So, you wanna be a franchisee?

Yesterday, my friend called me and told me he was going to open a franchise. He said that his cousin's friend's uncle had a great deal on a new franchise brand and he could get in on the ground floor if he acts now! I waited a beat or two before replying then asked if he had ever run a franchise business, to which he said, "No," so I asked him the Big Question:, "Do you understand what franchising is?"

"Of course," he said. "Franchising is a business model where a franchisor grants the right to use its brand, products, services, and operating systems to a franchisee in exchange for an initial fee and ongoing royalties.

Great, that's a good start, so then I asked," Do you understand the positives vs the negatives of franchising?" I told him that the positives of owning a franchise were having:

• Established brand recognition and reputation.
• A proven business model and support from franchisor.
• Access to training, marketing and operational resources.
• Potential for higher success rates compared to starting a business from scratch.
• Potentially lower risk compared to starting a business from scratch.

Negatives, however, were:

• Limited independence and control over business decisions.
• Fees and royalties to be paid to franchisor.
• Restrictions on products/services offered and how the business is run.
• May require a significant initial investment.
• Limited ability to differentiate from other franchise locations.

As he thought about it, he started to have some questions about some of the negatives like the limited independence and restrictions parts. Now, he was getting a bit concerned about his "Great" deal so he asked, "How do I pick the right partner?"

I was happy to tell him to consider:

• Market fit: Ensure the brand is well-suited to your target market and has a proven track record.
• Franchise support: Consider the level of support and training provided by the franchisor to franchisees.
• Financial performance: Research the financial performance of existing franchise locations and the franchisor's track record.
• Franchisee satisfaction: Ask existing franchisees about their experience with the franchisor and their level of satisfaction.
• Brand reputation: Consider the brand's reputation and public perception.
• System flexibility: Determine if the franchisor's systems and processes are flexible and adaptable to changing market conditions.
• Territory: Assess the franchisor's territory policies and ensure they align with your growth plans.
• Cost: Evaluate the franchise fee, ongoing royalties, and other costs associated with the franchise.

The next steps would be to thoroughly review the franchise disclosure document (FDD), attend a discovery day and talk to franchisees, industry experts, and legal and financial advisors before making a decision.

Additionally, consider the franchisor's history, stability, and experience in the industry. A franchisor with a long history of successful franchise operations and a strong commitment to ongoing support and training is often a good indicator of a strong franchise opportunity.

Solid franchisors will offer:

• A proven business model: The franchisor should have a proven and successful business model with a track record of stability and profitability.
• Support and training: The franchisor should provide comprehensive support and training to franchisees, including ongoing operations and marketing support..
• Financial stability: The franchisor should be financially stable and able to provide ongoing support to franchisees.
• Franchisee satisfaction: The franchisor should have a high rate of franchisee satisfaction, with franchisees reporting positive experiences and strong relationships with the franchisor.
• A good brand reputation: The franchisor's brand should have a strong reputation and be well-regarded in the market.
• Flexible systems: The franchisor's systems and processes should be flexible and adaptable to changing market conditions.

This was a lot of information to process all at once, so I told him to go home and think it over and we would talk again. I guess if there is a moral to this story it is "Look before you leap, think carefully, and weigh the potential consequences before making a decision or taking action."

It encourages caution and encourages taking a moment to reflect before acting impulsively. Just because something is labeled as a "deal" does not necessarily mean it's the best option for you. It's important to thoroughly research and compare all options available, considering factors such as quality, value, and total cost, before making a purchase or investment decision.