Franchisor Stories
SPONSORED
Sean Fitzgerald: 5 Tips for minimizing risk when buying a franchise
1851 spoke with Chief Development Strategist Sean Fitzgerald on approaching franchising the smart way.
Although it is impossible to eliminate all risk when investing in a franchise, there are some things you can do to minimize risk. 1851 caught up with Sean Fitzgerald, Chief Development Strategist of No Limit Agency*, to leverage his years of experience in franchising to get some good tips on this subject.
Why do franchises fail?
Lots of reasons, but one of the biggest I’ve seen is that franchisees don’t do their due diligence finding out all the working capital they will need. Not having proper capital to start a franchise is a huge risk. Item 7 in the Franchise Disclosure Document (FDD) reveals the initial investment required for a franchise but only lays out three months of investment. Unless you are successful in that first three months you will need more cash flow to sustain the business.
What other things should franchisees do before investing?
Seek validation from existing franchisees. Ask them questions about the business beyond what the franchisor has provided you. Ask them what has made them a successful owner. What were their pitfalls and mistakes? The time taken to find these answers is worth their weight in gold.
Reading the FDD is a good idea too, huh?
Exactly! But don’t just read it – understand it. You also have to understand the franchise agreement and what is being asked of you. People read it but don’t comprehend it correctly.
Should you read it alone?
Hire a franchise attorney that has a track record and experience with franchise law. They will better be able to negotiate on your behalf because they understand the franchisor/franchisee relationship. They will look for things outside the norm of franchising in the FDD and franchise agreement. Most agreements are standard and experienced franchise attorneys will be able to detect anything unusual.
Any last thoughts?
Make sure that you have a good grasp of the day-to-day of a successful franchisee operator in the brand you are researching. If it requires you to be good at sales and marketing to do well and that is not your skill set you are setting yourself up for failure. Be sure that you want to do the work expected of you. Remember, it isn’t about doing what you love; it is about loving what you do.
Don’t Miss the Next Big Franchise Story
Sign up for the 1851 Franchise newsletter to get our biggest stories before everyone else
By signing up, you agree to our user agreement (including class action waiver and arbitration provisions), and acknowledge our privacy policy.
About the Author
Nick Powills
FollowNick Powills, CFE, founded No Limit Agency in 2008 and serves as Chief Brand Strategist for the Chicago-based firm. No Limit is a full-service communications agency that establishes and elevates brands by bridging Public Relations, Social Media, Marketing, Advertising, Digital, and a lot of creativity, to best strategize well-rounded and successful campaigns for 50+ global franchise brands. By presenting visionary ideas and building real relationships, No Limit is able to create effective media branding strategies to help companies grow. Nick currently leads a staff of writers, media strategists, designers, social media experts and digital producers in an office think-tank where brands are humanized for strong, compelling media stories. Prior to starting No Limit at the age of 27, Nick spent four years working at a franchise PR agency where he mastered the art of building rapport with media outlets and creating newsworthy pitches for earned media placements. He holds a Bachelor of Journalism from Drake University in Iowa.
