10 Tips on Choosing a Franchise
Thinking of becoming a new business owner? Are you leaning towards a proven business like a franchise? Perhaps, you should approach your quest in the same manner as choosing a spouse. Outward appearance might be a reasonable place to start, but the more you know about your potential mate, the more likely you will make a sound choice.
The same is true for choosing a franchise business. The best franchise opportunities boast more than a pretty face. The more you have in common with the industry and their style of doing business, the more likely your success. No matter what you current interests are, the following tips should be helpful:
1) Look for an extensive support system. The franchise model works best when there is a specific “package of support”. The package should include persons and materials that have been specifically developed for each phase of the process. Know what will be required of you in every phase. From the first meeting, to field and operation managers meetings, you will learn what is expected of you. Make sure you have access to the decision makers or franchisors. Support from fellow franchise owners and franchisors create a “team experience”. You will also assemble your own support team, consisting of your banker, accountant and lawyer.
2) Passionate senior management/franchisors. Passion is contagious. It’s the fuel that propels franchisors to go “above and beyond.” This is the type of operation you want to be part of. It takes extraordinary mentors to hone your success. Have they lived the better part of their lives immersed in the business? Are they in the “growing” stage or the “coasting” stage of their career.
3) Stable franchisors with a clear outlook on the future. A business model that has been honed to maximize growth and adjust to competitive forces will fare better than one that was developed and carved in stone. Successful franchisors keep ten fingers on the pulse of all factors that currently impact their industry and anticipate opportunities and pitfalls that are around the next corner. Has your franchisor mastered social media trends that you can follow?
4) Goal-proven franchises with access to current franchisees. By setting realistic goals for franchise owners, the question, “How am I doing?” will be easily answered by the franchisee. The best franchises are “team” oriented. The franchisee should never feel alone. Access to current franchisees should be encouraged, both before and after the purchase of a franchise.
5) Must have extensive and consistent training programs. Find out what services are offered. Instructors and manuals must be unified and easily repeatable. Everyone should be on the same page.
6) There must be a clear estimate of the costs to open this franchise business. You must have all the necessary calculations to figure out ongoing costs, overhead, profit margins and be able to calculate potential success. Make sure you are provided the details found in section “Item 19”, in the (FDD) Franchise Disclosure Documents on earnings, costs and any other factors that affect the financial performance of the franchise. When you are provided straightforward valuable financial data in this manor, you have the basis for building a trusting relationship. Not every franchise opportunity provides this essential information.
7) Always look for a clear discussion about franchise fees. This must be a strict “no surprise” zone. All fees, royalties, surcharges and charge backs that directly affect your bottom line, must be spelled out in a clear, concise manner. There is no room for interpretation when dealing with franchise fees. Unless you have had extensive experience in these matters, this is the perfect time to “call a friend” for assistance. Asking a certified public accountant and/or a lawyer to review the contracts is money well invested.
8) Innovative products and strong brand recognition. Successful franchises are “known” for special products or services that differentiate their brand from the competition. Contributing factors in the food industry could be the unique size or shape of the product, exclusive ingredients, a trademarked name or mascot and a distinctive taste. Brand recognition is based on longevity in the marketplace and advertising support. Brands that have been popular for three generations are more likely to have broad based support than the “new kid on the block.”
9) Understand how this will impact your lifestyle. What kind of lifestyle do you dream of attaining? Are you willing to trade your current lifestyle for a future lifestyle? Consider your own body rhythms. If you find it difficult to wake up before 9am, avoid businesses that require a 7am start. Conversely, if you find you need to be in bed by 10pm, avoid a business where the doors close at 9pm. Consider the rhythms of your family: carpools, athletic and artistic after-school activities, preparing kids for school Mon-Fri, being home when they return from school, as well as community and church commitments. Invariably, you will need to put in more hours than advertised.
10) Being prepared for challenges. No matter how well operational systems are devised and executed, no matter how extensive the training program, no matter how accessible your support team, count on unforeseen challenges. There will be business related challenges that are within your control and some outside of your control: like legislation and economic factors. The challenges could be personal in nature: health issues and relationships. If you expect there will be challenges, you will be better prepared to face them and overcome them. In these times of challenge, is the Franchisor always accessible? Supportive? Ask an existing Franchisee.
Whenever possible, exceed expectations.
11) Location. Location. Location. As in all things having to do with real estate, finding a favorable location is an important factor in optimizing success. Look to the franchisor to help you analyze traffic patterns, demographics, zoning, population growth, seasonal population shifts and even weather and temperature patterns. How are the current franchise locations, are they favorable?
To find out more about Nardelli’s franchise opportunity, go to www.nardellis.com/franchise.html