10 points for a successful formula between the Franchisor & Franchisee

To be successful in a franchise business, you must be willing to do certain things to ensure that success. Franchises are unique in that you are taking a product and service that the franchisor has formulated – and to some extent already proven successful – and starting a “new” business. This requires that you maintain a good relationship with your franchisor, find the best business location, develop a marketing plan, take care of financial matters, and manage your resources so that everything works smoothly. Franchises that fall short in one or more of these areas are often the franchises that fail.

But franchising is not for everyone, nor is every franchise opportunity created equal. So before you jump on the franchising bandwagon, ask yourself these ten questions.

1. Will I be happy as a franchisee?

Step back and take a good, long look at yourself to determine if franchising is really the right path for you. Ask yourself:

• Do I believe in the Brand and believe in what it offers?
• Am I willing to embrace someone else’s system without trying to do it my way or make it “better”?
• Can I follow someone else’s lead and accept advice?

If you can honestly answer “yes” to these questions, then you should continue to explore franchise opportunities. However, if you have a true entrepreneurial spirit, if you want to do things your own way and can’t resist the temptation to tweak a little here and there, or if you believe that you really do have a better secret recipe, then you will probably be much happier on your own.

The second part of this question is whether your family will be happy with you as a franchisee. Starting any business requires long hours and hard, hard work, and there’s always the very real risk that things will not go as planned and will not work out in the end. Without the support of your family, a hard job will be even harder.

2. How strong is the franchisor?

Not only is it important to select the proper business, but you must also select the right franchisor. Put aside the emotional “I want one of these” or “If I don’t buy it someone else will” responses. Then step back and take an objective look at the strength of the franchisor. The franchisor’s disclosure document and franchise agreement will tell you a lot of what you need to know to make an informed decision. Take the time to read it cover to cover, and have a lawyer and an accountant familiar with franchising review the agreements that you will be signing. With their understanding of franchising, they can answer your questions and point out where your agreement differs from common practices in franchising.

3. Is there a market for the franchise you want?

It is important to have a business you enjoy running, but it is essential to have a business that meets consumer demand in your market area. Selecting a franchise solely because the concept is a hobby of yours or you read somewhere that the concept is “hot” may result in failure.

Take an objective look at the area in which you wish to locate your business, and make sure that the consumers in this area share your interest in the concept. Make sure that they have both the desire and the ability to become your loyal customers in numbers sufficient to fuel your bottom line. Do your homework and don’t get caught up in the hype of the moment.

Another important area to look at is the ability of the franchise to change and evolve to meet customer needs and market trends. It is important that the franchisor can demonstrate their ability to stay ahead of the game or you might get left behind by your customers.

4. Are you a people person?

Before becoming a franchisee, be sure you’re not an introvert who’d rather stare at a computer monitor all day. It’s of the utmost importance that you feel at ease with people and enjoy interacting with customers (and employees).

Taking pleasure in working with people from all walks of life is an important trait of a franchisee. Know, however, that you won’t always be giving pats on the back and spirited pep talks. From time to time you’re going to have to put your foot down with certain employees. Do you feel comfortable being in a position of power like this? If necessary, are you able to terminate an employee for bad behaviour or poor performance? Do you consider yourself to be a confident and able team leader?

A word to the wise: If you don’t like people, you should not buy a franchise. If you want to make it, you have to put in long hours and work with all kinds of personalities. It’s an undeniable fact that some people are more difficult to interact with than others. As a business owner you need to be able to interact well with people from all walks of life. The ability to manage employees also is essential to the success of your business.

5. Am I willing to be part of a network of franchisees realizing that there may be times when what is the best course for the network as a whole is not what is best for me?

There is a lot of talk about buying and selling franchises, but what do you really get when you “buy” a franchise? If you buy a non-franchised business, it’s yours. You can change policies, add or delete menu items, make the food a little spicier, cut your own deals with vendors and suppliers, and even change the name.

However, the essence of a franchise is consistency. Customers expect to have the same experience from one unit of a franchise to the next, and the only way to ensure consistency is to have everyone operate according to the same standards. If you choose to purchase a franchise, there’s very little you can change, at least not without the permission of the franchisor.

So if you have a true entrepreneurial spirit and are constantly looking at things from a slightly different point of view, if you want to do things your own way and cannot resist the temptation to tweak a little here and there, or if you believe that you really do have a better secret recipe, you will probably be much happier on your own.

6. Maintain a Good Franchisor Relationship

While most of the time the franchisor helps the franchisee, there are times when the relationship with the franchisor can become a hindrance. A constructive franchisor-franchisee relationship is more often than not the key to a successful franchise business.

If the franchise has a poor relationship with the franchisor, and/or gets little or no assistance from it, then the business’s chances for success diminish considerably. Many large franchises, such as McDonalds, weed out any franchisees that don’t follow the franchisor’s prescribed standard. This standardization is often what makes these companies a successful franchise business. If the business model as outlined by the franchisor is not easily duplicated, the chances for success decrease.

A franchisee/franchisor relationship requires an ongoing commitment, with each party expected to uphold its end of the bargain through active communication, common goals, and mutual respect. Some people think that prenuptial agreements mean you are planning for the worst but just as in business arrangements, sometimes contracts are a necessary evil. The idea is that if you have to refer back to the contract, the relationship has gone off track. In order to prevent either party from pulling out the contract, both the franchisee and the franchisor need to understand and carry out their respective roles under the agreement. The ability to do this revolves around sharing a vision, maintaining professionalism, support, training and open communication.

7. Know where you stand

Before selecting a franchise concept you need to fully understand not only your interests, background and business ability but your financial position. What is your net worth? Do you have any liquid assets? How about your credit rating? How much money are you willing to lose? Knowing your budget and skill levels will enable you to select a franchise business at which you will be most successful and that you can afford.

8. Are you comfortable asking for help?

Even though you will have thoroughly researched the franchise you want to be a part of, and even though you should have some prior experience with being in a managerial role of some kind, there will come a time when you need help. Can you check your ego from time to time to ask your franchisor for advice when you know you need it? Or seek out help from others whose franchises are doing well? In fact, you should seek advice from both these parties even when things are running smoothly, since in business there’s always room for improvement. Remember, to eat an elephant it’s easier to do it one bite at a time. So even the smallest improvement may only improve your business by 1% but if you do this consistently they quickly add up.

9. What is your exit strategy?

Although it may seem counter-productive to figure out an exit strategy for a brand-new business venture, knowing where you want to end up can help you get there. Your primary concern will be to ensure that the franchise agreement you sign provides you the opportunity to exit or continue the business in accordance with your plans.

10. Are you ready to put in long hours?

You should expect your business to take up a huge chunk of your daily life. Can you handle work days where you’ll barely be able to take a break? Where you’ll essentially be the go-to person for every problem, no matter how big or small? Do you have the energy and drive to juggle a multitude of tasks? If you can answer “yes” to these questions, you’re most likely ready to step up to the plate.

Finally, remember that you are entering into a long-term agreement. Regardless of what all your research tells you, and in spite of your financial projections, your future happiness rests on whether or not you are cut out to be a franchisee and whether or not you like the franchisor and its staff. Do you believe they will provide the leadership and support you need as a franchisee? If you cannot answer yes to this question, then you should probably keep looking.