Doc Franchise Writings and Ramblings

If you are the proverbial Internet information junkie, the one who grabs hold of a topic and then will run the gamut you will find abundant opinion and expert on franchising. When researching for "your" franchise you will find a maze of opinion and thought and philosophy as it relates to whether or not you should buy a business, specifically a franchise business. You will trip head long into massive doses of opinion that run smack dab into one another with the force of two locomotives, at full steam, heading over any trestle you have ever seen in any movie scene with trains in the last fifty years.

It's ridiculous! It's absurd! Who are some of these Nimrods? What do they get out of making the most ignorant statements other than to see their own words typed on a page in front of their faces?

I want to clear up some things that seem to fly in the face of one another if I can. However, if you are simply one of those who loves to hear his or her jaw flap when you finally get someone in the know on the phone as you consider business ownership this will have little affect other than to provide more fuel for the fire to keep words floating in the wind and your actions from actually moving you into business ownership.

Here is a bottom line statement you can take to the bank: If you aren't prepared to step out of your comfort zone and become a business owner you will find a plethora of excuses to justify your lack of forward progress.

Here is another: More than 85% of the people who engage a franchise consultant or a franchise development person in negotiations to investigate franchises NEVER BUY A BUSINESS OF ANY KIND...EVER! The corollary to this statement is that they will bother, annoy, cajole, hassle, stalk, bedevil, beleaguer, nag, nettle, perturb, pester, plague and provoke a half dozen individuals who earn their livings providing assistance to those who truly are looking at changing their lives. That is what happens...ever searching but never making a decision to become a business owner.

So, here is my advice to you if you are a true seeker. Look in the mirror, and for a week of Sundays and all the time in between those 7 Sundays, say to yourself, "Stanley (Susan, Ward, Jill, Rudy... whatever YOUR name is) you have decided you are not going back to work for another company as an employee. You have decided...I have decided I will become a business owner. I will understand the components of a business (not the name of it but the attributes of the business model as developed by the franchiser) that will satisfy my personal needs and I will decide what it is I must be able to experience in a business in order for me to have created a condition that I would define as success."

Here is the second piece of advice - If you are still out there looking for a business and looking for the next job simultaneously you will never be any good to another employer or to a franchise company (who needs you at your best in order to continue to grow the value of the brand). Stop looking for the business. Now. Stop it. Seriously. Go get the job and shuffle back into mediocrity. At least for the time being and until your resolve is cemented and you have the will to change your life.

Having said that I realize there are business models that allow you to grow the business as a sideline. As long as you are willing to move at a snails pace in a business whose cost structures would be decidedly less, whose progress would be exponentially greater if you were available full-time plus, then fine...give those a go and put that into your set of business model requirements. Just know regardless of what anyone will tell you, this ex-franchisee in multiple business models and current consultant who works with hundreds of franchises (yes 100's!) is telling you right now what should be obvious to you, more involvement, more hours, more dedication to your business means more rapid, more sure success.

Where was I? Oh yes first you (and then later the nimrods of confusion) - this is what you need to do:
1. Decide first you WILL become a business owner
2. Decide what your business needs to be able to take advantage of relating to:
Your talents - Your learned skill sets
- Your personal gifting (orator, mechanical, tech astute, creative, financial, systems, admin., etc.)
- Your passions (community, environment, faith, hobby, physical fitness, etc.)
3. Decide what your budget is...and frankly don't decide on less than $50,000 liquid ($100K is better) plus
4. Review the types of business format and which you will be most satisfied in operating:
Entrepreneur: I must create it - mold it - make it - control it - be lord of all I see within and relating to it
Franchisee: I will take advantage of someone else's passion, system, creative idea and operate something I enjoy and feel strongly about that meets my criteria (see above) within a structured framework of systems, training, market niche, branding and culture. I will own it but be content with having support and a fraternity of others in my same fleet and type...
Business Opportunity: See Franchisee above and extricate any strong ties to accountability, systems, training, branding (possibly) and ongoing support. There are many fine business opportunities and distributorship's but in my estimation should be the focus primarily of those who already bring marketing, operations, experienced internal training and a talented team to the business table.

There are iterations of all of these...businesses that fall in the cracks; but the more succinct the definition you are able to associate with your business and what you are developing the more you will be content in operating the better you will be to focus on creating business success than constantly tweaking the model in order to stay in some sort of compliance to governing rules and regulations.

What are these disassociated claims that fly in the face of each other that I spoke of early on...?

I just read a plethora of posts that all said franchising is more expensive to operate than like non-franchises. Really?

Let me pose two questions:

1. What would you rather end up with...a business in which you made 30 cents on every dollar over breakeven but you were limited in reach to your market, say you top out at $500,000 by virtue of your model, product offering, branding, systems or marketing efforts or would you prefer a business in which your average unit revenue is less limited and perhaps tops out at $1,000,000-1,500,000 but you only make 24 cents per dollar by virtue of an expanded market, product offering, systems, technology, etc.?

If this takes you more than 6 seconds to answer do NOT become a business owner...not until you get your time down under six seconds.

I have just described what typically happens in franchising. Business franchise formats take advantage of systems, marketing, operations excellence, ongoing support, superior training and far better market savvy and take market share from less organized and professional independent operators. Occasionally they create products and markets. Most often they simply improve on a market that exists and feed a larger piece of the potential market.

On to question two:

2. On what planet does someone in small business consulting have to be living on to tell the Internet world it costs more to be a franchisee than it does to operate an independent business?

I mean the uninformed, usually newbies to franchise research, might add things up like royalties, required advertising and conformed purchasing practices (where you buy from an approved list of suppliers) and say, "Ah ha! They take my money and more of it than I would normally spend...that's their sneaky, under-handed trick to separate me from my wallet!"

But really? Is that what you think? I could list half dozen studies done by the International Franchise Association, Franchise Update, Entrepreneur Magazine and more that show otherwise but let me just make a plea to rational thinking with you...

If you are a bigger business, say, oh, a franchise of 50 units or 100 units or 500 or 15,000 units and you centralize purchasing, and negotiate for volumes do you think you will, as a franchisee have the opportunity to take advantage of preferred pricing or will you pay more than your independent competitor? Now, before you answer, yes, I admit it, there are the very few instances when an unscrupulous franchise company takes the excess savings and pockets them. It is rare. Why? Because in a franchise system there are no secrets.

By the way, you would be correct and earn extra credit if you surmised that the bigger the system the more negotiating power you gain, the lower your rates can go.

Secondly, the expense required to advertise...where do you think that comes from? Now, in some organizations there are larger national expenses than others and these are typically with franchises who have grown to the size where they can take advantage of their market position. That is what happens. Organizations mature, they grow, they get bigger, they are better known and they can take advantage of their brand name, market reach, size and positioning - it is the price you pay to be effective.

Free truism: This one costs you nothing - there are very few franchisees in the universe that like the marketing campaigns of their franchiser and it's corollary is everyone knows more than the experts about a better method to do it. Deal with it. Speak into the situation where you can but just realize this on the front end.

Finally, the cost of royalties is not a cost at all and unless you are running a schlock operation; should you be running your business as prescribed in the franchise model your production and business systems, cost savings through ordering and economy of scale and more effective and consistent marketing efforts will more than make up for this line item expense.

If you want to understand the cost of doing business in comparative independent businesses and franchises always remember seek first to understand before you open your mouth and remove any doubt of your lack of solid research.

• Compare average revenues of franchises to independent businesses
• Understand the expenses in a comparative sense as well
• Realize that advertising creates recognition and recognition gives you a fighting chance in the market ergo it is not just necessary but needs to be consistent, focused and aggressive
• Think deeply about what you will need to do and create if you decide to run your own show without the support of a franchise company - realize that systems create more time to produce and more time to produce create increased revenue opportunities

...and that kids is a big part of what a business should provide to you...

Now, I know some of this sounds harsh - but you owe it to yourself to use your time wisely and that is my hope for you. Please take this to heart. It will provide you with a more sure and solid foundation from which to make this life-changing decision to own your own business.

John is a 26-year professional in the franchise industry. He has been a franchisee, a franchise executive and an advocate/consultant to the public and to dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at docfranchise@gmail.com. or direct office 480.838.1641