Behind the successful franchisee
Big-name company or not, it happens all the time: One franchisee flops, another somehow flourishes.
But a signboard bearing a recognizable logo doesn’t necessarily mean commercial success. Winning the franchise game takes discipline, goal-setting, an enterprising spirit and an ability to be both creative and willing to adhere to a tried-and-true system.
“The biggest misconception is people will buy into a franchise, open their doors and there’s going to be a lineup of people around the block to use their services,” says Rob Lancit, a franchise expert and the former president of BeTheBoss.ca, Canada’s largest online franchise directory.
“The fact of the matter is you still have to work the business.”
Here are some pointers to keep in mind: Consider whether the franchise is the right match Lancit has a saying: “One of the fastest ways of making a hobby not become a hobby anymore is to make it a business.”
That said, Lancit agrees that being passionate about something can certainly keep the job interesting.
“If you’ve got a passion around food, would a food franchise make sense? Absolutely,” he says. “If you’ve got a passion around helping people, maybe a seniors care franchise might be right for you.”
But just because you like going out on Friday nights to eat ice cream with your family does not mean you’re destined to open an ice-cream shop, warns Rick Bisio, author of The Educated Franchisee. “Think about it,” he said. “When are you going to end up working? It’s Friday nights. There goes your free time.”
Factor in the complications of working with a perishable product and that business idea may lose its lustre quickly.
Before buying a business, evaluate your skills, interests and aversions. If a core element of the business is something you don’t like to do, you’re not going to have fun. Create a business plan “If you don’t know where you’re going, the road to mediocrity is painted with good intentions,” says Gary Prenevost, one of Canada’s top franchise matchmakers.
Plan measurable, executable steps toward launching and building a business and generating positive cash flow. “The business operating plan is about achieving the objectives so the business can deliver to my personal lifestyle,” he said. “How many hours am I going to work? How much am I going to make?”
Calculating top-line sales goals means setting the bar for labour margins, rent and cost of food and comparing it with company norms.
Prenevost sees businesses as servants rather than masters. “When you train a servant, it takes a long time to get them to do exactly what you want,” he said. “Once the servant is up and running, now they’re looking after you. If I want to make $75,000 a year and work 40 hours a week, find a business where the franchisees are enjoying that lifestyle.” Secure financing After you’ve done your due diligence, tested out the product or service as a consumer and contacted franchisees to get a sense of the work involved and income expectations, ensure you can afford the business.
Franchise opportunities are at every conceivable level of investment. If you have the means, certainly finding a trustworthy private investor can be a good path because you won’t have collateral.
If it’s a bigger company, call up your bank and discuss what your access is to financing, advised Lorraine McLachlan, president and CEO of the Canadian Franchise Association. Hire a franchise lawyer Contacting a legal expert with your documents is one of the most important, sometimes overlooked steps, McLachlan said.
Ontario’s Arthur Wishart Act for franchise disclosure requires that franchisors lay out relevant information that might affect the value of the company.
“We look to see that all the elements are there . . . Part of what needs to be included is a list of franchisees that have opened or closed within the previous couple of years,” McLachlan says. “There’s also a section on litigation. A franchise lawyer has to disclose the relevant litigation they’re involved in.”
While contracts are usually already settled by this point, McLachlan says advice from a lawyer could end up saving the prospective franchisee a lot of money and heartache.
“It may cause you to decide this is not the right opportunity for you so you can walk away,” she says. Don’t go rogue With franchising, you’re buying into an established system. “That means the reason it’s been successful is because it offers these products and services in a certain way at certain standards,” McLachlan says, adding that consistency of consumer experience is a tenet of franchising.
“If you go in and think you can do it better, or differently, or introduce a bunch of new products or change the sizing, that’s not going to work,” she says. Buying a business with the backing of a brand name is an expensive acquisition because the franchisee is not expected to reinvent the wheel. “I jokingly tell people when they buy, you’re buying someone else’s mistakes,” Lancit says. “Your road map to success is laid out if you follow the system. You’ve got a support mechanism in place, and when you run into an issue you’ve got the support of a franchisor and a network of franchisees to rely on to help you bounce ideas off.”