Start Business Franchise

There are thousands and thousands of franchise opportunities in the United States. Many people consider becoming a franchise owner as a way to transition into owning their own business. It allows them to own their own business without having to start it from scratch. This approach, start business franchise, SOUNDS less risky and more like of a sure thing.

I haven’t personally owned a franchise, but my brother did and so do a couple of my good friends. My brother’s franchise attempt was VERY unsuccessful, but my two friends have been extremely successful with their franchises. What’s the difference? Why are some successful at start business franchise while others fail?

What is a franchise?

According to Webster’s Dictionary franchising is:

“The right or license granted to an individual or group to market a company's goods or services in a particular territory.”

The key words in the definition are ‘to market’. Most franchisers are looking for franchisees to market their product or service. So the key skill you need to have is the ability to market their product in your region or niche.

The people I know who have had successful at start business franchise are great at SELLING. They’re good at bringing the product to market. Conversely the people I know who have failed where not great at marketing/selling, but they had other skills that weren’t utilized as a franchise owner.

Can you start business franchise successfully?

The short answer to this question is yes, if you are good at selling and you have enough money to get into the program. Both are essential for success.

Most good franchise opportunities will cost a minimum of $50,000-$100,000 to get into, not including the time and energy you’ll to spend to get the business to be profitable. You should probably assume it will take you two years to become profitable and four years to recoup your initial investment. But after that if you’ve chosen a good franchise and you like the business you’re in you should be good to go!

If you don’t have the money and can’t wait the two years to become profitable you should probably NOT buy a franchise. Why? There is one thing that’s certain, the franchiser will get paid!

Most franchise agreements are totally biased for the franchiser. Some laws have been put in place to help protect the franchisee, but its not much protection. Once you sign the franchise agreement you owe the franchiser ALL of the money specified in the agreement. They may force you to sell everything you own to pay them, so be very careful!

Why some fail at start business franchise

The most common reason people fail at a franchise is they lose money. It’s that simple. The amount they owe the franchiser, plus their other expenses, is more than the cash they’re bringing in.

I was working in one of my dad’s grocery stores as a kid, and the family in the store next door had a brand name ice cream franchise. The family worked morning, noon and night and tried and tried to make it. They failed.

Why? There were some major areas of concern. First they failed because they had the wrong location. The businesses needed to be in a location with a lot of walk-up traffic, but that was not the case. Also, they weren’t good at merchandising. They hated the long hours they HAD to work. Another contributing factor was weather. The store was in a northern state, and because of that there are many months of the year when people don’t walk up to the store for an ice cream cone. They tried to add some food items, but it didn’t work.

This is a pretty common scenario with franchising. Always remember that the franchiser gets paid and the franchisee (who does ALL of the work) loses all of their money.

What to look for to start business franchise

How can you avoid failing if you chose to go into a franchise business?

- Invest is a strong franchise, one that many people have heard of

- Make sure you have the right skills for the work that needs to be done; if you don’t like sales don’t go into an investment or insurance franchise

- See if they have a trial program so that you don’t have to invest a huge amount before you know if you’ll be successful (My brother did this and it saved him $200,000 and his house)

- Actually visit successful franchise locations and spend time learning why they are successful. Make sure to be HONEST in your assessment. Are they REALLY making money or is someone actually funding the business?

- Is there a good match between your skills and the daily requirements of running the business? For example, if it’s a cleaning franchise do you like to clean, manage people and get new clients? If not DON’T DO IT, you’ll be miserable and probably fail!

- Do a financial plan and DON’T vary from it. Most franchisers take 6%-8% off the top. That means you have to produce 18% return to make a reasonable profit. With many businesses it’s almost impossible to produce that level of return, so be careful!

My advice only franchise if you HAVE to

My advice is only franchise if you have a lot of money to invest and you can buy into an extremely successful franchise like Taco Bell or Culver’s. There many be no other way to get into the business you’d like to be in; like insurance, auto repair tools etc.

Try to figure out a way to get into the business yourself so you get to keep all of the profits of your hard work.