Monday, June 13, 2005

You're Late If You Want a Franchise in 2005

If you've been planning on buying a franchise this year, you're probably too late!

My calendar says it's time to be planning a Fourth of July getaway.

Having helped hundreds buy franchises in the last 25 years, I know that researching and reaching a decision takes time. Then there's often a site search, remodeling and headquarters training. Combined, you're talking 3, 6, 9 and often 12 months from the time you sign your Franchise Agreement until you open. Chances of being open by year end are slipping away.

And you haven't even found the right franchise system yet!

Here are a couple of guesses as to why your January, 2005 New Years Resolution is so far from a reality.

Many franchise buyers spend hours surfing the internet looking for their "perfect match." Unfortunately, most don't know where they'd excel if they bought their own company. We provide a tool called the FranchiseFit Entrepreneurial Survey that's helped many gain a better focus on their next career--as a franchisee.

"When you don't know where you're going, how will you know when you get there?" This common question posed by goal setting seminar leaders applies to you in your franchise search.

If you spend time reading short ads on franchise offerings saying to yourself, "No, too competitive." "No, not profitable enough." "No, too hard to find employees." "No too boring!" You're Never going to own your own business!

If you are truly ready to own your own franchise, you need to pick up the phone today and call somebody!

Call a couple of franchise systems that seem even moderately interesting. Ask the salesman what business personality and experience has proven to be most beneficial to new franchisees. If that matches your profile (see above), fill in their qualification sheet and begin a dialog. Ask them to send you their Uniform Franchise Offering Circular and then call two or three existing franchisees for help in understanding what they do in their daily activities. If this matches your interests, find out if they're making any money. Surprisingly, most will give you a great deal of help because they want other winners in their system. They also want to prevent those who should not join from making a mistake.

Keep repeating this process every week until you "fall in love." Remember, your lack of clear focus, your lack of "insider knowledge" of how each system works, and your innate fear of failure will prevent you from moving ahead unless you start motivating yourself.

Think back to when you began to consider owning your own franchise. Why haven't you invested yet? Unless you change your pattern--and I've just suggested a proven method--YOU'LL NEVER OWN YOUR OWN BUSINESS.

You may think there aren't any good franchises out there. But, with all due respect (as they say in Washington), I hope you don't think you're smarter than the owners of 800,000 franchises that are now in operation!

Check out the resources available at The Franchise Doctor's website; read enough articles to get your free "MBA in Franchising;" consider our book Insiders Secrets to Buying a Franchise and take your FranchiseFit Entrepreneurial Survey.

You could also call us with your questions--800 220-8256.

It's time to stop just sitting there and DO SOMETHING!

Friday, June 03, 2005

Spotting Red Flags in Franchising

Recently a caller asked, "What are some of the most common "red flags" that should warn one away from a particular franchise system?"

My reply: While the Franchise Doctor believes that buying a franchise is the best business decision for most aspiring entrepreneurs, there are some systems that seem to disregard the needs of their franchisees.

A quick check of their "corporate culture" can be as simple as measuring the time needed to respond to your inquiries. If calls from a buyer are not returned promptly and courteously, you may have discovered a lack of attention to their franchisees.

Another way to analyze their culture is the system's approach to their fee structure. Some systems charge very high licensing fees (up to $50,000!), then "pile on" fees for using their proprietary computer software (to $15,000 per year) and then demand 8 to 10% royalties on every dollar you produce. While their salesman may provide a great pitch that these fees will not slow your growth, we've found that most franchisees feel these fees are a heavy burden 2 or 3 years after opening.

A very critical concern is called infringement. When a franchisor sells many franchisees the rights to open within a small geographic area, customers will typically frequent each unit equally and therefor reduce sales in each. Some food franchises now grant a license to operate "within these walls"--clearly warning that another unit may be placed across the street. Some food franchises today sell their products through grocery stores. If a consumer can buy frozen tacos or gourmet ice cream at the store, will they frequent your unit more or less often? The franchisees of Taco Bell and Ben & Jerry's Ice Cream seem divided on the benefit/liability of these alternative distribution systems.

Franchisees will usually share their experiences with you if you call and explain your interest in joining their system. If many say they would consider selling their operation at low prices (compared to the start-up investment), you may have discovered a problem. You'll find an extensive list of suggested questions on our Home Page in the article "How Should You Evaluate a Franchise Opportunity?". The clincher is, "If you knew then, what you know now, would you still buy this franchise? Why or why not?"

Do your homework and be sure you're joining a network where franchisees are seen as very valuable partners in the system.

Wednesday, June 01, 2005

Looking Beyond the Hype and the Documentation

Tips for Matching Your Franchise to Your Personality, Skills & Interests

Before you invest in a franchise, evaluate yourself: What job experiences have you enjoyed? Disliked?

Are you experienced in sales? Customer Service? Employee Hiring & Management? Can you manage money? What is your energy level? How do you handle stress? How do you define a long day? How competitive are you? What are your persuasive abilities? Level of Creativity? How decisive are you? What are your feelings toward these functions?

What is the demand for these functions within the franchise system you are evaluating? Can you confirm this?

Have you evaluated the people at the franchisor with whom you are dealing? Are they "your kind of people?" Are they knowledgeable about the industry and the system, or just "hustlers." Have you talked to the Regional Operations Manager who will visit your unit? What about the head of training? How do you evaluate the other franchisees? Are they similar to you in background, experience & philosophy?

What can you learn reviewing the "tone" of the franchise offering circular? Any legal problems of concern? What is the background of the principals? Can you verify their philosophy in industry trade associations? Are fees reasonable and competitive? (Any reductions as you grow?) What about the ad fund? Do you understand how its used? (Are most franchisees satisfied?) Does the tone indicate a "partnership" mentality or "parent/child?" Any onerous provisions?

You should plan to obtain several Offering Circulars so that you'll have something to compare to. All franchise systems are NOT created equal--you need to discover how you'll fit in before you invest.

The Franchise Doctor's FranchiseFit Entrepreneurial Survey is a great tool to help you learn what personal job descriptions will be the best match for your personality.

Another great tool to help you wade through the hype is The Franchise Doctor's book "Insiders' Secrets to Buying a Franchise."