no other locations in your area, your Franchise location will be a START-UP! You will lose money just like a start-up. Don’t get caught up in the idea that success is imminent. In fact the International Franchising Association estimated at a conference I attended last year that 10,000 Franchisees would go out of business; this prediction was well before anyone knew the severity of the current economic crisis.

Don’t get me wrong, there are many successful Franchise concepts out there. You just have to realize that the resources that are available in the world to get advice from are the one’s who are SELLING franchisees. Just remember; Do your homework and talk extensively to existing franchisees. It will be the BEST investment of your time.

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