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Paint franchises: One size fits … some
ccording to IBISWorld, the total number of paint franchisees in the U.S. is expected to grow to 1,558 by 2022. While the growth for the franchisor appears modest—up just 70 franchises from 2018—the potential impact of the opportunity for the individual aspiring franchisee is significant.
Weighing your options According to Mark Gandy, founder of G3CFO, a financial consulting firm for small businesses, when deciding whether or not to go with a franchise, “There’s no right or wrong answer. There are just consequences. Depending upon your personal and professional strengths, a franchise can be a great or not-so-great fit,” says Gandy. “A franchise can fill in weak areas by providing ready-to-go systems, etc. But if you’re someone who likes to innovate, the restrictions can be limiting. It’s not the business model for the fearless innovator.”
Finding comfort in the proven When Michael Dodick retired from the military, he knew he wanted to start his own business. But even with his military experience and an MBA in hand, he didn’t want to start from scratch. “I liked the idea of not recreating the wheel,” says Dodick. “As I saw it, a franchise could give me a good boost in getting my business launched. That’s one of the key reasons I decided to go with Five Star Painting.” Operating out of New Orleans for the past two years, Dodick also likes the fact that if his business is successful, he can ultimately sell it to a crew member or another interested individual. Dodick is also a fan of the support provided by Five Star. “I have weekly calls with an internal support person and I talk to other owners every day or two just to compare notes. I never feel like I’m out there alone. There are some limitations—like the logo is sacrosanct, there are reporting requirements, and I’m in a 10-year deal—but for me, the upside of not having to try and build something makes it all worth it.”
Recognizing the risks Unfortunately, not all franchise stories go as well as Dodick’s. Depending upon your understanding of and experience with running a business, the provided training may or may not be enough to truly get you started. If you’re not systems savvy or simply like to make your own rules and do things your own way, the franchise path can be long, frustrating and/or expensive. 10
inPAINT | Nov/Dec 2018
It’s also important to recognize that signing on with a franchise doesn’t guarantee you an instant pipeline full of work. While the franchisor may provide the branding and back-end systems, it’s up to the franchisee to drum up qualified leads and follow them through like any other business owner. Some associated expenses, like local advertising costs, may not be included in your agreement with your franchisor.
Doing your due diligence As a mentor for SCORE, a nonprofit resource that provides mentoring and education to small businesses, Len Briskman spends a lot of his time advising individuals considering buying or selling franchises. His first piece of advice is this: “Talk to as many franchisees as you can. Call at least six, if not a dozen. You want to be sure to ask how their relationship with the franchisor is and how long it took them to break even. Of course there are factors that will influence one person’s business versus another’s but if seven of 10 franchisees took 18 months to break even, you may want to rethink your decision.” Briskman also advises potential franchisees to review the franchisor’s financial disclosure document carefully. Typically provided when talks start to get serious, this document can shed light on how many franchises opened in the past 12 months and how many closed. It will also list how many lawsuits are outstanding against the franchisor. “You really need to read this document carefully and share it with your legal counsel,” he says. Briskman, who has managed several franchises, notes that franchises are far from a sure bet. “While it can provide a lot of structure for your business, it’s still up to you to really build it.”
“There are some limitations ... the upside of not having to try and build something makes it all worth it.” —MICHAEL DODICK, FIVE STAR PAINTING