What I Would Look For in Buying a Franchise

The process of deciding what franchise to buy starts with taking a hard look at yourself. Are you ready to put in the work to make it worth your while?

By Nick Powills1851 Franchise Publisher

SPONSOREDUpdated 3:15PM • 06/09/16

I have been in the franchise industry for more than 10 years, and I have not attended a discovery day outside of learning about a client. I would suspect many in the franchise industry are probably the same. Are we not qualified prospects? Or are we simply not ready to buy?

I have thought a lot about the diversification of our business portfolio. I have thought about adding a franchise-side of our portfolio to help increase the knowledge base of our team (if they dedicated 10 percent of their time helping in that business). And I have also thought about how I could groom a team to be amazing at operating a franchise on behalf of our agency. Yet, those thoughts have not come to fruition.

If I were going to buy a franchise, though, I would probably go through the same steps as you. Do I believe in the product? Do I believe I can make money? Do I believe in the leadership? Does the brand have the territory I want open?

Far too often, when really starting to think about owning a franchise, the brand is sold out in the territory I want—prime time Chicago. The other challenge for me is that I would have to be an absentee owner because the business opportunity that provides me with the most upside would be creating the greatest mid-sized agency that ever existed and an awesome technology content platform.

What category would I look at? Well, certainly, I am attracted to the restaurant industry just like many of you. But I also know that the only way you can truly make life-changing money in the restaurant industry is to have scale. Thus, I would probably look at the QSR space—an investment around $350,000. I could then buy three units, open them quickly and within brand-influencing proximity of each other, and leverage my leadership staff across all three. I know that by getting three locations open fast, the collective marketing spend would have impact each of my units and would help create the volume needed to open store No. 4 and No. 5.

But restaurants are challenging and they will require nearly 100 percent of your time, all of the time. Thus, most likely (unless it was a $2 million plus volume investment), I would look at service or retail. I would look at something where marketing could greatly impact the business. I like the home category; I like real estate. I even like haircuts, since I get so many.

You see, I wouldn’t buy a franchise unless I was fairly confident I would have a chance at being No. 1 in their system. Call it competitive, call it what you will, but that’s the way I look at it.

When it comes to money, I am interested in average unit volume, but I am more interested in what the top unit makes, how many other units are around that unit, how much goes into marketing for that unit and surrounding units, and how much that franchisee spends on labor and real estate. I want to know that data, because if I am going to buy a franchise, I want to be No. 1.

Now do you see my dilemma? Clearly, I am not ready to buy.

Passion will drive me to create ultimate success. If I am already thinking about being an absentee owner who doesn’t know what he wants, am I ready to fight to be No. 1 in a system?

The dream is free, the hustle is sold separately.