Check Your Franchise buyer profile

Which Franchise buyer profile am I ?

 

For every franchisee story about a concept, there is a franchisor story about the operator. Industry experts have categorised and analysed them from both perspectives with some interesting results shown below. I could not help but add my own observations. Want to know who you are ?

 

This is the guy who wants to own a franchise, let someone run it , and carry on with his other business or his job which he does not like but wants to keep because of income security and benefits. When he is satisfied that the business is taking off, he may quit his job for the franchise world. So let me see what is going on here: you want to throw over $200,000 in cash or financed loans towards a franchise that will be run by minimum wage employees theoretically promoting your business and adhering to Franchisor standards, as a team effort and who are looking out for your best interests-all for minimum wages. Correct?

Would you buy a Rolls Royce for $200,000 and let high school students practice their driving skills on it? No? Then why would you turn over a $200,000 franchise to them?

 

When you invest your money, make a commitment to the franchise in terms of energy, time, business acumen and other resources. Otherwise you are asking for financial trouble and franchise failure, not to mention a distasteful divorce from the Franchisor for your lack of commitment. And if you have no devotion to the project, don’t bad mouth the Franchisor when you leave. Just close the door quietly and put your tail between your legs. You will not be building a nest egg this way-you will be fouling it.

 

 

This guy has never been in business, lacks basic business skills and needs some serious hand holding in the process; his saving grace is that he will listen to everything the Franchisor or his advisor says and is prepared to follow his training manual precisely. The franchisor loves him and shows him off as a model franchisee. In most cases he will succeed because he is willing to follow directions as he knows he is relatively clueless about site selection, marketing, and lease negotiations and such matters. The real part of his success comes when he has mastered his admitted shortfalls. He is an operational superstar, and he is willing to become a multi-unit franchisee. Let’s call him the Model Franchisee now that he has passed rookie status. But he had better do his due diligence to get to this stage

 

This guy just loves he concept, loves the franchisor, loves the operation and everything oozes “love”. He is so enamoured by his newly discovered franchise, he has boasted about it with all his friends and neighbours and can already taste the sweet smell of success. He has passion and commitment. Great start, but if you let your heart rule over your head, you may land in trouble for lack of due diligence, common sense, and basic numerical review. You should not pick a stock because you like the name, so don’t pick a franchise only because you “love” it. True love and marriage is hard work and divorce can be expensive. Follow your passion, but with a heavy dose of due diligence work

 

This guy sees many warnings, and signs of trouble in the franchise operation and franchise documents, but convinces himself that “it will never happen to me”. Of course, God protects everyone including your territory, right? What if it was God who put those warnings there for you to see and gave you two eyes to see with? What did you say - blind faith? Tell that to your attorney and the judge when you lose the case.

Pay attention to all warnings and evaluate them; ask for advice and second opinions, and do some killer due diligence. Check out the non-compliant franchisee list, arbitrations, and lawsuits against the franchisor in the back of the FDD(UFOC). Call a few of them for their story-they were in your position a while back. Wait ! there is a light at the end of the tunnel; is it daylight or a train wreck waiting to happen?

 

This guy has some street smarts, and some good education and a knack for business. If he is a true entrepreneur, it is going to be hard for the franchisor to keep this guy in the saddle. He is innovative, challenging, questioning and wants to re-invent the mousetrap. He will even help you change and re-invent your franchise, sometimes before he has been successfully running your franchise. He has the expert ideas, even though you have 1000 happy franchisees out of 1010 operating. This guy is trouble for the franchisor unless his enthusiasm, drive and ambition are properly channeled to work in the system and not against the system. He would make a good Master Franchisor, or Area Developer, or multi unit operator and Franchisee spokesman. Get his input and have him voice the franchisee consensus. Help him become more successful and keep him in the loop. Make him the expert he wants to be.

 

This guy knows his stuff but some would say he has been brainwashed into believing that it is better to own a franchise than to go it alone as an independent. There is much debate today, even from the IFA, on whether franchises are safer than independent businesses. I guess it depends on your definition of business failure. If you built a franchise or independent business for $200,000 and sold it 2 years later for $100,000, did you succeed or fail? Technically the new owner still has a going concern, so the business did not fail but you know what I am getting at. And if a franchisee closes his store, walks away, and the franchisor resells that location or the right to operate that franchise under the original license, it is technically still a valid franchise (number) as the right has not been terminated. Interesting

Back to Thomas-he just does not trust himself and would like to take the perceived safer route to business success. He sees the glass as half full, but occasionally it really looks half empty. He will probably venture into franchising as long as his spouse keeps her job and they can survive off one income while he gets his pet project under way. He is a closet Optimist and will probably do his due diligence, business plan and calculate all the “what if ” scenarios so they can sleep well at night. Eventually he will make it because his heart and head are aligned. It is his confidence that needs re-alignment and grounding.

 

This guy never did any due diligence, but made it through the franchisor interview. He is by no means stupid. He bought the franchise because his friend said it was good and his Uncle seemed happy with it in another State. That was endorsement enough. He will learn the hard way, because his deal structure may not be right, he may overpay for the franchise, or he may be in B location (near his house). He has limited investigative and analytical skills, so he always depends on others assuming they did the proper research. He is the guy who says, “what, there is no territorial protection? Why do I need the franchisor’s consent to sell my franchise? Where did I give you the right to audit my sales? ”. HE NEVER READ THE FDD(UFOC) OR THE FRANCHISE AGREEMENT. He just signed where his Uncle told him to sign. Imagine the conversation at the dinner table at home. (But, honey…) However he knows how to run an efficient store, so we will save him. Will he ever learn though from his ignorant ways? This guy needs to invest in his education before he repeats this questionable behaviour.

 

 

So what is your profile? Can you identify with one of the above or did I miss your particular unique profile? E mail me your thoughts, fayaz@mrfranchiseman.com