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How to not succeed in franchising

If you are reading this, you are one of three people. You are someone who is potentially interested in buying a franchise; you are someone who has had issues with franchisees in the past; or you are a friend or family member of mine who saw that I posted this column on Facebook. Either way, you’re h.....

By Nick Powills1851 Franchise Publisher
SPONSOREDUpdated 5:17PM 11/25/14
If you are reading this, you are one of three people. You are someone who is potentially interested in buying a franchise; you are someone who has had issues with franchisees in the past; or you are a friend or family member of mine who saw that I posted this column on Facebook. Either way, you’re here — and you’ve made it to the bottom of paragraph one. Paragraph two begins with the reason why you shouldn’t buy a franchise: You won’t succeed. Why? Because you are not meant to. You may think I am being harsh or arrogant, but what I am being is honest. Success is in the eye of the beholder, and the drive to succeed must come from inside, not from a manual or system. For the truth, here are some statements you should evaluate as you decide whether franchising is right for you, and thus, whether or not you can succeed. MONEY When initially thinking about owning the brand, it’s all about the money: At the end of the day, it is all about money — whether you can afford the business and whether the business can make your life better. But, it can’t be all about the money. It has to be more about passion for the brand and passion to make a better life for yourself. A better life is not all about money, it’s also about being your own boss. If you are going into franchising just for the money, don’t do it. It won’t work. If you are going into franchising ready to work harder than you have ever worked before because you own something, do it. One of your first questions in the process is what will the average franchisee make: I hate this one on so many levels. Yes, Item 19 is important, as it can depict an average. But, why would you ever say you want to be average. Your question should focus on the best. How much does the top producer make, and how can I top that? If that’s not your mentality, stay working for the man, because average is never the best for you or for the franchisor. OPERATIONS If you build it, they will come: You know “Family Feud”? Think about the noise made when the survey returns no results. That’s the big, loud noise that should play in your mind if you think this is the case. Even the best franchises don’t survive on the strategy of building it and magically make money. Be ready to work hard, market, shake hands and kiss babies. If that’s not your thing, you have two options. Option one is to find someone who does. I once heard a franchisor talk about Mickey and Arthur. Mickey (as in the mouse), is lively, outgoing and focused on front-of-the-house operations. Arthur (as in the aardvark), is a back-of-the-house, bookkeeper type. Both are essential to an awesome business. Option two is to not buy a franchise. One of your questions revolves around time commitment, as in, how many hours do I have to work: Good luck with this one. Don’t want to work hard? Don’t invest your life savings in a business. Soon, you will be a statistic. Over time, you can certainly evolve the amount you put in. But there is absolute truth in getting back what you put in. GROWTH You are coming to the table thinking about one unit: Want to make a lot of money in franchising? The majority of franchise brands won’t set you up for life with just one unit. Sure, you can build it and have a stronger exit strategy with the backing of the brand. But, one unit won’t make you a ton. After you pay royalties, marketing fees and recoup some of your startup expenses, it will be years before hitting true ROI with most brands. Don’t go into franchising unless you are thinking long-term about growth, especially if you are pioneering a market and being the first of that brand to enter that market, city or state. VALIDATION So many former franchisees complain about the brand, now I’m worried: Go look on Glassdoor. Do you know what that is? Pick a company you admire and search for their profile on Glassdoor. What do you see? Negative, negative, negative. Very rarely will someone leave a company and say great things about it. In franchising, more likely than not, franchisees fail for lack of following the system, not because the franchisor didn’t magically make them money. Therefore, they will be negative. Now, due diligence is important, but don’t ask questions that will influence your enthusiasm negatively. Ask what they would have done differently (even to current franchisees). Use this as a learning lesson to help you in your business planning. MARKETING Ha, the franchisor requires me to spend 2 percent on local-store marketing. I will show them and not spend it: This is dumb. Absolutely dumb. History will show you that marketing works. If you don’t budget to grow, you won’t expand. Some marketing initiatives won’t deliver direct ROI, but they may create valuable first impressions. All of us take a magical number of impressions before we buy something. You have to market, market and market to increase the impressions and increase the chance someone will take a chance on you. Yes, this will eat into your profits, but it takes money to make money. If you are thinking about how can you cut corners and keep that 2 percent, don’t buy a franchise. Now, your success does not just rest on you, it also rests on the franchisor to decide whether or not they believe you can be successful in their system. Unfortunately, because franchise fees often keep the lights on, the majority of franchisors — not every franchisor, but more than 50 percent — will say yes to you even if you don’t fit. This is a challenge, because you also trust them to help you make the right decision. Yes, buying a business can be intimidating, and you should have some nerves when buying a franchise, a house, a car or even a book. Don’t buy a franchise to get rich. Get rich because you are focusing on long-term possibilities through the power of buying a franchise. Happy fran-hunting.