I once had a client who was miserable in his career, well capitalized and had dual incomes as both he and his wife were employed. There was one problem…
He was miserable in what he was doing…
The hours were too long, his boss was overbearing and there was no fulfillment in his career. This is where franchise brokerage will differ from franchise consulting. A lot of people think franchise consulting is nothing more than sales, and while that certainly is a BIG part of the equation, the role is more geared towards coaching and mentorship…. And here’s why….
There is a common saying in the franchise industry. You don’t sell franchises… you help people buy them. The reason for the phrase is simple. Buying a franchise is a significant commitment both financially, as well as a lifestyle adjustment. Gone is the certainty of a regular paycheck. The owner must invest a large portion of their savings, and head into the uncertain world of business ownership.
This is where the franchise consulting, or “coaching” aspect comes in. It’s very common for people to become afraid. It’s fear that stops people, and in some cases, it can be a good thing. Owning a franchise or independent business is NOT for everyone. It’s very important for people to understand the risks associated with the investment. While not everyone in the franchise industry follows the best business practices (this is no different from any other industry for that matter), the fact is there are people who can help their clients and coach them through the process.
In the case of the client above, the issue was clear.
He was unhappy.
He had the financial resources to cover the purchase of the business.
He had the experience and ability to be successful.
He had adequate income from his spouse to cover living expenses.
The question that kept driving the client was “certainty”. He wanted to make sure the investment would be successful. What I told him was simple. There is no way to know, as there is risk in EVERY investment. It’s really up to you to be comfortable with the concept of making the change.
This is where most of the discussions go in my franchise consulting practice. While we spend a lot of time talking about business planning, researching the franchise and discussing goals and objectives, it almost always comes down to assessing the risks and overcoming fears.
In my experience, this is something that has to be addressed by the client. It’s up to them to determine if they are comfortable with the risks and believe in both the franchise model and their ability to operate the business successfully. If you find yourself frozen and unable to move forward, take some time to assess your fears.
Are they reasonable and warranted?
Is this something you really want?
If you are not successful… can you handle the impact?
These are difficult questions and one of the reasons the business of franchise consulting is more coaching than sales oriented. In my experience, it’s always advisable to seek counsel from your CPA, financial advisor and a franchise attorney. They can provide helpful guidance to help you make the RIGHT decision for you!
One of the best franchise consultants I know has a great acronym for the word FEAR. What fear represents is:
There is nothing to FEAR!
F – False
E – Evidence
A – Appearing
R – Real
I am in the franchise consulting and brokerage business. What that means is I am compensated by franchisors to sell their system to people who want to own a franchise. Most believe those in the industry are nothing more than sales people. This is the part where those who are more cynical folks chime in and say…
“Hey? Franchise Consulting? Franchise Consultant? Franchise Broker? … You’re nothing but a sales person motivated by commissions!”
Regrettably a number of people in our industry do fit into the category and primarily focus on selling, and while I am not hear to defend franchise consulting and brokerage, I would add there are a lot of good professionals who add a great deal of value to both their clients and industry as a whole.
In fact, while franchise consulting is sales, the practice is more coaching oriented. Our biggest challenge is addressing people’s natural fear of change, as most clients are making a transition from employee to business owner. While fear is a natural part of our psyche, it’s important to not let it lead to INDECISION.
Take a deeper look into the acronym FALSE EVIDENCE APPEARING REAL. The important distinction is false evidence. If you find yourself becoming indecisive about a franchise investment and are looking for some guidance, here’s a helpful strategy.
Acknowledge the fear and determine if it’s real. Here are a few questions that might help:
Why do you want to own a franchise?
What is driving you to want to own your own business?
What type of income does your business need to generate?
What types of resources are available to fund the business?
What excites you about owning a business?
Do you have an additional income streams?
Do you believe this franchise system can generate the income you need?
Is your family, spouse, or partner supportive of your decision?
What are your biggest fears in owning a business?
Let’s face it there is risk in any business. That’s one of the reasons I like the last question. It makes you think about fear. If you take this approach, what you might find is the fear subsides. This allows you to think pragmatically and make a more informed decision.
The purpose of these steps is not to force a sale or force a purchase. In fact, the art of closing a client is helping someone make the RIGHT decision for them. Even if that decision is not to make the purchase. In the case of franchise ownership, it’s certainly NOT for everyone. What’s important is to not let fear become paralyzing. This leads to frustration and indecision… some people call this “analysis paralysis”. If you find yourself in this position, consider the above referenced questions. They just might be helpful in overcoming the fear and making a more informed decision.
I was recently contacted by a colleague who had a friend considering a franchise investment. The person was looking for a website that provided unbiased information regarding specific franchise concepts. This is one particular area that can be frustrating with franchise research. Most websites in the franchise space are designed to be lead generators. You request information and are soon contacted by a sales representative or franchise broker. While this is a very common business practice, and there is nothing wrong with franchises using the Internet to try to make sales, it can be very frustrating for people who are simply looking for basic information.
There are 3000+ franchise concepts available in the market today. With so many options it can be very difficult for people to determine the best option, as the process is overwhelming. If you are serious about franchise ownership, but not necessarily ready to speak to a concept directly here are a few steps that can help you with your research.
Determine the income you will need to support your current lifestyle – Think of it this way. If you were to change your job, what would be your salary requirements? Don’t forget to factor health insurance!
Create a personal balance sheet – This will help you determine what assets are available to purchase a franchise. If you need assistance speak with your CPA or financial advisor. Remember to factor working capital for business and living expenses as it will take time for your business to generate a profit.
Assess your skills – Are you good at sales? Managing Employees? Budgeting expenses? Business planning? In my franchise consulting practice, I always suggest clients to list their strengths and weaknesses. Certain franchise systems require different skills to operate their business models.
What type of business would be ideal for you? –Do you want to work from home? An office? A retail store? Do you prefer to sell a product or service? Do you want employees and do you like to manage people? How many hours a week do you want to work? What days do you want to work?
What do you know about franchising? – In my franchising consulting practice, we spend a lot of time educating people about the industry. While there are benefits to owning a franchise like brand recognition, training, support and a proven business model, there are additional costs like franchise fees, royalties and advertising fees. Before researching specific concepts, take some time to learn about the industry. This will help you determine if it’s a suitable option and better prepare you for your research.
When people start looking for a franchise, they almost always start by looking at specific concepts. While that can be fun, it can also be overwhelming and frustrating. If you are seriously considering a franchise investment, I suggest following the above referenced steps. This is a process we go through in my franchise consulting practice. It helps clients learn about the industry, determine if it’s something they want, and target specific opportunities aligned with their objectives. It’s a more organized approach that will reduce frustration, save time and help make a more informed decision.
There are a number of benefits to owning a franchise. If you took a survey of franchise industry professionals, the list
Does the franchise have a good SYSTEM?
would likely include:
Brand Recognition
Training & On-going Support
Marketing Assistance
Site Location and Build-Out Assistant
A Proven System
For this article I wanted to speak about the benefits of a system. In my franchise consulting practice I have worked with a number of franchises to help them refine the system and establish procedures to help replicate it. That’s one of the keys to a successful franchise model. Can we establish steps and procedures to train someone to operate the business.
When I work with clients, most tend to focus entirely on “brand recognition”. If they have heard of the model, there is instant credibility. In fact, if I present both a well-known franchise with a franchise that is not as well known, a candidate will almost always gravitate towards the model they recognize. This can sometimes be a trap as there are other factors to consider. In addition, just because a brand is recognizable, doesn’t mean it’s successful.
For example, here are a number of well know franchises that have had problems in the past. Feel free to click on the associated links to read more about the problems these particular brands have had in the past.
Krispy Kreme Donuts – Had issues with corporate locations competing with franchises.
Quiznos – Flaw within the system making it difficult to generate an income. They recently had a reorganization of their entire business.
Cold Stone Creamery – Required franchisees to purchase inventory from corporate relationships making it very difficult to generate a profit.
Please note, I am not here to bash a particular franchise system. If you perform enough research, even the best franchise brands will have some litigation history as well as people who failed. The point here is to not fall for the trap that name recognition means success.
That’s why I always ask clients these questions in my franchise consulting practice:
What’s the most important thing in a franchise for you, name recognition or a successful system?
If you found a franchise and you were confident in the business model, but didn’t recognize the name would that matter?
The reason I ask these questions is identify the what’s important to the client, and also educate them that there is more to a franchise than brand recognition. In fact, there are some lesser known models, and models in recession resistant industries that are very successful.
Here are some brands I like:
Service Team of Professionals – This franchise is in the restoration business. The company was founded in 1971 and started franchising in 1996. They currently have 45 franchisees. They have a great track record of success and have 95% franchisee satisfaction.
Certapro Painters – This brand is more well known. Certapro started offering franchises in 1992. They currently have 300+ units. It’s a great system with an excellent marketing strategy that also has strong franchisee validation.
College Nannies & Tutors – CNT opened for business in 2001 and started offering franchises in 2005. They currently have 79 units in operation. I like the system and their validation process. Two years ago I placed a client with CNT who has since been honored as one of their top franchisees.
These are just three examples of models you might not know. They have excellent systems and validate well. They could present a great opportunity for people who have the skills, financial resources and interest in the industry. While brand recognition can certainly be a great benefit, if the system is flawed doesn’t work then there is no value. If you’re serious about franchise ownership, try to avoid worrying too much about the brand and pay more attention to the quality of the system. You will be glad you did.
In my franchise consulting practice I often get questions from people about the benefits of franchise ownership. Some people prefer franchise ownership versus starting their own business because of the training, support, the system and brand recognition. While all of these concepts are important, one area I find particularly critical is the MARKETING.
Let’s face it, if you have a steady flow of leads that are willing and able to buy your product or service it means more REVENUE. That’s what you want as a business owner. More revenue covers expenses, pays salaries, provides capital for expansion and increases the VALUE of the business.
That’s what the best franchise consultants do when they work with emerging brands. If your marketing a product, you have to clearly define your target market, your unique selling points and have a carefully crafted marketing message to deliver to potential customers.
If you happen to be an emerging franchise concept, can you honestly say you have a clearly defined strategy to help new franchisees acquire customers quickly? If the answer is no… then I would suggest spending some time to address this need. If you don’t have a defined marketing strategy, how can you help your franchisees increase sales?
Here’s an interesting story. I once had a franchisor reach out to me to get my opinion of their system. She was kind enough to invite me to a presentation where the founders were speaking to franchise consultants, brokers and potential franchisees to learn about their business. Since we’re friends, she wanted me to listen carefully to the message and provide an opinion of the content presented.
After the call she was excited to hear my feedback. Before giving my opinion I asked her what type of feedback she would like. I asked if she was ok with me being “brutally honest” or perhaps provide some basic thoughts. My colleague had stressed to me they we’re having trouble selling the brand and needed help. She wanted me to be completely candid.
I had the green light, and with her permission I was clear… It was one of the WORST presentations I’ve ever heard, and the reason is they failed to clearly demonstrate how the franchise would help the franchisee acquire customers. The presentation spoke too much about the opportunity and failed to provide basic details regarding the marketing. Again, how can your model be great if you cannot articulate how the franchise helps their owners market the product?
With this in mind, I asked her a basic question. How does the franchise get customers?
The answer… “guerilla marketing”.
While guerilla marketing can certainly be part of the marketing equation, I think you need to provide a little bit more if you are going to get someone to invest $150,000+ in the system. It’s a major flaw in their growth strategy and needed be addressed.
That’s where you really have to be careful if you’re considering a franchise investment. Sometimes we tend to get too caught up in the opportunity and don’t focus on the importance of marketing. That’s the key element to getting more prospects and revenue. Understand how the franchise can help drive customers to you. This will go a long way towards helping select the best franchise opportunity for you.
I recently participated in a Linked In discussion regarding the top five reasons franchisees fails. The discussion
Why does a franchise business fail?
involved a number of franchise professionals including franchise consultants, attorneys, brokers, franchisors and franchisees. The discussion generated 40 plus comments and I thought it would be interesting to share the reasons discussed. Listed below are some of the responses. Please note they are in no particular order:
Undercapitalization
Not enough marketing
Poor closing skills
Micromanagement
Poor location
Absentee ownership
Poor franchise system
Bad hiring practices
Poor communication skills
Drug/alcohol abuse
When you get franchise consultants and brokers (the sales folks) J in a discussion with franchise attorneys, especially litigators J who often deal with people who have regrettably lost money it can make for an interesting and sometimes heated discussion. While that might seem to be problematic for some, for those of us in the franchise industry, particularly franchise consultants and brokers, we tend to have very thick skin J.
There are a variety of opinions within these groups. Some folks are very “metric oriented”. They prefer measurable data to determine the basis of an opinion. Others based their reasons on personal experience and discussions with franchise consultants, franchise owners and brokers. While it would be nice to have detailed data to support the reasons, regrettably, there are so many factors involved that can make it very difficult to completely understand why a franchisee fails. In this discussion, what I found interesting was 9 of the 10 reasons focused strictly on business factors and only one focused on personal factors… alcoholism and drug addiction.
This is why I think it can be very difficult to fully quantify why a franchisee fails, as there are so many variables, particularly on the personal side that can impact a business. I am not sure if anyone has ever researched these issues, however, I would be very interested to learn about the results.
Owning a business or franchise is more than simply sales, marketing, budgets and capitalization. It’s a lifestyle, and owners can sometimes encounter painful and often unforeseen events that can have a lasting impact. Some of these issues can include:
Divorce
A death in family
Illness
Accidents
Substance abuse
Special needs children
These personal factors are rarely considered when trying to determine why a business fails. While I am not certain that anyone has done research on this topic, I would be very interested to see the results. If I had to guess, I would not be surprised to learn if personal factors played more of a role in failure than many of the items we discussed.
If you are new to the concept of franchising and are seriously considering the concept, working with a broker can have its benefits. Please note, franchise consulting and brokerage is a service provided by the author of this article, so it’s important to consider the source in reading it .
A qualified and reputable franchise broker can help you make a more informed decision...
The last few years have been economically challenging. It all started in 2008 with the debt market collapse, primarily in the residential and commercial real estate sectors. The effect on employment has created a lack of new job opportunities. While I don’t want to write on the basis of job creation, nor want to get into the details of economic statistics, I have noticed a steadily increasing interest in people wanting to own their own business.
This might beg the question, if the economy is bad, is opening a business a good choice? Well that’s one of the reasons working with a qualified franchise broker or firm that provides franchise consulting services might be a good option as they can help you guide you in the process, perform your research and determine if the solution is a good option. The fact is, even though the economy has suffered its bumps of late, there are certain industries that continue to expand, are more resistant to fluctuations in the economic cycle where one can do well.
Another benefit to starting a business in uncertain economic times is the cost of entry, particularly if you need to lease space for your franchise. Right now in some markets, landlords are offering rent concessions, attractive allowances to fit out your space and reduced rents.
Keep in mind, the world of franchise consultant and franchise brokerage, like any other industry, regrettably can have its cast of characters who… let’s just say… don’t follow the most ethical business practices. In addition, while there are MANY different franchise options available, not all are good and thus it’s very important to perform your research.
There are, however, many reputably franchise consulting and brokerage firms, as well as individuals who help people find franchise concepts aligned with both their income and lifestyle goals. In addition, particularly if you’re new to franchising, a good franchise broker can provide access to many different opportunities you might not have considered.
In fact, last week, I had a client reach out to me regarding franchise options. What was interesting is they thought a franchise investment required at least $1mm in order to get started. While that can be the case, there are many other options available. In some instances, you can actually start your business for less than $50,000.
So what’s your next step? Well, if you are interested in the concept of franchising, I would suggest you educate yourself in the industry. There are tons of free resources available on the internet, there are books you can purchase, and trade shows you can attend. I always suggest this concept to clients as it can really help you determine if a franchise is a good solution for you. It’s also important to understand that you don’t necessarily have to work with a franchise consultant or broker if you want to buy a franchise. It’s all a function of what you’re most comfortable with. If you like, you can always do a google search for “franchise consulting” or “franchise broker” to find a local representative to speak with. Ask them questions, understand their services… see if you’re comfortable with their approach.
One final thought for those thinking of taking the next step. Buying a franchise is a big decision. Whether you chose to work with a franchise broker, consultant or go at it alone, its strongly recommended you work closely with your CPA and a qualified franchise attorney. They can help you identify the risks and help you make a more informed decision.
Last month I participated in a business forum where one of the panelists stated that owning a franchise is one of, if not the worst way to open a business. He further added that if someone wanted to start their own business they are simply
is franchising bad business?
better off creating their own idea, creating their own brand and starting on their own…
Considering the panel included entrepreneurs, bankers, a business and franchise broker (not me), an attorney and business coach, I’ll let you guess which member made that statement .
But questions remain…
Was this person right?
Is owning a franchise a bad way to enter a business?
Considering I have my own franchise consulting and brokerage firm you might think I am biased in one way or another. Be that as it may, let me take a stab at these questions.
Regarding the first question, was the person right? The answer to the question is NO. Franchise is NOT the worst way to get into a business. Well I guess I answered both questions right off the bat, but before you start thinking that since I do “franchise consulting and brokerage” and thus of course I am going to think this way… here me out.
There are a lot of horror stories regarding franchising. If you google the web, you will run across countless stories regarding people who lost A LOT of money and failed miserably with a franchise. If you’re curious you can do some research and you’re bound to run across many examples… In fact, I have been brutally attacked by critics and former franchisees when I provide any sort of debate regarding the viability of the industry… and while I hate to see people fail, and I know there are many poorly run franchise models, it doesn’t mean owning a franchise is the wrong way to own a business.
So does that mean franchising is a bad business option?
The answer is certainly not, and while I am not going to perform a statistical analysis (much to the chagrin of my critics I would add that for every negative story you can find a positive one. My point here is, just because people failed, doesn’t mean franchise ownerships is a bad way to enter a business… and while you still may want to consider the source, there are many franchises, franchise consulting firms, brokers, attorneys, lenders, and franchise owners who would agree, argue and provide examples of many people who have been VERY successful with a franchise investment.
So how do I know if a franchise is right for me?
Well, that’s the $64,000 question. In my experience and after having discussions with a few franchise consulting firms, brokers and franchisors, it depends upon a number of different factors including the quality of the franchise, a willingness to learn and follow the system, having enough start up and working capital and also making sure it’s a business the person actually enjoys. That’s really the hidden element… enjoying what you do. I would further add that franchising is NOT for everyone. Too often I run across people who want to buy a franchise because they think in GUARANTEES success, which could not be further from the truth. I have been doing both franchise consulting and brokerage for years and nothing bothers me more when a concept uses the phrase “recession proof” to describe their model. The reality is, owning a franchise has risk… just like any other investment.
The bottom line here is a general statement… “franchising is the worst way to open a business” is just plain wrong. Saying that is just as bad as someone saying owning a franchise guarantees success. If you’re serious about the concept… I highly recommend doing your research. Educate yourself about the industry and speak with people (particulary franchise owners) about their experience. In addition there are many local and national franchise consulting and brokerage firms and franchise attorneys you can speak with. This can help teach you about what to look for and make the best possible decision for you.
Franchise consulting is a field similar to any other consultant-to client relationship whereby the franchise consultant would charge a fee to a client in exchange for a particular service. This is how the field was traditionally defined. If a
Say what you ARE!
franchisor needed a particular service, whether it was the formation of their franchise agreement, business planning, marketing and sales advice or any other type of third party consulting services, they would hire the consultant, draft a contract and scope of service and pay consulting fees.
In the last few years, the definition has been changed as various franchise sales networks borrowed the term “franchise consulting” or “franchise consultant” to describe “franchise brokerage”. Instead of charging a fee, the franchise consultant offers their services for free and only receives compensation if their client happens to purchase a franchise. If you are interested in reading more about this shift in definitions please click to read this article.
It’s my opinion that this new definition undermines the concept of franchise consulting as a service. In addition, to those who are marketing themselves as franchise consultants, when they are essentially franchise brokers amounts to nothing more than a misrepresentation of what they offer.
It’s a little disingenuous to describe yourself as one thing, when in fact you are doing something else. This is an that issue stirs a lot of debate in the franchise industry, and unfortunately, as franchise networks continue to expand, it could potentially marginalize it. I have seen this issue discussed on linked in forums, trade shows and franchise radio programs. While I have not conducted any polls, I imagine if I did, those in the industry prefer the traditional definition.
Please note, there is absolutely nothing wrong with franchise brokerage. Franchise systems are looking to expand their brands and many concepts leverage their relationships with various brokerage networks to bring them qualified candidates in exchange for a commission. It’s no different than residential or commercial real estate brokerage, mortgage brokerage or leasing brokerage. A fee is paid for a service performed.
The issue here is simply to accurately describe and define the role. If you are a franchise broker that is compensated by selling franchises, call yourself a franchise broker. If you’re in the field of franchise consulting and are providing additional services for a fee, call yourself a franchise consultant.
While I don’t foresee this debate getting resolved in the immediate future, as the franchise industry continues to mature, I think all of us would be better served by calling ourselves what we actually are. A close colleague and fellow franchise broker loves to use the phrase “fransparency”. Essentially it’s all about full disclosure. If we place more emphasis on this concept, the franchise industry would better position itself for the future.
If you stumbled upon this post, you’re probably wondering what crabs and a basket have to do with buying a franchise. Let me explain…
In my franchise consulting practice, I advise people on whether business ownership, particularly “buying a franchise” is a suitable option for them. Many times during this process, clients will seek the opinions from personal friends and family during their research. While I think it’s important to seek input from your loved ones, especially your immediate family, if that’s your sole source of counsel it can soon become problematic.
You see, sometimes those close to us are afraid of our potential success. When we speak with them they can project their own insecurities, fears and desires on you… Regrettably, at times they want to hold you back.
This is what I mean by “crabs in a basket”
Have you ever seen a basket full of live crabs? If you have, you might recall what happens when one of the crabs tries to climb out. Just before they reach the top, the other crabs reach up and pull them back… it’s a vicious cycle that repeats itself over and over again. One gets nearly free and soon the others reach up and pull it back…
I see this everyday in my franchise consulting practice. In this case people are looking to own their own franchise business. They find an opportunity, do the research, determine it’s something want to do, yet their friends try to talk them out of it…
Now considering the fact my chosen vocation is franchise consulting and I earn a living via franchise sales you might say to yourself…
“Hey, you do franchise consulting… isn’t franchise consulting all about selling franchises? You obviously might be a little biased.”
If that’s what you are feeling, then your cynical like me J. Believe me, I can see why you might feel that way, however, the reality is I don’t care if someone chooses to buy or not buy. The point I am trying to make is sometimes advice from friends and relatives can sometimes be biased… and NOT in YOUR best interests.
This begs the question…why? Why would a loved one or close friend project fear, reservations, or even attempt to hold you back? The answer to me is that it’s human nature…nothing more. I don’t try to understand it, justify it or rationalize it… it’s just the way it is.
So how can you avoid the crabs from pulling you back?
This is a question I get pretty often from clients. It’s one of the reasons that franchise consulting is more coaching oriented than many people think. What I always suggest is to first, educate yourself as best you can on the opportunity and seek advice from OUTSIDE your immediate friends and family. I have a number of mentors that I constantly lean on when I need help with a situation. These people are not FRIENDS, but I do value and trust their opinions. Some examples of people that can help you make the right decision could include a business attorney, a CPA, a business coach or even someone you know who has experience in owning a business. What you’re looking for is open, honest and unbiased feedback.
If you are considering a franchise, a business, or desire anything for that matter, think about this concept. I have seen many close friends get caught in that basket… and every step they make to free themselves, they regrettably always seem to get pulled in. If you find yourself in this situation, think about this concept and focus on finding a good mentor. They can provide open and honest feedback to help move you FORWARD, versus pulling you BACK!
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