Insights from an Experienced Franchisee
By Stephen Shapiro
In 1988 my family and I ventured into the world of business ownership. Armed with what we believed was a “good tip,” the “right feelings,” a business that “inspired us,” and the inarguable position that “everybody knows who they are,” we became franchisees with one of the worlds largest franchise companies.
Now, more than 14 years later we are still in that franchise. It is our boss. Its customers are a slave to our marketing, familiar with the products but nonetheless no longer satisfied with them. For a number of years after our multi-unit purchase we would pull ourselves out of bed at 5:30 in the morning. We would look at one another like, “what are we doing?” and drag ourselves into the workplace.
We made a mistake. We have been paying for it ever since. Oh, it’s not that the business doesn’t provide us with a good income. The business from a monetary standpoint is a great business. The business does not provide us with what we had purposed or hoped that it would.
Perhaps it is that we really didn’t have a way to articulate what it was we wanted. Maybe we never spent the time and effort it takes to understand what it was we had desired by our becoming business owners. Whatever those elements were that led us to the decision we made, they were the wrong ones.
So in the next few paragraphs I will hope to enlighten you and perhaps provide you with some guidance on finding your right business fit. It’s out there. You just need to be looking at the right things in order to truly find it.
Here are some of Shapiro’s laws of franchise purchasing:
If You’ve Heard of It You’ll Pay Too Much for It
This is a general rule. Forget about choosing a franchise because YOU have heard of it. There are more than ,3000 franchises operating in the U.S.A. I bet you can’t name a dozen of them without a cheat sheet. Most people can’t name more than six. Franchises, by their nature, and most of the top 1,000 create brand awareness by virtue of the continuity in product and service delivery as well as the consistent message of a higher quality of marketing they provide.
You may ask, “If I don’t use brand awareness to buy a franchise, what do I use as my main criteria?” According to a 2001 study conducted the International Franchise Association, the top 5 reasons franchisees themselves give for their success are as follows: 1) Strong operating system, 2) support system that has depth and breadth, 3) training program that goes beyond the initial program, 4) R&D that provides options and strategy for future growth and business development, and 5) Marketing programs that can be reproduced with ease and with the collaboration from the parent company pinpoint my market and address its needs.
Just so you know, brand awareness was #8.
Franchises that have developed strong brand awareness started with those five above. Some of them have forgotten those five. They haven’t forgotten that their name now means they can overcharge however. Be careful. Choose a franchise on its depth and not glitz.
Choose Substance NOT Inspiration
“When I get into business for myself, I am going to choose something that will really get me revved up… something I can’t wait to get to in the morning!” My wife used to say something similar about me… before we were married.
Every business has perceived strengths and weaknesses. Choose your business on its ability to meet your needs and implement your strengths. Think Objectively! Research it.
* If you need a business to provide you a substantial six figure income then that is a criterion.
* If you have a sales background, choose a business that can take advantage of it.
* If you personally need a flexible schedule, don’t choose a business that has long retail hours. (Unless you can verify that it can be run with a manager.) A B2B or service business may be better.
* If you are project-management focused, choose one where you have deadlines or provide a custom product.
Unless you are the franchise company pioneer; the person behind the idea or Walt Disney, don’t look for someone else to be your inspiration and don’t look for your work to inspire you. Allow your hobbies, family, faith, your love of music, theater, and the arts, etc. to inspire you.
More of my friends who never got into business use this as their excu… er… reason. Well, forget it. You are fooling yourself. If you are using the old, “it doesn’t inspire me” reasoning what you are really saying is that, “I am happy with other people telling me when and where I work and how much I will earn. It’s ok if I am laid off again. The status quo is good enough.” The fact is it just doesn’t hurt enough for you to make the jump. When it does, you will realize that you should find a system that allows you to dispassionately and without bias choose a business that meets your goals and isn’t found in your dreams.
Choose Simple over Complex
This was the Steve Shapiro problem. When I looked at businesses, I looked at everything. I came back to the one that made me feel most comfortable. It was subjective. I didn’t really know. Because I had heard about this business, I thought, it must be the right business. I was wrong… dead tired wrong.
The fast food industry, many forms of capital intensive businesses (although not all) and those that require a heavy investment in either tons of low wage earning employees (such as fast food) or multi-faceted high paid technicians are generally complex businesses.
I would bet my favorite bagels for a year that if you like complex business providers, you are yourself a techie or someone who likes gizmos. I will also bet there is a business 50% less complex where you could work less and earn more.
Choose simple business models over complex models. They will allow you to work harder on your business and will help you to spend less time investing in the day-to-day operations of the business. Simple business plans that are service focused are even better. They typically provide a highly leveraged product or service that is just full of gross margins and revenues.
Further, those businesses are most easy to replicate. You can get them up and running quickly, turn profit more quickly and move onto your business plan for growth whether that means expanding your product/service offering or opening additional units.
Some Final Thoughts
Other types of business that have a tendency to strangle the entrepreneur in all of us are those with either high inventories that require you to invest large numbers in things that sit in your showroom or in your backroom waiting to be turned into finished product. Be wary of businesses where more than 30% of your working capital is invested into inventory.
Secondly, remember no one business is meant for any one of us. I have described some things that are definite challenges to the franchise owner. We have been involved in the fast food business for over 14 years now. We are good at it. We don’t like it. We have come to realize that as a family we appreciate our time together, our play time and our times when we can get away and do things without heavy repercussions. Make sure you know your own personality. Our business would be perfect for the person who enjoys the public, likes repetition, desires to work 70 plus hours a week, and gets a kick out of the general “busy-ness” of it.
This last year we vowed to expand our business plan and have added a fun business to our portfolio. Yes, it is a franchise. No, it is not food. What it gives us is hope for our future. Working the hours we want, making the kind of living and developing the equity in our business we want.
Now, if we can only get this boat anchor off our necks!
Steve Shapiro is a multi-unit franchisee with a major fast food organization. He is also a franchisee in a business consulting organization along with his wife and brother. Steve is also a writer and lecturer.
Perfect Fit Franchises provides no-cost assistance to entrepreneurs nationwide, helping them identify franchise business opportunities that match their interests, backgrounds and financial means. We offer hundreds of business opportunities in a multitude of categories.
We are an affiliate of the world’s largest franchise consulting network with more than 25 years experience helping entrepreneurs like you find and own their own businesses.
Contact us at 1-866-391-3134 or moreinfo@perfectfitfranchises.com.
PFF BUSINESS JOURNAL
VOLUME 114