Although no one can completely error-proof their buying decisions, many commonly-made mistakes can be easily mitigated by going beyond the most obvious questions franchise buyers ask franchisors – on cost, ROI, and market area -- during the due diligence process.
Here are five questions you should ask a franchisor as you gather information to facilitate your decision-making process:
Who are your top performing franchisee and what characteristics make them successful? Why do you think my background is a good fit for your business? It is just as important that the franchisor know you and your skill set as it is for you to know their business. You want to walk away feeling that the franchisor knows you and feels you would be a good fit for the business based on your skills, not that they are only interested in selling a franchise.
What is your process for resolving disagreements and conflicts? Even in the best business partnerships, conflicts occur. It is important to know how franchisors deal with franchisee-franchisor conflict. Ask for an example or two so you can judge if franchisees are treated fairly.
Once my business is established, what value do I receive from the fees I will continue to pay? The first couple of years of operation, your franchise fees and royalties will cover the support you will need to launch and run your new business successfully. After the first couple of years are behind you, you will want to know what value you receive from those ongoing royalty payments – like extra programs and services that provide added value.
What challenges do you see for this business over the next 10 years and what are you doing to address these challenges? Every business has challenges and you want to see a franchisor provide frank feedback on the strategic planning they’ve done to mitigate these challenges and protect franchisees for the future.
Do you have a franchisee satisfaction survey and do I have access to the results? If so, this will help you identify a franchisor’s strengths and weaknesses and also tells you something about how open they are to franchisee collaboration.
Find out more about the franchise validation process at our free May 24 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
If all it took to make a new business successful was the desire to be your own boss, no business would ever fail. Certainly, it takes much more than that – including lots of sacrifice, determination, hard work and a clear understanding of both your business and your ability to perform well as an entrepreneur.
Before deciding if owning your own business is a right fit for you, consider:
Time – think about how much time you will need to launch your new business, and you may find that you won’t need to quit your day job just yet. That paycheck may be extremely important to you and your family as you work on ramping up a new venture.
Money – be realistic about how long it will be before you see a living wage again once you start a new business. Calculate what you will earn, and then divide it by half to help keep expectations in line.
Shoestring operation – you want to keep expenses as low as possible when starting up a new business, so research ways to bootstrap your business to profitability at low or no cost. You may be able to trade services with other businesses and use no-cost marketing tools like social media to get the word out.
Know thyself – you need to know yourself as well as you know your business. Be the boss you would want to work for, and stay true to your core values.
Take a break – it is easy to become consumed by starting a new business, but you shouldn’t become a stranger to family and friends, who can be a welcome support group for you. Be sure to get plenty of sleep too – not just for your physical health, but because current research shows that we often are able to solve problems much better after a good night’s rest.
Learn more about starting your own business with a built-in support system during our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Decades of immersion in the franchise industry has helped the International Franchise Association (IFA) identify the Top 10 keys to franchise success:
Adequate capitalization. Determine how much you have to invest, what you’re willing to risk and how much you need to live on in the first year.
Follow the system. Investing in a business with a proven track record helps mitigate risk; by following the system, you protect your investment.
Be an evangelist for your business. Enthusiasm is contagious; your customers and employees can catch it and make your business successful.
Recruit the best. Great help is essential to running a franchise business that requires staffing; hire the best.
Continuous training. Be sure you and your employees take advantage of all training opportunities to improve your service delivery.
Give great customer service. Give customers a reason to keep coming back with exceptional customer service.
Get involved in your community. Customers like to patronize businesses that support the community; look for ways to give back.
Communicate with other franchisees and your franchisor. Keep up to date with your franchisor, attend annual conventions, meet other franchisees and form a support network.
Watch the details. Have a good financial reporting system in place.
Don’t neglect family and friends. Be prepared to work long hours, but be sure to set aside time for family and friends; their support is essential to your success.
Learn all about franchising opportunities during our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
An article in the Huffington Post on Wednesday noted that for people who’ve ever wanted to own a franchise or expand an existing franchise portfolio, now may be the best time to do so.
Citing an April 2012 Small Business Lending Matrix report from the International Franchising Association and FRANdata, interest in owning a franchise is growing along with opportunities, despite a lag in lending.
The report noted a high demand for unit transactions and transfers, an increased lending ability from financial institutions and a steadily recovering economy. Although lending continues to lag demand, the report noted that the lending gap has been gradually closing since 2010. It projected that in 2012, there will be $9.5 billion in franchise lending available, which could result in the financing of almost 36,000 franchise units, creating over 425,000 jobs and generating more than $56 billion in economic output annually.
The report also noted that as unemployment rates rise, interest in franchising increases and that, historically, franchising opportunities have shown resilience during periods of economic downturn, growing six percent over the past decade.
Learn all about franchising opportunities during our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
A new monthly Franchise Lending Index shows that franchise lending has been steadily increasing over the past 12 months, growing almost 11 percent between February 2011 and February 2012.
The Franchise Lending Index was developed by the International Franchise Association and BoeFly, the premier online marketplace that connects small business borrowers with lenders. The Index is created from a monthly analysis and integration of both proprietary data from BoeFly's marketplace and franchise loan data from the Small Business Administration (SBA) since 2002.
BoeFly's data is collected in real-time based on the activity of more than 2,200 community, regional and national lenders who use BoeFly to source franchise borrowers. The Index, a time series index set to a value of 100 in January 2002, creates an insightful, standard measure of franchise credit access.
If you are interested in learning more about franchising and financing for a franchise, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
According to a national Business Journals analysis, Austin ranks #1 as the best U.S city for small business – which also finished first on the list in 2010 and 2011 reports.
The Business Journals’ On Numbers editorial staff analyzed small business climates across the U.S. for six factors: five-year population growth, five- and one-year private sector employment growth, concentration of small businesses per 1,000 residents, one-year changes in that concentration, and one-year growth in the number of small businesses.
The top 10 U.S. cities for small business in 2012 are:
Austin, TX
Raleigh, NC
Oklahoma City, OK
Houston, TX
Salt Lake City, UT
Denver, CO
Pittsburgh, PA
San Jose, CA
New York City, NY
Seattle, WA
The On Numbers editorial staff also ranked best small business cities by region; Texas dominated the South region category, with four of the top 10 Best for Small Business: South cities located in the Lone Star state: Austin (#1), Houston (#4), McAllen-Edinburg (#5) and Dallas-Ft. Worth (#9).
If you are interested in learning more about how to successfully launch your own small business wherever you are, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Earlier this week, a Huffington Post article reported on the opportunities that franchises are offering women who are stay-at-home moms – i.e., “mompreneurs” -- to run a successful business from home.
More women than ever are being attracted to franchises that offer both a low cost of entry and the opportunity to run your own business from home. According to the article, “With options like tutoring services, food trucks, home services and so many other industries adding a low cost franchise opportunity with flexible work schedules, it is primetime for women in franchising.”
Brenda Donkers, the founder of Pump It Up, the Inflatable Party Zone (PIU), is a huge fan of franchising. Although she built her own business from the ground up, she says franchising can be the perfect solution for mompreneurs:
“When you invest in a franchise, you are investing in a proven business model. I was very blessed that PIU was a hit...studies show that franchises have a success rate of approximately 90 percent as compared to only about 15 percent for businesses that are started from the ground up. The increased probability of success usually far outweighs any initial franchise fee and nominal royalties that are paid monthly. Also, many franchises participate in women's funding opportunities, or have pre-registered with the SBA to avoid lending issues. Franchising is amazing. But not all franchises are created equal. If you decide to explore franchises, be sure to use your talents as a woman...practice discernment and use your intuition as you speak to these franchise brands. Any doubt, find another brand.”
Donkers also advises women who are considering buying a franchise to ask themselves the following questions:
Can I follow training and directions easily?
Can I follow someone else's system requirements?
Am I a multi-tasker?
Can I fund the franchise until it is up and running successfully?
Do I have my family's support?
If you are interested in learning more about franchise opportunities, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Most people start their own business because they want to “follow their dream.” If that dream is one of working for yourself and being in charge of your own destiny, then I say go for it. If your dream is to run a golf shop simply because you love golf, I say...not so fast.
Over the past decade, I have worked with countless people and have learned through that experience which road leads to success and which one to probable failure. There are two deadly mistakes that potential business buyers can make that will set them off on the wrong road:
Spooked by risk. While risk does involve possibility of loss, failure and uncertainty, it does come with a potential of greater upside, wealth creation and return on capital invested. Investment theory has long supported that notion – that higher-beta (risk) stocks (in this case, franchises) tend to be more volatile and therefore riskier, but provide the potential for higher returns. Don’t you wish you were one of the visionary, pioneering franchisees that caught on with McDonalds, Holiday Inn or Jiffy Lube early in the game?
Misguided by passion. The ‘passion imperative’ does not necessarily translate to profit and long-term market viability. All too often I find buyers walking away from strong opportunities because they did not have an out-of-body experience when initially checking out a particular category or specific brand. They seem to think they need to be doubled-over in bliss in order to pursue something.
There is no business that offers a perfect risk/reward equation. And if someone is promising you that, you need to run for the hills. I often counsel people that if you need a “sure thing,” then self-employment is probably not for you. But if you are cut from entrepreneurial cloth, you realize that the greatest risk is not taking one.
If you are interested in determining if self-employment is in your DNA, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Most people dream about being their own boss – but how many take the time to really examine the attributes it takes to successfully run a new business?
Here are some tips you can use to examine your likelihood of succeeding at being your own boss:
Passion – you must have a passion for being in business for yourself, not just a passion for making money. That being said, I believe that the ‘passion imperative’ has been overused and much abused. It can cloud one’s judgment and encumber one’s objectivity. Moreover, it does not necessarily translate to profit and long-term market viability. I have just seen too many people try a golf business or bait and tackle shop or the like (their ‘passions’) only to burn out quickly and/or find that they got crummy advice to contrive their passion or hobby into their business. Starting a new business can be rocky, and you need a strong will to persevere. Are you excited enough by the fact of owning your business to stay in for the long haul?
Financial plan – you need to have a detailed financial plan and enough resources to get you through the first year of a startup. Realize that you may not receive a paycheck for the first year or so – can you secure the proper financing to do it?
Partnership – do you want to operate a business by yourself or do you work better with a partner? Franchising offers you a built-in partnership, which helps spread the workload and the risk.
Potential customers – do you have a list of people who you would be able to do business with right away? Investing in a well-known franchise brand that can translate to built-in customer demand may help.
Marketing – do you like to sell? All successful business depends on good marketing and sales. If that’s one of your weaker areas, investing in a franchise may be a better option than going it alone, since franchisors offer proven marketing strategies to franchisees and are vested in their success.
Advice – are you willing to seek and listen to good advice? Heeding the advice of someone who has “been there and done that” can be a great advantage for entrepreneurs just starting out.
If you are interested in exploring whether or not you could be your own boss, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Manta, an online small business community, recently conducted a survey of more than 1,000 small business owners to find out why they chose to start their own business. The results may –or may not – surprise you:
Follow my dream: 41 percent
Be my own boss: 29 percent
Make more money: 6 percent
Lost my job: 6 percent
Asked by friend/family member: 3 percent
Hated my boss: 1 percent
Hated my job: 1 percent
None of the above: 10 percent
The third most popular category – “none of the above” – illustrates the fact that the reasons people choose to start their own businesses are varied and sometimes not easily categorized. A majority of the survey respondents – almost 60 percent – had no previous entrepreneurial experience.
The importance of building a strong customer base right off the bat was apparent in the survey, which found that 55 percent of new small business owners received new business from customer referrals. Investing in a franchise can help you tap an existing customer base that may already have brand loyalty – a key component of new small business success.
If you have a reason you may want to start a new business, attend our free April 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Although no one can completely error-proof their buying decisions, many commonly-made mistakes can be easily mitigated by going beyond the most obvious questions franchise buyers ask franchisors – on cost, ROI, and market area -- during the due diligence process. 
If all it took to make a new business successful was the desire to be your own boss, no business would ever fail. Certainly, it takes much more than that – including lots of sacrifice, determination, hard work and a clear understanding of both your business and your ability to perform well as an entrepreneur.
Decades of immersion in the franchise industry has helped the International Franchise Association (IFA) identify the Top 10 keys to franchise success:
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Earlier this week, a 
Most people start their own business because they want to “follow their dream.” If that dream is one of working for yourself and being in charge of your own destiny, then I say go for it. If your dream is to run a golf shop simply because you love golf, I say...not so fast.
Most people dream about being their own boss – but how many take the time to really examine the attributes it takes to successfully run a new business?
