Franchisors and Franchisees:
There are many conversations, in person and online, trying to determine responsibility for the success or failure of a franchise. Now there is talk of whether buying a franchise is a great retirement plan or a prison sentence… (On LinkedIn, Franchise Network Discussion Group)
Being a franchisee myself, as well as an experienced franchise consulting coach, here’s my take, short and sweet:
The candidate absolutely must engage the experience and advice of a franchise consultant and franchise attorney.
They must have financial projections and pro forma statements created; hire an expert if necessary, and be sure you understand ALL the costs and expenses to run the business (dig deeper, there are always surprises).
Being realistic with themselves about what it means to not only own a business (with the necessary skills to do so), but also to work within the confines of a franchise.
A core advantage of a franchise is the processes and systems. A core disadvantage of a franchise is the processes and systems, if you don’t want the system to work. Franchises are not for the ‘cowboy’ shotgun.
Due diligence cannot be underestimated. It is the candidate’s responsibility to research, speak, interview and canvass etc. the potential franchisor, the franchisees and all aspects of the business they are considering. The franchisor is required to provide a full disclosure, so be prepared with a very long list of questions for them that cover all aspects of the business (and ask for help formulating that list if necessary). All of this being said, the franchisor should definitely be completely open with full disclosure. They need to show off their warts and highlight their strengths. Believe it or not, some people are okay with warts if they understand the company’s potential (even the best corporations have warts).
Franchisors need to do a better job of qualifying prospective owners. They have to raise the bar to make sure high-quality, prosperous owners sign up. Franchising for the sake of new franchises will cost the franchisor more in the long run and definitely in the short run.
Franchisors, your primary goal is to increase revenue, expand your footprint, and spread brand awareness in the marketplace. Therefore, do not cut corners in the award process, the qualification standards must be high.
Franchisors must fully understand and admit the gaps they have in providing a full service to their franchisees. So they need to hire you, outsource you, or hire you! It’s in everyone’s best interest (even if it costs extra). They will recoup costs if they have productive, profitable and HAPPY franchises, growing revenue and expanding presence.
Franchising is a great retirement plan and can make many people successful. It is up to BOTH the franchisee and the franchisor to do their part to earn the investment returns that will provide them with a prosperous retirement.
