Why Buy A Franchise

By Joe G. White | FranChoice Inc.

Your Uncle May be Wrong About Advising You Not to Buy a Franchise

It amazes me how many so-called business advisers, like my Uncle Bob, know so little about franchising but are always ready to give advice without knowing the facts.

I am often asked what the best franchise to buy is. Where can I make the most money? What is the hottest brand? The answer I give every time to these questions is: I do not know because I do not know you and what is right for you. It might be easier to ask why people buy a franchise versus just starting their own business? Now that is a great question. There are a number of misconceptions around franchising that need to be erased. Here are just a few erroneous ideas:

• Buying a franchise is like buying a job. You will never be able to resell your job or take advantage of the goodwill you created in your job. The race to success is always better in the long term in franchise business ownership.

• You have to pay royalties. Yes, you do, and all royalty streams are not created equally. But you need to look at the value proposition and understand that royalties are no more than a line item on a balance sheet; it is the cost of doing business.

• I know someone who failed in a franchise because they (fill in the blank). Yes, people do fail in franchising, but it is believed that well over 80% of the people who start a franchise are still running and growing these businesses 5 years down the road. Okay, how many non-franchise businesses are still in business 5 years down the road? I often hear that it is less than 20%. Or even better, how many people will have their job in five years?

SO WHY BUY A FRANCHISE BUSINESS?

1) The safest path to entrepreneurship for many is the franchise system, which allows first-time business owners to avoid the traps and mistakes of starting a business. This can be from marketing to sales to accounting to networking to existing national accounts and a brand that is established or growing. Question: how long would that take to do all of that on your own?

2) The investment is often viewed to be a lot safer. The failure rate is commonly believed to be much lower, the investment is typically a lot lower, and the opportunity can be bigger depending on the choice in selecting a franchise.

3) Personal and professional development. This is seldom thought of as an advantage, but there is much you can learn about business as you appreciate the value of what you've grown. In fact, investing in your own business can reap a much bigger reward than taking an MBA. I recently had a family purchase their son a business. The parents deemed there was much greater learning value for the son in running the business. I remember chuckling when the investing father told me it would be his experiential MBA. As a side note, this business is thriving and growing, and the son has repaid his father the investment and is looking to open a second territory.

4) It is often easier to get funding. Banks and lenders like a proven system and a franchise business plan. They know its success chances are typically higher and thus less risky.

5) Start-up costs can be less. Remember, you are looking to buy into a proven system, and all you should have to do is apply the model and work at it.

6) A more flexible lifestyle. Do not be confused about this; you still have to work hard and drive the business, but the decisions you make to attend a family event or work late or not are yours and your schedule to run. You never have to answer to the boss because it is you.

7) Training, support, and direction become cornerstones of the franchisor's commitment to your success. Remember they should be fully invested in your success, and, in the long term, the royalties they obtain from helping you grow the business usually far outreach the money they may make on the franchise fee.
This is why franchising can be an exciting entrepreneurial partnership.

8) This is a regulated industry, and as such, the franchise companies must comply with the laws around franchising, and they can be held accountable for the promises they make. They are required to fully disclose to the buyer how the business is run. This eliminates a lot of surprises generally associated with a start-up business.

9) Pride of ownership. It is nice to say, "I own this" or "I built that," and this is my business.

This is why, when you step back and truly understand franchising, you might ask a different question like how do I learn more about this huge business category and where do I fit in?

Joe G. White is a Franchise Consultant at FranChoice Inc. He provides professional advice to people looking to engage in franchise ownership.

Contact Joe at 647-724-0742 or jwhite@franchoice.com for more info, or click here to schedule an appointment.