When thinking about a career transition, you have more options than taking another corporate job or starting your own business from scratch; you could buy a franchise. The International Franchise Association predicts that 2012 will see a 1.9% growth in franchises. According to their research approximately 4% of all small businesses in the U.S are franchise-related. But before you pull out your checkbook and take the entrepreneurial leap, let’s take a closer look at whether this option is right for you.
I recently had the pleasure of meeting Alice Errett, CEO of Right Fit Franchise. Alice is an experienced and competent Franchise Consultant, so I called on her to help me with this article. Thanks, Alice!
What is a Franchise?
A franchise can be defined as, "A form of business in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with someone (the franchisee) operating under the franchisor's trade name and usually with the franchisor's guidance, in exchange for a fee."
According to Alice, "There are 2,500 franchising opportunities available in the US! It’s not just fast food anymore! There are opportunities from commercial truck maintenance to child development centers, from golf services to newspapers." And the number keeps growing as new ones such as Healthy You Vending are established.
How do I Select a Franchise?
Here’s what Alice told me in response to this very important question. "The internet is full of information about franchising, and that’s a great place to start. However, at some point you may decide to work with a competent Franchise Consultant in order to learn more of the ‘real story’ behind the franchises you are interested in. The Franchise Consultant’s job, at no charge to the prospective franchisee, is to help you evaluate a variety of opportunities against your own desires and interest."
If you’re not familiar with what a Franchise Consultant can do to help you sort through all the options and make the right decision, here are some insights into the types of conversations Alice holds with her clients:
- "How do you feel about selling? Some franchises require it; others do not."
- "Do you need a franchise that allows you to work a flexible schedule? That’s possible with some and with others, it’s not."
- "Are you looking for a tried and true history of success, or are you open to some risk with a model that is more speculative?"
- "What’s your preference between a stressful environment and one that is more relaxed?"
- "The profit potential varies greatly between franchises – what are you looking for?"
The benefit of working with a firm such as Right Fit is that they know the hard questions to ask, they listen to your needs, and from the beginning of the relationship they utilize their extensive knowledge of franchises to pair you with only those potentials that most closely align to a great fit.
Pros and Cons of Owning a Franchise
Alice is quick to point out that franchises vary WILDLY in terms of quality, support and outcomes. Her point is well taken; make sure you do the proper level of due diligence.
Pros:
Alice agrees with me that for someone looking for security and limited risk, a franchise might be a better option than hanging out a shingle. "A franchise offers a tried and true model for success, with name recognition, credibility, loyalty and branding, so it’s much easier to quickly develop customers and traffic."
Another advantage is that the parent company provides training to help owners and employees acquire the right skills and knowledge to do their jobs effectively and build a successful business.
This benefit is huge, as it usually comes with policy and procedure documentation.
Since the parent company also negotiates lower costs for supplies based on volume, the franchisee can take advantage of lower overhead costs vs. trying to control business costs on their own.
Cons:
Owning a franchise means you will adhere to the rules and operating procedures of the company. This can be as simple as using company uniforms, or as restrictive as participating in nationwide promotions. For the individual that wants to hold all the control, this could be a problem.
Alice mentioned that one negative for some individuals might be the initial cash investment, which depending on the franchise, might be more than the cost of starting up an independent business. "Although financing is available, she suggests individuals interested in franchising should have $35k or more available for investment before investigating financing options."
Although the company’s established brand is a plus, it can also be a minus. Any scandals or problems the parent company encounters can have a ripple effect on its franchises.
"Fit"
Just as it is important for a job seeker to confirm fit with an organization’s culture, performance expectations, and competencies, an individual considering a franchise option must do the same. Naturally a lot will depend on the leadership, operational tools and support offered by the parent company, as well as the personality, preferred work style, education and past experiences of the individual.
Probably the most important piece of the "fit" question is that you need to know yourself. This is where working with a career coach can be helpful in developing a personal profile of interests, strengths, and work style preferences that will then be used when working with a Franchise Consultant to align with the right franchising opportunities.
Also, just like in any career search campaign, research is key. Identify the products or services that interest you. Understand the different franchise business structures. Find alignment with the reputation, culture and credibility of the brands. After you have narrowed down your list of possibilities, network with franchise owners. Interview them, just like you would someone at a corporation you were interested in going to work for.
Working with a qualified Franchise Consultant can make the navigation to the best franchise easier. Alice acknowledged that there are many qualified consultants out there, including her own organization. Whether you contact her at Right Fit, or another agency, Alice offers the following questions for you to include as you develop your interview strategy:
- "How have you been directly involved in the franchise industry, beyond consulting?"
- "What is your process for helping me identify the right franchise fit?"
- "How many franchises do you represent?"
- "Is there a contract for service?"
As the economy continues to get stronger, we will see more job openings; but perhaps you’re ready to take a turn in the direction of owning your own business. Folks like Alice, who love franchising, will tell you, "owning a franchise means being in business for yourself, not by yourself."
The franchise option can be overwhelming. If you decide to explore further, develop a strategy that includes:
- Working with a career coach to create your personal work style profile. This will include utilizing various assessments, interviews and exercises.
- Conducting extensive research.
- Working with a Franchise Consultant to navigate the complicated road to the right organization.
Check out Dear Job Seeker for my answer to Ruth's question.
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