Furthermore, the lending shortfall for franchises (that is, the difference between projected loan demand and loan supply) is expected to be one-half that of last year’s figure.
And yet, how frequently do you hear the statement, “I don’t like franchising, because I don’t like fast food?”
One of the most common misperceptions is that franchising equals restaurants. Franchise coach Rick Bisio hears that erroneous sentiment all the time and writes, “Indeed, according to the International Franchise Association there are currently more than 750,000 franchise establishments in the United States covering approximately 75 industries.”
Just as we happily share our vast point of sale experience and expertise with startup owners in order to help them make the best decisions from the very beginning, we at Sintel Systems are happy to share articles and commentary about the perceptions and reality of the risks involved in a career change into franchising — a major area of our point of sale (POS) expertise.
In a recent Entrepreneur.com blog post, “Before You Jump Into the World of Franchises, Ask Yourself These 5 Questions,” Bisio writes, “So while there are the Paneras of the world, there are also big-name franchises like 7-Eleven, Meineke, and SuperCuts.” He added, “And while these well-known chains can represent excellent franchise investment opportunities, they are not for everyone.”
Bisio advises prospective franchisees to not just focus on big, recognizable brand names. Instead, he encourages them to identify a proven concept that fits their skills, lifestyle objectives and needs. “To embrace that mindset, answer these five questions”:
1. Does the brand allow you to take a deep dive under the hood?
– The most important component of the due diligence process is to research your targets in depth.
– Does the franchisor hand select franchisees for you to call and get feedback about the company, or do they provide you with access to the full list?
– Do they give you their Franchise Disclose Document immediately after the first call, or are they reluctant to share it?
– How does the company respond to what customers and franchisees say about the brand online?
– Seek out companies who value transparent, open relationships with current and prospective franchisees — as well as their customers.
2. Is the industry itself poised for success?
– Bisio says many people consider franchising an industry, but it’s not. Franchising is a business model used by companies in 75 diverse industries. “Take a deeper look into the market within which your franchise targets operate and make sure it’s trending upward,” he writes.
– For instance, Bisio says multiple industries have benefited from healthcare advancements and our aging population. “There are obvious examples, like senior in-home care franchises, and less obvious ones, like shelf-installation franchises that help seniors stay at home longer,” he writes. “Do your research and explore the industry at large.”
3. How well do your skills match the needs of the business?
– How well does your career experience and personal skill set match up with the daily tasks associated with running the specific franchises you’re exploring?
– Bisio’s example: A service franchise that requires owners to sell the business personally wouldn’t be a good fit for an operations executive with little sales experience.
4. Can you afford the franchise businesses you’re targeting?
– Bisio says this is where many conversations about owning a franchise end — particularly conversations about restaurants.
– Restaurants, and other businesses that operate from brick-and-mortar storefronts, can be quite expensive, as they require a real-estate lease and build-outs, not to mention investments in equipment and staff. Even the cheapest storefront franchises typically cost more than $150,000.
– Non-storefront businesses that operate from an office, warehouse or home can be significantly less expensive, so Bisio advises that franchise hopefuls explore proven, home-based models that they can own without a staff and brick-and-mortar location to minimize costs.
5. Will you be happy actually running the business?
– Bisio says this is a question far too few potential franchisees ask.
– Bisio’s example: Many prospective owners believe they would love to own a golf store because they love to play golf, however, owning and operating a golf store requires exhausting hours spent managing employees, stocking shelves and interacting with customers. “Running a golf store means less time on the golf course, not more,” he writes. “Make sure you’re buying in because you’ll enjoy running the business — not because you like the products the business opportunity offers its customers.”
“So, remember, choosing the right franchise requires far more than simply picking a popular restaurant brand,” writes Bisio. “Do your homework and make sure the brand fits your needs, personality and skill set,” he concludes. “If you focus on those five questions early and devote yourself to a thorough due diligence process, you are much more likely to turn your new franchise into a powerful financial asset.”
Read Rick Bisio’s full Entrepreneur.com post here.
For more insights into the franchise-seeking mindset, check out our related posts, A Franchise Personality Fit For A King, Asked and Answered: 107 Franchisee Questions for Franchisors, and Franchisees Have It. Got It?
Sintel enhances our customers’ success by turning point of sale data into strategic decisions, allowing larger franchises to grow and providing startups the foundation for future growth from the very beginning by acting as a franchise incubator, nurturing their businesses for the long haul.
Don’t wait until late in the game to plan for your point of sale system. The benefits of establishing an early relationship with your point of sale company are many — not just in demystifying the process and determining the optimal system, but even before you decide on a franchise direction.
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