Don't Buy a Franchise In a Hurry

Don't Buy a Franchise In a Hurry - click on title to view original article online

Submitted by Granville_Bean on Fri, 2009/04/24 - 22:46.

I have been a franchisee for more than a decade. We don't make as much money as a lot of people in the community seem to think, but we do make more than 90% of the households in America. I read all the horror stories on Blue MauMau, and contrast how people are buying bogus franchises with how we got into our system.

People talk about dealing with sales people who want to sign them up for that deposit or franchise fee. People talk about how THEN they might work in a store "for a few days", or go to a training that takes a week or two.

And they think that a week or two will make them into business people???

What is really scary are the poor folks who decide to buy a franchise BECAUSE THEY ARE GETTING LAID OFF. That is a TERRIBLE motivation because the fearful job-losing employee will want income IN A HURRY. Franchising has been around for decades, perhaps a century, and yet the job-loser will feel pressure to find the franchise and buy it in as little as a few weeks. No, no, no. It can take YEARS to find the right business opportunity.

About that salesperson and that fee: For contrast, in the McDonald's system you have to be approved as a Registered Applicant before you will be considered to buy a store, and you don't pay the fee UNTIL you buy a specific store. And to BECOME a Registered Applicant you have to first prove yourself to be operationally qualified.

You might work in the stores for a year, not a week. You go through four levels of courses and you don't just walk in and attend the course. You have to prove yourself operationally qualified and pass an assessment as to your operational knowledge, before even being allowed into the course. You can't just read manuals in your office or at home, you have to prove yourself in the restaurants. And this is BEFORE you are ALLOWED to pay a franchise fee to acquire a restaurant.

Contrary to sentiment from some of Blue MauMau's columnists and commentators, I am NOT a big fan of "due diligence" to the extent that it implies that if you just hire enough consultants, you can indeed walk right into a business that you knew nothing about 2 weeks ago, and the "diligence" will save you and make your success guaranteed.

Nope. People do come into McDonald's from outside but they gain their own knowledge of the industry before they buy a store. They don't throw it over a consultant's transom and ask if it is okay. And let's face it, most McDonald's franchisees came with prior McDonald's experience.

Corporate franchisor employees aspire to become franchisees (and often do). General Managers with decades of experience buy their stores when the prior franchisee retires. Whether or not they buy their parents' stores, second and third generation franchisees DO buy McDonald's stores.

I am VERY skeptical when people who know NOTHING about an industry except what the franchisor told them, or that plus what they looked up on the internet in two days, think they can run a successful business in that industry just because it is a franchise. And I am ESPECIALLY skeptical about folks who were employees all their lives and who, now that they are laid off, think they will magically be transformed into employers overnight, by virtue of a franchise.

Folks, being laid off doesn't qualify an employee to be a business owner. Being dissatisfied with how your employer treated you as an employee doesn't make you qualified to be an employer yourself. People who run successful businesses have often been entrepreneurial all their lives, they didn't become transformed just because they couldn't find a job. (Lots of them quit good jobs because they preferred to be on their own, the opposite of going on their own because they couldn't find a job.)

So: Don't buy a franchise in a hurry. Be darn careful about buying into an industry you didn't know much about UNTIL you became interested in a franchise in that industry. Be careful of franchisors that want your fee NOW, and then they'll find you a location later.

Franchising can be lucrative because owning a business can be lucrative. Buying a franchise is buying a business. Just because a business is a franchise doesn't guarantee success. Oh yeah, and "concept" isn't worth squat. It's all in the EXECUTION!

Good luck.