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Researching a Franchise

Finding Your Perfect Franchise

Ten sure-fire strategies for tracking down the right one – and five things to avoid.

Gwen Moran

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Buying a franchise is more complicated – and riskier – than just picking a famous brand and writing a cheque. This is a decision that is going to require a significant investment of time and money.

To be successful, you need to find something you can be passionate about – that you’re going to enjoy doing. Getting into a franchise is a lifestyle decision. But how do you start narrowing down the overwhelming number of franchise opportunities to find the perfect one for you?

Here are ten essential steps.

1. Start with yourself
The process begins with some self-examination. You need to ask yourself what your business strengths are and what types of business activities you really enjoy.

At the same time, identify your weaknesses and what you don’t like to do. Ask yourself some key questions. What kind of lifestyle do you want this business to support? How much money do you need to earn? What hours do you prefer to work.

If you have trouble dragging yourself out of bed in the morning, a coffee franchise where you need to report at 5 am may not be the best choice. Some franchise concepts may require you to be very sales oriented and if you’re not a sales oriented person, you may find it’s not a good fit. Make sure that you understand exactly what it’s like to be that franchisee.

2. Do your homework
Narrow the choices down to a few industries you are most interested in, then analyse your geographic area to see if there is a market for that type of business.

You can work with a franchise consultant, or contact all the franchise companies in those fields and ask them for information. Any reputable company will be happy to send you information at no cost.

At the same time, do your own detective work. Search online to find all of the information you can about the company you’re considering.

Also, check with the consumer or franchise regulators in your state to see if there are any serious problems with the company you’re considering. If the company or its principles have been involved in lawsuits or bankruptcies, try to determine the nature of the lawsuits.

3. Check the money, honey
Franchise investment can range from a few thousand to tens of thousands of rands based on a variety of factors, so crunching the numbers is also critical. Look at all investment costs, including upfront outlays, monthly franchise fees, advertising contribution and royalties.

Work with your accountant and your best estimates of the future of your business and your industry.

Then, look at the capital you have available for investing. Be sure that the projections you make include enough money to support you and your family for the period of time necessary until the business becomes profitable.

4. Understand your rights
Franchisors are required to make the company’s disclosure documents available to prospective franchisees. It’s important to carefully examine this document as it includes details about the franchisor’s finances; fees, royalties and other costs; patents, trademarks and copyrights; obligations of the franchisor, and a variety of other pieces of information about the company.

Surprisingly, a number of prospective franchisees don’t take the time to read every document from the franchisor.

5. Get outside counsel
Find an attorney, accountant, or consultant who specialises in franchise matters. These counsellors have seen the different kinds of issues that can arise and don’t have the emotional investment that you have in the deal.

They may be able to spot areas you’ve overlooked or that expose you to more risk than is wise. Speak to brokers or others in the marketplace.

But make sure that you get a lot of different opinions from people other than yourself who can play devil’s advocate for you in this process, so that you’re not making a purely emotional decision.

6. Talk to franchisees
The franchisor must also provide names and contact information for other franchisees – and you must make those calls.

Conversations with existing franchisees can give you invaluable information about the actual experience of working with the company and the true impact of the brand’s advertising efforts.

Some of the questions prospective franchisees should ask include: Do the franchisors deliver on their promises? Are they providing you with adequate support? Did your investment fall in within the range that is listed in the disclosure document? Are you happy with your current returns?

How much money are you making? Do you feel good about the decision that you made? Ask specific questions: What am I doing on a day-to-day basis? Tell me what my day is going to be like. What skills do I need to have to be successful in business?

These may seem intrusive, but most will be happy to share the information.

7. Meet the management team
It’s important to become acquainted with the franchisor’s management team in person, preferably at their headquarters. This will allow you to see the entire operation and get to know the people who will be providing your support services.

The look of the office and the attitudes of the people working there can speak volumes about the company itself. You want to have lengthy conversations with them. You’re marrying these people. You have to look them in the eye and like what you see.

8. Make careful projections
Develop a profit-and-loss analysis that includes how much you would have to sell to make the royalties and other costs worthwhile.

Revenue flows from different areas, so it’s important to understand where the money will come from – and what needs to be paid.

9. Have a plan
It’s important to have a franchise business plan. For this kind of plan, the main sections include an Introduction, with a complete description of the business and the products or services involved; Management, which describes the key management roles in the firm; Marketing, which outlines how your franchise will promote itself to attract business; Financial Projections, including income and cash flow statements, and balance sheets that project anticipated financial performance; and Financing Needs, which outlines potential capital needs of the business in the period before it becomes profitable or as it begins to grow.

10. Don’t fall in love
Finally, many people buy a franchise based on emotion, without doing the proper research into the prospective market or the franchise’s history or requirements.

Falling in love with a franchise idea before you’ve done the due diligence outlined here is a recipe for disaster.

You’re quitting your job, getting rid of your benefits, taking your entire life savings, and doing something you’ve never done before. Before you do that, you owe it to yourself to do a little research. l

Take the test

I am my franchise
When it comes to franchises, one size doesn’t fit all. Your personality and natural inclinations – how you behave and make decisions – must mesh with the business you choose, otherwise you’ll be going down the wrong road. Do you see yourself as calm and consistent or creative and challenging?

Are you interested in working part-time from home while you pad around in your bathrobe and bedroom slippers? Or do crave to be the next franchise king in bespoke suits, opening that Far Eastern operation in Bali?

Our simple quiz won’t give you any definitive answers about your inner self, but it just might help you decide what kind of franchise is right for you – and which one isn’t. Consider it a start.

Quiz:
1. Which best describes your work style?

  1. Part-time or flexible full-time hours.
  2. Early to bed, early to rise, with reasonable hours in between.
  3. Love my work, so why not do it all the time?

2. Do you prefer:

  1. Work that keeps you close to home – or even in the home?
  2. Work that allows you to meet new people all the time.
  3. Work that keeps you focused on the details.

3. Your dream job is:

  1. Something you can do out of your spare bedroom.
  2. Consulting with business owners to help them succeed.
  3. Owning a restaurant or nightclub.

4. How would your friends and family describe you?

  1. The dependable one. You’re always steady, calm, and consistent.
  2. The creative one. You’re always dreaming about the next big idea.
  3. The wild one. No risk or challenge is too big.

5. When you think about where you want to be five years from now, it’s:

  1. Working in a business that allows me the time I need for other activities.
  2. Working in a growing business that provides a comfortable living.
  3. World domination – at least in my geographic corner of this franchise system.

Scoring key:
For every 1 answer, give yourself 1 point.
For every 2 answer, give yourself 2 points.
For every 3 answer, give yourself 3 points.

If you scored:
5-8: You might be best-suited for low-stress, low investment franchises that either supplement your other work or allow you to work part-time. Investigate home-based franchises or those that require minimal investment in the location.

9-12: You understand the hours it takes to run a business, but you don’t want it to overtake your life. Look for well-established franchises with good track records. You might want to avoid those that require odd or long hours, such as food service or entertainment franchises.

13-15: You’re a wild child, ready for anything. If it’s risky or overwhelming, bring it on. You may be well-suited to franchises that allow you to express your dynamic personality and love of people. Just be sure that you’re not biting off more than you can chew – never skip doing the all-important homework before you jump in.

Gwen Moran is co-author of The Complete Idiot's Guide to Business Plans.

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Researching a Franchise

5 Strategies For Franchise Leadership Development

Follow these steps to develop the most effective leadership skills for your franchise business.

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franchise-leadership-development-mcdonalds

In my most recent article, I identified the five primary departments that make up every business: Leadership, finance, operations, marketing and technology.

The most important of these is leadership. The experience, business acumen and commitment of company leaders have a greater impact on the outcome of the business than the other factors.

Apply these strategies to create a leadership development plan for your franchise business – or for any other kind of company, too.

1Develop a clear vision and plan

Many companies suffer due to the lack of a plan. This leaves the team to struggle for direction and spend time putting out fires instead of taking constructive action. This is like taking a journey without a map.

The first step is to write down the company leadership vision. Be specific and include job descriptions and action items.

Related: How Body20 Moves Their Franchisees In The Direction Of Success

2Choose your model

I always say that it is critical to identify your operating system and adapt the business model accordingly. Your operating system is what makes you tick? For instance, if you have experience and work better in the field than behind a desk, you may be more effective as a hands-on trainer than as an in-office resource. In this example, you may choose to have others run the office duties.

3Examine your current team

One of the more painful consulting duties I have had over the years has been the duty to reposition or remove team members. This can be especially difficult if the individual is a friend or family member. Make sure each member of your team is the most qualified for the position.

Don’t be afraid to make necessary changes for the good of the overall company. Be selective as you add people to your organisation to make sure they are a good fit and have what it takes to help your company thrive.

Related: Savvy Sales Skills To Grow Your Franchise Footprint

4Get outside help

I frequently hear from my clients that they don’t know what they don’t know – they don’t know where to start or what they need to learn. Leadership is one area that has many resources for ongoing education and development. Recently, I attended the Multi-Unit Franchise Conference in Las Vegas.

One of the most successful multi-unit franchisees stated that the most important strategy he has implemented was signing up for a leadership training and development program.

5Use technology tools

Engagement and implementation are the most important factors of any business system. Technology tools can enable you to make sure that the leadership key performance indicators (KPIs) are executed and are being tracked. You will want to make sure that the technology tools also help you implement the important leadership development tasks and behaviors on all levels of your organisation.

Becoming a great leader may seem to be a daunting undertaking. Remember that every great leader started out the same way you did, and you are still writing your success story.

Related: Why Digital Isn’t Enough To Attract (And Keep) Every Customer

One of my favorite examples of leadership that I wrote about in Franchise Bible, 8th Edition contrasted the difference between inspiration and motivation. I was the CEO of my second franchise organisation, and I was talking to one of our franchise owners on the phone about my leadership style and strategy. I told him that I identified that I needed to be a motivator. He quickly corrected me by saying “we don’t need a motivator, we want you to inspire us.”

It is critical to be an inspirational leader for your business to thrive. Each member of the community needs to look up to you and your team. They need to turn to you when things get tough.

This article was originally posted here on Entrepreneur.com.

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Researching a Franchise

3 Books Every Franchise Buyer Needs To Read

With technology disrupting the world of franchise, use the tools from these three books to stay innovative with your business.

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There are many new authors in the franchise and small business category that have written some very helpful books for our industry. Recently, I have been asked to recommend books to help franchisors and franchise owners.

Take a look at the following books:

1Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne

Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne

I have been coaching some very innovative new companies lately that are bringing new technology, business models and marketing tools to the franchise world. Some of these businesses are creating a whole new market. When I identify companies like these, I always suggest that they read Blue Ocean Strategy to further develop their skills and vision. This book is a paradigm shift for many business owners that focus on moving in the direction of untapped new markets, or “blue oceans,” instead of going head-to-head with the competition in “bloody red ocean” existing markets.

Related: Should You Purchase An Existing Franchise?

2Brick and Mortar Franchise Success by Carolyn Miller

brick-and-mortar-franchise-success-by-carolyn-miller

This book is a must-read for anyone that is opening brick and mortar locations. In her book Brick and Mortar Franchise Success, Carolyn Miller identifies the industry tips and gold nuggets to save money and time before, during and after the build-out and construction phases of a new business.

Many of my clients have benefited in a very tangible way from this book. Franchisors will find many strategies that can immediately be implemented to better train and support franchise owners as they prepare to launch. Franchise owners can use this book as a guide as they move through site selection, assemble their construction team and initiate their pre-opening steps.

3Millennial Millionaire by Bryan M. Kuderna

millennial-millionaire-by-bryan-m-kuderna

I recently wrote an article about the millennial generation and what is important to consider as a franchisor if you seek to recruit these individuals. This led me to meet the author of Millennial Millionaire, Bryan Kuderna. Kuderna is a Certified Financial Planner with a goal to educate young professionals in the area of financial literacy. This book will help you understand the priorities, beliefs and lifestyle of this generation as well as reveal some solid financial strategies.

During my research for Franchise Bible, 8th Edition, I found that the franchise industry has changed in many ways over the years. Technology has had the biggest impact by modifying buying behaviors. Not too many years ago, franchise buyers would find an opportunity in Entrepreneur magazine or by attending a franchise expo in-person.

Related: Owning A Franchise – Good Idea Or Bad Idea?

They would then go through the franchisor’s respective step-by-step process to qualify, purchase and launch their franchises. But today, buyers can find a plethora of information online about nearly any franchise they want to learn about. This has leveled the playing field for new innovative companies to compete favorably with the “big boys” in the marketplace. Now, the more creative and tech-savvy companies have the advantage instead of the ones with largest budgets.

Franchise operations have also shifted quite a bit due to technology. Franchisors now have more information at their fingertips than any other time in history. This enables them to offer better training such as video operations manuals, ongoing educational webinars and a variety of dynamic tech tools to gather critical stats.

These changes have made it more important for franchise leaders to learn as much as possible to gain a competitive edge and stay relevant in an ever-changing business world. The books that I reviewed in this article are a great starting point. But, remember that innovation is the key to growing in the modern marketplace. Now is a great time to get your team together to create leadership and marketing strategies using these tools.

This article was originally posted here on Entrepreneur.com.

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Researching a Franchise

Start A Service Franchise: Cash In On These 3 Successful Models

If you thought all the money was in fast food, think again. Consider switching your focus to a service franchising as a profitable business investment.

Diana Albertyn

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sorbet-store

There are important considerations to make when choosing to buy into your first franchise. Sure, everyone’s going for the restaurants, grocery stores, and other product-based concepts, but is that really where the money is?

“The franchising services sector has shown healthy growth despite challenging economic times,” says Sybrand Bezuidenhout, business development manager franchise: services, Barclays Africa Group.

“All indications are that it will continue to grow and positively contribute to the economy – especially if franchisees focus on providing quality products and top-class customer service.”

Related: 4 Types Of Business Models

Take advantage of ‘the lipstick effect’ – where consumers are more likely to spend on little luxuries such as lipstick (or renovating instead of buying new homes, or keeping their cars for 10 years instead of five) as opposed to making big purchases in dire economic times – by investing in the following service franchises, to experience good returns, even when product franchises aren’t:

1Harness the power of pampering

woman-getting-manicure

When money’s tight, consumers tend to cut down on so-called ‘luxuries’, but they don’t deny themselves the odd indulgence. People still strive to spoil and pamper themselves, the difference is the price tag.

“The change is seen in what their hard-earned money is spent on,” says Bezuidenhout. “For instance, rather than going to a spa, a woman will choose to get her nails done. That way, she still feels she is treating herself, but at a fraction of the cost.”

Sorbet, a branded chain of health and beauty salons, nail bars and dry bars, is on almost every corner for a reason – people are using its services, even when disposable income is low. It not the cheapest treat, but also not the costliest.

2Build a future-proof franchise

A recession isn’t the ideal time to start renovating or building your dream homes, but a wise franchisee knows that it’s not when you start a construction services business, but where. ‘Location, location, location’, so goes the real estate adage.

Related: 3 Types Of Ecommerce Business Models

Have you noticed a suburb where newly built complexes and houses are springing up lately? This could be your new premises. “Building franchises specifically, perform much better in these because home owners are more likely to undertake work on their homes,” says Bezuidenhout.

Silverline Group provides construction services including architectural support, detailed shop drawing design, structural engineering, quantity surveying, distribution, and construction.

3Older cars, more servicing

older-cars

As the fleet of cars on South Africa’s roads get older, auto services franchise groups are soaring in popularity. You can join them if you effectively market your competitively priced services as a viable alternative to dealerships.

Related: How Women Entrepreneurs Can Change the SA Business Landscape

“Even if the economy shows unexpected recovery and growth, the auto services franchise industry will still thrive as higher disposable income will see a new wave of entry level consumers who will replace those customers who upgrade their vehicles to new ones under maintenance plan,” explains Bezuidenhout.

Car Service City, specialists in affordable service and repairs, is fast becoming one of South Africa’s leading car servicing groups, according to FASA. Its rapid growth is owed to exploiting a gap in the market and running with it.

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