What I Wish I Knew Before Buying a Franchise

By Eric Stites

Dennis Monroe had worked in operations management for over 30 years when he decided to buy a ColorAll franchise (an on-site auto body repair service) with his business partner. The pair owned and operated their ColorAll franchise in Phoenix, Ariz., for nine years before exiting the business and retiring. Looking back on his franchise experience, Monroe says he would do it all over again—but with a few alterations.

Labor challenges can cripple a business

“Our franchise was initially very successful,” explains Monroe. “We landed large, national accounts, but eventually, due to poor tech performance, the business went downhill.”

One of the reasons for his business’s decline was the unexpected challenge of having to hire skilled employees. “In our case the biggest problem was the unpredictability of auto body tech’s quality and responsible customer relations, which ended up costing us a lot of very profitable customers,” says Monroe. “I had no problem finding customers who appreciated the value and convenience of our service, only to lose many of them because of the tech’s job performance.”

Hiring can be a top challenge for many business owners. While it is often most pronounced in the food and beverage industry, where low unemployment rates and increasing wage pressures have left restaurants scrambling to find the help they need, it is prevalent across almost every sector.

In senior care, for instance, hiring challenges have been spurred by the rising numbers of aging Americans. “For national senior care franchises, recruiting thousands of skilled, dependable caregivers to match the specific needs of each family is no easy task,” says BrightStar Care, a national private duty home care and medical staffing franchise.

In the automotive space, hiring challenges are evolving as the automobile undergoes a rapid transformation, becoming more than just a transportation tool, but a “powerful digital device,” according to an article by PwC. While Monroe struggled with finding competent technicians, many in the automotive space today need workers with an entirely new skill set.

A common misconception of franchising is that all of the hard work has been done for you, but as Monroe explains, “You can’t depend on the franchisor to make your business successful. The corporate franchisor should provide training, startup support, national marketing, and name recognition, but it is up to the local franchisee to make the business work and create profitability with its customer base.” A large part of this, of course, is hiring.

Finding skilled workers who will represent your brand well and treat your customers right, while also providing excellent service, is a tremendous challenge for any business owner. However, as Monroe discovered, if you’re in an industry that depends on skilled talent, the inability to secure that talent can quickly cripple your business.

The franchise contract should be considered long and hard

While Monroe struggled with finding quality talent to keep his business afloat, he says that owning a franchise offered him great independence and personal satisfaction. The experience was so positive for Monroe, that despite his issues with underperforming technicians, he says he would do it all over again. He also says he would choose a franchise with less dependency on tech performance, and negotiate more favorable contract terms up front.

An attorney can help you evaluate terms in the franchise agreement and the company’s Franchise Disclosure Document (FDD). There is a lot of information covered in a franchise agreement and the FDD; a few areas that should be looked at closely include the royalty payment structure, the right to close, the right of first refusal, litigation statue of limitations, non-compete clause, and franchise territory, to name a few.

Not all franchisors will be open to negotiation. Still, it is always in your best interest as a prospective franchisee to evaluate franchise documents closely, and with the help of an experienced franchise attorney.

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It’s also important for prospective franchise owners to speak with current and former franchisees during the research phase. The insights franchisees provide can be invaluable, and it’s advice that many franchisees willingly will offer to interested new owners.

As Cindy and Phil Bacon, franchisees of FASTSIGNS say, “Do your due diligence and contact as many franchisees as possible.” Heather and Seth Allison, franchisees of American Poolplayers Association similarly advise, “Talk to other franchisees first to get their perspectives, and make sure your franchise is well-established and highly rated.”

Franchise opportunities offer a pathway to business ownership—and potential profitability—for interested entrepreneurs. Choosing the right franchise and structuring your agreement so that it fits your needs long term can be a challenge, however. And this is why it is so important to speak with current and former franchise owners, who can offer a wealth of information and insight into the world of franchise ownership.

RELATED: 10 Signs of a Great Franchise Opportunity

About the Author

Post by: Eric Stites

Eric Stites is the CEO and Managing Director of Franchise Business Review, a leading market research and consulting company specializing in franchise satisfaction and performance. Franchise Business Review’s mission is to work with the very best franchisors and franchisees to continuously improve system performance. Eric designed and created the Franchisee Satisfaction Index (FSI), which has quickly become an industry standard for measuring and benchmarking franchisee satisfaction. Eric is an active member of the International Franchise Association (IFA), serving on the IFA’s Franchise Relations Committee, as well as past Chairman of the VetFran committee

Company: Franchise Business Review
Website: www.franchisebusinessreview.com
Connect with me on Facebook, Twitter, and LinkedIn.

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In-N-Out Manager Pay Surprisingly Good

In-N-Out Manager Pay Surprisingly Good

QSR managers work hard, but in spite of that are not generally thought to have particularly good wages. That’s not the case for In-N-Out Burger managers. They make substantially more than college graduates with some of the better marketable degrees.

A typical architect in California earns about $112,000 a year, according to the jobs site Indeed. For lawyers and software engineers, the average figures are more than $115,000.

But beating them all — by a lot — is an unlikely job title: In-N-Out Burger store manager.

According to the latest numbers from the Irvine hamburger chain, the average yearly pay of its restaurant managers is now more than $160,000. That’s roughly triple the industry average. —Mike McPhate, The California Sun

In-N-Out Burger photo by Chase N.

BMM Staff
Mon, 01/28/2019 – 06:38

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In-N-Out at night

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Is Now the Right Time to Franchise Your Business?

Franchising a business can be an exciting prospect for many entrepreneurs. You have found success locally, and are now ready to expand well beyond your home base.

But while the prospect of going nationwide is exciting, there are a number of issues to be aware of. That’s why we asked members of Young Entrepreneur Council (YEC) the following question:

Q. For anyone thinking about franchising their business, what is one crucial thing they should consider first?

1. Assess if there is enough demand

The last thing a new franchise wants is to see their franchisees fail. Make sure that your business has a great amount of demand before thinking about a franchise model. One way to determine demand is to pay attention to Google keywords mentioning your business. If you see a huge spike in people searching for your business in a certain city, then you know there’s interest there. —Syed Balkhi, WPBeginner

2. Understand what you need to control

Franchising is about control. You want to know exactly what is critical to the business’s success and what can be put aside. When you franchise a business, you need to set standards and controls which ensure the business’s success and protects the brand. You may have to give on some areas and choose what they will be, but if you are clear on this, then you are in control. —Baruch LabunskiRank Secure

3. Determine if your business can be replicated

Franchising can be a great growth strategy for businesses that can be replicated fairly easily. It’s likely to fail if a business depends on the input of specific individuals or if its processes are hard to duplicate. Start by thinking about your business’s core processes, documenting them and considering whether they could be replicated by other people in a different location. —Vik PatelFuture Hosting

4. Research the potential

Not every business has franchise potential. Research the interest and demand for what your business offers to see if it can be replicated in multiple areas, and have the potential to be successful and grow. It may not be something that is sustainable. —Serenity GibbonsNAACP


5. Consider hiring a consultant

Franchising your business is a complicated process, so consider whether you should hire a consultant to help you along the way. There are franchise developers you can hire, if you have the funds, who will simplify the process for you and make sure the transition occurs without a hitch. —John Turner, SeedProd LLC


6. See if you can step away from your core business

Franchising is about a process. You need to define literally every single step of your business, from which suppliers to use through how someone would greet a customer at the door. Before you franchise, see if you can step away from your current business. If you have defined your processes well enough so that you can be away for a week—and be happy with the results—then you’re ready! —Aaron Schwartz, Passport

7. Understand the franchise agreement

You should understand how the franchise agreement will restrict you from setting up a similar business. For example, many franchise agreements include a non-compete provision prohibiting you from conducting a similar business for a certain period of time within a certain distance of a franchise location, and stringent confidentiality provisions prohibiting you from contacting customers. —Doug BendBend Law Group, PC

8. Determine if your business can run without you

If your business cannot operate without you, it is not at a stage where it’s scalable. You have to get your business to the point where you’re no longer involved in the day-to-day in order to consider scaling. —Rachel Beider, Massage Outpost


9. Document everything

It’s crucial that you document your entire process from start to finish before franchising your business. You want your franchisees to be as successful as you are (or more) so they can spread the word and you can get more interest. Even the smallest things should be documented, such as phone scripts, email templates, and anything they may need in order to succeed. —Jared Atchison, WPForms

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10. Choose the right location

Your business is special, so you want to make sure you’re establishing new franchises in the best location. For example, consider an area that is already aware of your brand and would be receptive to your business (but careful not to stay too close to home so it won’t interfere with your original business). Additionally, while a large city may be tempting, a smaller city may be less competitive. —Shu Saito, Fact Retriever

11. Make sure you have enough funds

Franchising is not cheap. I would know; I’ve built one. There are so many things to consider in terms of location, documentation, legality, and regulations. You won’t be able to do it without bringing on a consultant. Before that, though, ask a few questions. Can my business be simplified enough so that someone with only a high school degree could manage the entire operation? Who is willing to buy? —Nicole Munoz, Nicole Munoz Consulting, Inc.

12. Consider potential risks to your brand

While having franchises can be profitable, it also means that you give up quite a bit of control over your brand. Franchisees, while they need to adhere to certain conditions, are still business owners, and you can’t simply fire them if you don’t like the way they’re operating. When setting up a franchise agreement, make sure you specify standards and policies that protect your reputation. —Kalin Kassabov, ProTexting

13. Think systems-dependent, not expert-dependent

A systems-dependent franchise model creates a repeatable customer experience by relying on an extraordinary system that can be run by ordinary people, and not relying on the hopes that you’ll be able to hire extraordinarily talented experts at every location, every time. When your operations manual can be expertly managed by anyone, regardless of skill level, then you’re ready to make the leap. —Magnus SimonarsonConsultwebs

14. Start building your team now

Start building your team now. If you’re going to franchise and want to maintain your corporate culture, work environment, and a passion for your business, you’ll need to start looking for people now who are willing and able to take all of that on. Plus, they’ll need to learn a lot of that before they can put it all into practice. —Andrew SchrageMoney Crashers Personal Finance

RELATED: 8 Reasons Not to Franchise Your Business

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Three Chains to Celebrate Free Cone Day

Three Chains to Celebrate Free Cone Day

Dairy Queen will be celebrating its own Free Cone Day on the first day of spring, Wednesday, March 20, when it will be giving away free small soft serve cones, followed up from March 21-31 with $.50 cones to those who use its mobile app.

Ben & Jerry’s Free Cone Day will be on Tuesday, April 9, and Häagen-Dazs will be serving mini cones gratis from 4 p.m. to 8 p.m. on Tuesday, May 14, 2019. —Adam Campbell-Schmitt, Food & Wine

BMM Staff
Thu, 03/14/2019 – 18:56

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Dairy Queen sign

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