Small Business Blog

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“I know other franchisees have failed, but that doesn’t mean I will.”

You know, you’re right. You can still succeed in a franchise even if the business has a high failure rate. But don’t make the assumption that because you’re smart, you’re going to make it. Why? Because this assumption can cause you to gloss over the hard-hitting questions you should be asking about a small business franchise opportunity, such as: (continue reading…)

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“Well I don’t have any sales experience, but I’ll just have to learn. My franchisor will give me the training and coaching I need, so it’ll work out.”

By law, franchisors have to spend a certain amount of time training you to be a franchise owner. This training generally covers basic topics related to running a business, plus any specialized skills related to the franchise’s specific operations. If the business requires you to cold call and sell, you will be given sales training. If the business requires you to use specialized equipment, you’ll be introduced to that. If you will need to hire and train staff, you will be shown how to get those tasks done as well. You’ll also be given an operations manual that outlines most of what you need to know to run the business.

While training is a good thing for any profession, you do have to approach it with realistic expectations. (continue reading…)

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“The Franchisor wants me to be successful. With that kind of support, I can power through any business challenges that come my way.”

Here’s where I have to tell you more about our franchise story: we still own and operate the franchise we purchased. After a terrible first year, we turned things around to achieve moderate profitability. It’s not the kind of profitability you dream about; it has to be healthily supplemented with other lines of business to be even worthwhile. But we found a way to make it work. And frankly, the support of our franchisor was not a factor in the turn around. In fact, at times, we went directly against the advice of our franchisor. I can think of two specific pieces of franchisor advice that would have likely put us out of business if we had followed it. There have been times when I truly wondered if franchisee churn was the franchisor’s true business model.

The reality is, franchisors only care about your success in as far as it facilitates their success. And this is not really unreasonable. You would do the same thing. If you had a choice between firing yourself or firing an employee, for example–you’re going to fire the employee, right? In the same token, your franchisor will, at the end of the day, pursue its own success. Even if that negatively impacts you and your business.

Real-life scenario (continue reading…)

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“The Franchise Disclosure Document provided me with extensive detail, including costs, of running this business — based on those details, I know I can turn a profit from this thing.”

When you are researching a prospective franchise business, you are provided with a pile of paperwork. Pages upon pages of official-looking documentation that details your upfront and ongoing costs and other issues particular to the business. This documentation is prepared by lawyers and filed with the state. And still, believe it or not, that documentation may be entirely misleading.

Operating and start-up cost estimates can be particularly problematic. Since the franchisor can’t legally give you detailed income statements and balance sheets for every franchisee, you get averages and ranges. If you don’t think carefully about how far off an average can be from true experience, your franchise business may be sunk before you even open the doors. On top that, the franchisor may not be diligent about collecting information from every single franchisee in the system. In reality, the most successful franchisees are the ones most likely to report their information. This would skew the range away from being credible and reliable. (continue reading…)