3 Ways to choose a Franchise
The Introspective Mode
What are you trying to achieve? When considering which franchise to buy, this is the most important question to answer.
“I call it the introspective self,” says Nick Neonakis, a franchise consultant and author of "The Franchise MBA—Mastering the Four Essential Steps to Owning a Franchise," who adds a number of other questions prospective operators should explore at the very beginning, long before they actually begin researching specific industry segments or brands within franchising.
“Who are you? What are you good at?” are two of those questions. You might not have thought about that for many years, maybe when deciding on colleges or considering a career change. But with plenty of experiences under your belt, now is the time to think about what jazzes you and what depletes you, and use that as a guide.
Then ask: What is this vehicle supposed to do? Where is it going to take you? And don’t stop at just the answer itself. Add details to the picture, by sketching out goals for one year, three years, five years and 10 years.
“Be specific about yourself and your goals,” Neonakis said, and don’t forget the decision to buy a franchise affects more than just you. “Make sure all the stakeholders in this decision, your family and so on, have a say in it,” he said.
“People focus on the subject matter” too early, he said, meaning the details of the business model “and not on what the business is going to do for them.”
So do some serious thinking—even dreaming—and be sure to write everything down. You can think of this part of the process as creating “a business plan for yourself,” he said.
The Investigative Mode
Once prospective franchisees have gone through their introspective phase, as described earlier, it’s time to arm themselves and start visiting brands that intrigue them. The best way to do that, say franchisees who are pros at this step, is to tell no one—just show up as a customer, at all times of the day or night, and watch what’s going on.
“Walk into the restaurant as a guest,” says Jeff Neely, who with his wife, Patti, own 23 restaurants in all, in seven concepts including Old Chicago. “You don’t introduce yourself, and you talk to the managers and the servers, the host, you talk to the busboys. Quite honestly, they tell you the truth.”
Of course, the same method works for any type of franchise, whether a restaurant or a gym or a paint-and-sip or a healthcare provider. If possible, try out different types of locations, too, during different times of the day. Try to go to a grand opening if there’s one in your town; if it’s a service business, make an appointment and try it out. Is it hard or easy to get in? Do you like it when you’re there? If there’s a problem, how fast is it fixed?
Then get on the phone and talk to as many franchisees as you can. “Of course the franchisor is going to give you names of people they want you to talk to, and I’ll talk to a few of those and then I’ll just call several at random,” Neely says.
Franchisors must list their franchisees in the franchise disclosure document, so you can find names and numbers there—but don’t make the mistake of skipping this step, as too many prospects do, Franchise Times has been told over and over. Most franchisees will be happy to help, because as Neely says, “I’ve been on both sides. I will always make time for them. Bottom line, we’re doing the same thing, just in different parts of the country.” And he outlines another benefit of participating in those calls: He also wants to make sure that prospects will be good representatives of the brand.
The Reality Check
You’ve been introspective, you’ve been investigative, and by now you’ve narrowed your choices down to a handful. It’s time to really figure out what it would be like to work in this franchise, and for that there’s no substitute for (drumroll, please) actually working in that franchise.
Get permission from the franchisor. (Most will allow this, and if they don’t you might consider that a reason to go with a different franchise.) "Do you love it? Do you hate it? Figure it out,” advises Nick Neonakis, founding partner of The Franchise Consulting Co.
This is also the time to bring in outside expertise in areas beyond your strengths. That’s what Judd and Erica Wishnow do. They are longtime Dunkin’ Donuts franchisees who wanted to branch into Taco Bell, and in 2014 did so, but not in their originally preferred method, which was to buy corporate-owned stores that Taco Bell was re-selling. “They said, basically, get in line,” Wishnow says, but then added, “if you really want to break into the brand you have to start building stores.”
So the Wishnows built four, and then earlier this year were able to purchase a package of Louisville, Kentucky, stores. Although both of the Wishnows have Wall Street backgrounds, they still hired outside experts who can crunch the numbers across a multiple-store deal, something most people recommend highly because calculating return on capital is complicated.
Hiring an attorney with experience in franchising, too, is a must, Wishnow believes. “Even if you know about contracts, hire a franchise attorney. The thing you don’t know is the thing you’re probably going to hate about the business,” said Neonakis.
And finally, arrange meetings with as many people in the brand’s management as possible, even though, as everyone acknowledges, those teams can and do change in this era of rabid buying-and-selling in the franchise space.
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3 ways to choose a franchise