Top 10 Franchising Essentials
1. Do not generalize: Not all franchises are good – just as not all franchises are bad
Franchising is not an industry – it’s a way of doing business. Franchising has enormous impact on the United States economy producing over $624 Billion in output and directly employing almost 10 Million people. It is stating the obvious to say that many franchise businesses are performing well financially. Even with this being the case, not all franchises are good. As a matter of fact, some franchises are lousy. It is YOUR responsibility to make sure you do your due diligence and determine good from bad.
2. Know Why You Are Getting Into Business For Yourself
Before buying a franchise, you must understand “why” you want to own a business. A more important question may be “should” you own a franchise. Owning a business is a real commitment. In many ways it is like having a child. It works only when fully committed to the task. Careful self analysis should precede your decision to get into business for yourself.
3. Get Past Your Emotions
Emotions can cloud your vision, making you vulnerable to seeing what you want to see – or what someone else wants you to see. When you are emotionally attached to an idea, you tend to listen to the information that supports your idea and you tend to dismiss the information that does not support your idea. This is not due diligence. Due diligence involves gathering information and then allowing that information to affect your opinion, regardless of where you started. Emotion should not come into play until you have laid a foundation built on facts.
4. Choose Outside Advisors Wisely
As in any field, there are many advisors claiming to be ‘experts’. Choose from among them carefully. You can start with this 3-part litmus test:
- Is the outside advisor truly an expert in their area of self-proclaimed expertise?
- Does the outside advisor add value to your process?
- Does the outside advisor have YOUR best interests in mind?
5. Beware of “Friendly” Advice – Don’t Confuse Vocation and Avocation
“Do what you love” is good advice … but does your love of golf mean you’re ideally suited to run a golf discount store? Carefully analyze options to ensure a good match between your interests/lifestyle goals as well as your skills/abilities. If you are introverted, do not get into a business that requires an outgoing personality to be successful. If you want weekends off, don’t open a restaurant. The bottom line: Be true to yourself.
6. Read the Franchise Disclosure Document
Franchise Disclosure Documents are published in plain English and are designed to protect you. At the same time, the FDD is also written to protect the franchisor by ensuring you are fully disclosed prior to becoming a franchisee. As a result, these documents can be very intimidating. Read Chapter 7 in The Educated Franchisee to put yourself in a position of strength as you learn more about this important document.
7. Be Sure To Have Meaningful Dialogue with Both the Franchisor and Franchisees
Step one is to speak with the franchisor. You will go thorough a number of calls with the franchisor before being allowed to call franchisees. Once you are allowed to call franchisees, be sure to speak with a minimum of 5. Most people connect with 8 to 10 franchisees. You’ll find most franchisees to be honest and unbiased, and you will learn a lot. Take advantage of the downloadable lists of questions in the ‘Resource’ section of www.educatedfranchisee.com. Conduct this part of the due diligence with attention to detail and you will have a solid understanding of what it takes to be successful in the franchise.
8. Understand the Numbers
Building an accurate financial projection is a critical step. Although it may be intimidating for many people, building a solid P&L is relatively easy with the right direction. Fully understanding the P&L is the only way you will know if you are making a sound financial decision. Read Chapter 13 in The Educated Franchisee the learn the secrets of the key step.
9. Be Deliberate and Be Decisive
You don’t want to be pressured into making a decision, BUT you need to be decisive at the same time. Decisiveness is a key trait of successful business people. If you find that you are unable to make a decision after using tools in Chapter 15, take some time a look in the mirror. Ask yourself if you are ready to be in business for yourself. There is no shame is just saying ‘No’. Franchising is not for everyone. But accept that you will never gather all the information you need to know the future. Successful business people are able to make important decisions and then move forward with confidence.
10. Signing the Franchise Agreement is Only the Beginning
Yes, the investigation and preparation stages seem long and arduous. But once you’ve signed the Franchise Agreement, the real work begins. Franchising does not equate to less work, just more predictable work and outcomes. Your focus and dedication are the keys to success. Part III of the book shares advice on reaching your full potential as an owner. Read this section carefully and know that the future is in your hands.