I have helped over 550 business owners over the past 37 years, many in franchising. (Franchisors and Franchisees) My passion is to help entrepreneurs, financial advisors, and franchise business owners achieve and succeed. I enjoy strategic planning and relationship building with my clients. One special point of pride is being a certified consultant for Winslow Assessments, a human performance assessment system used by Fortune 1000 companies as well as professional sporting organizations.
IS FRANCHISING RIGHT FOR YOU?
Buying a Franchise… can be a great way to get into business. It can be a way to get out of corporate employment and help you start your own business.
It can also be a huge headache if you’re not careful.
You might even lose your investment.
So what’s the best advice for a new franchisee? Buying any business can be risky and franchises also need due diligence. If you choose the wrong franchise you could end up in trouble.
As a franchise owner, you’re not the one coming up with the new ideas. Most franchises won’t let you change their formula. You’re not really a true entrepreneur but more like a manager/business owner. This is good news because the failure rate of startup businesses is 80-90% within the first 5 years. The success rate of franchise businesses is much better. To own a successful franchise business you don’t need to be rich, smart, or well connected. You need to follow successful business systems and processes.
Acquiring a franchise is like entering into a partnership agreement:
Its success depends on the experience, skills, and passion of both parties. The result, ideally, is an operation which benefits from a proven business model, the experiences of both the franchisor and the franchisees, and the flexibility and dedication of an independently owned business.
IF YOU FIND A GOOD FRANCHISE …
If you find a good franchise, you could find it creates wealth, often builds equity, and allows you to be the boss.
But…. it’s not easy to be a business owner. You may need to be the entrepreneur, the manager, as well as the ‘technician’.
YOUR NEW FRANCHISE MAY NOT BE ‘TURNKEY’
Your new franchise may not provide instant income, so you must be prepared and well briefed about the opportunity.
Do you have enough cash to launch?
- A frequent reason for failure of a new small business is the lack of cash for working capital.
- Check if your franchiser is under capitalized too.
- Don’t go into battle without any ammo.
- The biggest killer of a franchise business is not having enough capital to get through the slow period 3- 16 months.
- For a proper launch you will need money to spend on an effective marketing and media campaign.
RESEARCH IS VERY IMPORTANT
Make sure you do your research to see if you can get any type of franchise disclosure documents and any other information you can dig up including audited statements. Go to the Vancouver library research department. Pay $60 to get access to the paid (reg $1500) databases that you wouldn’t have had access to otherwise. Have your questions ready before you get there.
Question your sources and get good quality references.
Get a list of all the franchise locations and don’t just check their top 3 references. This research will save you so much money in the long run.
Call at least 6 references, not including the ones on the list they gave you. Their information will be biased. They gave you those contacts to say good things about them.
Seek out people independently. Don’t just use google. Go check out the other franchise business locations yourself. Call up the business owners at the other locations and ask if they would enthusiastically make the same decision again to invest in this franchise, knowing what they know today.
Ask them “If I could offer you today what you paid for your franchise, would you sell it to me?”
Be highly skeptical of any deal that says “If you sign the contract by Friday you get a discount. Don’t worry about hiring a lawyer we had that taken care of for you already.” They are trying to rush you into making a bad decision.
IF YOU ARE CONSIDERING A FRANCHISE
If you’re considering A franchise, it’s important to seek out information from independent, unbiased sources, and make sure you look into the risks and benefits objectively.
Taking the time to conduct thorough research and becoming well-informed can help to mitigate a number of problems right from the start.
ARE YOU A PEOPLE PERSON?
Do you work well with others?
Franchising means spending a significant amount of time interacting with your franchiser, fellow franchisees, customers, employees, and vendors, and great interpersonal skills are a requirement.
If you find dealing with others to be drudgery and don’t have a track record of great relationships, you’ll want to pass on being a franchise owner.
HIRE A GOOD FRANCHISE LAWYER
A good lawyer will be able to detect if the franchiser is presenting a franchise agreement. which allows both parties to be successful. You need to know if the franchiser owns the trademarks in Canada.
Don’t hire any lawyer. You will need a franchise specialist. Not using a franchise lawyer properly could cost you your dream. Doug Anderson knows 2 really good franchise lawyers and he would be happy to refer them to you if you email him.
YOU WANT TO KNOW….
You want to know if your franchise agreement was cut and pasted off the internet. These agreements may contain provisions based on laws outside of BC.
It’s true when they say:
“If you think it’s expensive to hire a professional, wait until you hire an amateur.”
CONSIDERING A BRICK & MORTAR FRANCHISE?
If you are considering a brick and mortar franchise find out quickly who holds the lease on the location.
Who has the legal and financial responsibilities? Be sure you know.
A mid-range franchise in a fantastic location is better than a great franchise in a terrible location.
Who owns the lease?
In 1979 a concentration camp survivor Xuan Nguyen moved to Kamloops, British Columbia to start a new life. He started as a floor cleaner at a Tim Hortons coffee shop. Xuan Worked double shifts to earn a small equity share in the company, he worked his way to owning 3 stores and bought the real estate the business operated in.
Tim Hortons made changes to the business he didn’t like so he sold his stake in the company but maintained the owner of the real estate. Tim Hortons had to pay him rent until the 2 year no compete clause was over. He later opened King Donuts in the same location and become very successful.
THIS MOMENT IN TIME IS ALL ABOUT YOU
Unplug from the world and contemplate…listen to your heart and your head.
Ask yourself the tough questions:
Can you visualize yourself in this business?
Why do you want to be a business owner?
What do you bring to the business?
What are you good at?
LOOK AT FRANCHISES THAT MATCH YOU
Look for a franchise which allows you to use your top skills and one who matches your key personality traits. (consider Winslow Assessment).
Matching a franchise up to what you’re really good at along with what your traits and characteristics are will go a long way in helping you lower your financial risk.
3 TRAITS OF A SUCCESSFUL BUSINESS OWNER.
Self Confidence – Do you like yourself?
Tough Mindedness – for when things don’t go your way
Ambition – Don’t start a business if you’re not ambitious. You will waste your life away. Do something you like to do.
FIGURE OUT YOUR INVESTMENT BUDGET, FIRST.
Figure out your net worth
Learn to figure out what you can afford
Know what you can spend and what the ROI is
Go visit your bank’s small business division. They may even help you apply for grants.
If you are between the ages of 25-39 you can check out Futurpreneur. They help young entrepreneurs get started and help fund your venture.