Industry

Why Franchising?

Did you know the franchising industry is the single largest employer in the U.S. next to the federal government?  While as many as 90% of private businesses fail each year, the numbers are opposite in franchising.

People invest in franchises to buy down risk and buy up the learning curve and breakeven. Why reinvent the wheel when there is a proven model to follow?  Successful franchise systems have already paved the way. As a franchisee, you can leverage their experiences to help ensure your success and avoid unnecessary pitfalls along the way. 

Michael Gerber, author of "The E-Myth Revisited," refers to this as "The Turnkey Revolution." It's proof that having a successful business model and a recipe for success is worth their weight in gold.

Most people think of food when they think of franchising. However, over 4000 franchise brands exist today, spanning 100+ industries, and covering every ownership model and investment level you can imagine.

 

These include blue-chip companies, high-growth or emerging brands, startups, and even future concepts that haven't yet launched. 

Is Franchising Right For You?

Frequently Asked Questions

Other Resources

Is Franchising Right For You?

Let's start with your motivations.  Why franchising and why is now the right time for you to do this? Next, we need to figure out if owning a franchise will help you achieve your goals and objectives? And if so, does it fit into your current work, family & lifestyle preferences?

 

Do you want to keep your job or transition out?  Do you own other businesses? The answers to these questions and more will tell us if the pursuit of franchising makes sense for you.

 

Your Role

Another critical piece of the puzzle is finding the right ownership model for you, which will determine your role and lifestyle as the owner. There are a variety of options to consider, each with its own benefits. Here are a few examples:

 

  • Self-Employed: Work for yourself, eliminate employees and replace a job

  • Owner Operator: Fully involved, hire a team and serve as the primary manager

  • Executive: Serve as CEO, grow a large business, scale back involvement over time

  • Semi-Absentee: Hire managers, invest 15-20 hrs/week on the business, open multiple units over time

  • Absentee: Low to no employees, 2-5 hours per week, potential real estate play 

  • Area/Regional Developer: Multi-unit focused, protect a large market, build a legacy

  • Master Franchisee: First to market movers, heavily involved in franchise sales and support, generate royalty income

 

Frequently Asked Questions

 

What Does It Take To Be Successful?

Your ability to follow a proven system will ultimately determine your success. The advantage of buying a franchise is it comes with a blueprint; make sure to use it! Your previous experience managing a business and leading people goes a long way toward success. And the combination of that experience paired with the proven processes and best practices established by the franchisor can create a powerful partnership.


Will I Qualify for a Franchise?

Like any profitable business, a franchise company will want to populate its system with great people. Since franchises are strong, consistent brands, franchisors look for owners who will present the brand in the most favorable light. They also want people who can learn the system and work within specific parameters.

 

There are four main areas franchisors emphasize in their qualification process:

 

  • Capital- All franchisors have a minimum net worth and liquid capital requirements to ensure you can support the business financially until it becomes successful.

  • Personality- Are you willing to follow a system? Do you enjoy working with people? Are you focused and decisive? Do you enjoy solving problems? Are you hard working? It matters.

  • Skills- They want customer-focused owners who can lead a team and understand financial concepts. They are evaluating your business understanding and ability to execute.

  • Experience- Most franchisors prefer franchisees without industry experience because it is hard to overcome bad habits. They care more about you, your skills, and your experiences.


How Much Does It Cost To Buy a Franchise?

There are almost as many answers to that question as there are franchise businesses. An essential step in the process is understanding all the costs involved. Think in terms of total project costs, not individual fees along the way. Include expenses such as franchise fees, build-out costs, advertising, equipment, inventory, working capital, and post-closing liquidity. All of this information will be available to you through the investigation process.


How Much Money Can I Make?

Your income, like your success, relies on your ability to execute.  Generally speaking, market investors can earn 10% to 15% on their money with passive investments. Since most franchises require you to invest your time and money, you should expect a significantly higher return to justify the investment. As part of the validation process, you'll be able to ask these money questions and learn first-hand how their franchisees are doing.