Franchise Information Blog

Buy Into a System

June 19, 2007 at 11:42 am | Posted in Be your own Boss, business, business ownership, franchise, Master Franchising, small business opportunities, Work from home | Leave a comment

 When Joe Grimand first opened a Precision Tune Auto Care franchise 25 years ago in Oklahoma City, he didn’t know whether the new venture would be successful.

He was a highflier but not as an experienced business owner or executive. He had just left the U.S. Air Force, where he was a combat pilot in Vietnam, among other assignments.

But Mr. Grimand was committed to his new business and worked long hours. His efforts paid off. He now runs eight Precision centers in Arkansas and Oklahoma, each generating $600,000 or more in annual sales.

“Looking back, I never thought it would grow to what it is now,” says Mr. Grimand.

Franchising can be a fulfilling and financially rewarding career for some. Franchises generate approximately $1 trillion in annual sales in the U.S. per year, according to the International Franchise Association (IFA), the industry’s primary trade group, based in Washington, D.C.

More than 320,000 U.S. small businesses are operated as franchises, in 75 different industries, employing approximately 8 million people. One of every 12 retail business establishments is a franchised business, and sales from franchisees account for 40% of all U.S. retail sales, the IFA reports.

Franchisees, who operate their businesses according to the original parent company’s established system and format, reportedly have a higher rate of success than owners who start from scratch. But franchises aren’t for everyone who dreams about leaving the corporate fold. The similarities between owning a franchise and owning an independent business are limited.

Katherine Fein of Fran Mart Connection, a consultant to potential franchisees based in Atlanta Georgia, notes the two main similarities: “You have to have the entrepreneurial spirit to quit your job. And you get a check only after you make money.”

However, she notes, “franchising is about being in a system, and, once you are in a system, you cannot change it.” For this reason, creative and independent types may chafe as franchisees.

Buying into a System

But not all of us wake up in the morning with a great idea and know how to make it into a business. Franchises know they need people who have motivation and a dream. Franchisees have time, talent, skills energy and desire. But they don’t want to spend years building an idea.

Some entrepreneurial personalities may bristle at rules about the hours franchisees must stay open, the color of paint they use in their units, or even the appearance of their delivery trucks. If you want to put a giant plastic bug on top of the truck as an advertising symbol, and the people at the franchise don’t agree to it, you have to deal with it. You can’t just go out and do it. The franchiser cannot be responsible for your success.  “They are there to support you, not do the work for you,” said Katherine Fein of Fran Mart Connection.

Do You Fit the Profile?

The typical prospect she advises is an experienced corporate manager or executive, age 35 to 65, who wants to escape the drudgery of working for someone else.  Most prospects want to spend about $150,000, with many financing the purchase through home-equity loans, says Katherine Fein of Fran Mart Connection.

Franchise coaches help their clients examine their interests, goals and personality types. Once clients define their business and career goals, coaches brief them about the franchise business.

Matchmaking

Franchise consultants can help prospective franchisees to sift through the thousands of opportunities available and to see whether they are a good fit. “We help them articulate what it is that they want to do,” says Katherine Fein. “We help them determine what their goals are, and use that to identify what franchises are a good fit for them. Our ultimate goal is to find a perfect match.

“Katherine Fein stresses the importance of researching a franchise thoroughly before making an investment. “You really have to do your ‘due diligence’ with a potential franchiser,” she says. “It’s like being a part of a football team in the end. The franchiser is like the team owner or coach, and you have to stay within the rules of the game, or go find another game to play.”These franchise coaches don’t charge would-be franchisees a fee. Rather, the franchise company the prospect signs with pays the consultants. “We’re like real-estate agents,” says Katherine Fein. “Our service is free to the candidate.”

By J.G. KOPROWSKI