Series: Questions to Ask Yourself Before Considering Owning a Franchise (Part 3)


This is part 3 in a series for you to use to ask yourself if a owning a franchise is right for you! Recently I took a short business trip which required some air travel. My traveling companion on the way back, not getting my subtle hint of isolation that my Ipod Touch and headphones projected asked me about my trip and then my profession.

Business Front Door (Photo credit: chunter01)

What followed was a series of questions that started out in very familiar terms: “You know, I have always wondered about getting into business for myself but I’m not sure I’m qualified or that it’s right for me. ” What followed was most of the following questions that are commonplace and typical. So, in only a mild order of importance or, more to the point the way they seem to flow, are my twelve or so typical questions people have burning in their bosoms about franchise business ownership.

You will notice that some do not have definitive answers. The reason is the kinds of business, the market segment and the format that franchiser has selected affect many of these conditions. How the franchise companies answers those ubiquitous scenarios however may affect what interests you and it behooves you therefore to get them answered before moving deeply into a full-blown investigation.

What form of training does the franchise company provide and how long does it take to complete?

It is important to franchise companies to put prepared franchisees into newly opened units. Nothing reduces the value of a brand than a poorly run unit, regardless of how remote or small or insignificant they might seem in the grand scheme of things. The truth is, most do an excellent job of providing proper training. If franchisees prosper, then the franchiser will prosper through the collection of fees. The franchise company have their reputation and name on the line.

What is a “Discovery Day?” Is it also a decision time for the prospect?

A Discovery Day is a day devoted to the franchise candidate (prospect) and, though some companies hold them in the field, it is normally held at the franchisor’s city, their HQ and in and around their area. You will spend time with key executives, operations and support people and trainers. The day is given to learning about systems and how the franchisor provides assistance, training, ongoing support and future services in the cause of your success.

Will I have a protected territory?

This depends on the product, service, the development of that industry segment and franchise company. Protected territory or “designated” territory is one of those things you need to realize is a catch 22 and does not always serve either franchise company or individual but needs to be evaluated based on the industry, and against offerings from competitors.

Will I have to pay royalties? Could there be other fees?

Every franchise collects some ongoing payment for all they have done and will do in the future. Some franchise companies standardize their fees; creating a minimum amount on a regular basis (bi-weekly, monthly, quarterly) and then a capped top-end. Others have a simple percentage of total revenues (Usually less taxes) earned. You don’t, as a candidate focus on royalties as good or bad. You develop your fact sheet and determine if earnings after all expenses is viable for the concept or not. Absolutely expect franchise to collect a form of ongoing fees. This is the primary reason they developed their opportunity in the first place.

Note that many low cost opportunities are not really franchises, but they are considered Business Opportunities (BizOps). BizOps are usually less regulated and can have smaller entry fees (this does not mean less expensive however) There are no ongoing royalty fees with a BizOp although licensing may be exclusive to product lines, equipment and services. Many are home based. However, be careful when choosing a BizOp. Make sure that the opportunity is tried and proven.

John is a 30 year professional of the franchise industry. He has owned them, been an executive and has had his own consulting business for over a decade helping hundreds find the precise business that gives them what they are hoping to find in their own franchise business. john@visionreachinc.com – Ph: 480.838.1641 – www.visionreachinc.com - www.linkedin.com/johnrwilsonsr

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