February 6, 2023

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Franchising – A Retirement Plan Or Prison Sentence?

Franchisors and Franchisees:
There are many conversations, in person and online, that are attempting to determine responsibility and accountability for the success or failure of a franchise. There is now chatter about whether buying into a franchise is a great retirement plan or a prison sentence…. (On LinkedIn, Franchise Network Discussion Group)

Being that I am a franchisee myself, as well as a coach with franchise consulting experience, here is my take, short and sweet:

The candidate absolutely should engage expertise and counsel by a franchise consultant and a franchise lawyer.
They should have financial projections and pro forma statements created; engaging an expert if needed, and are sure they understand ALL of the costs and expenses for running the business (dig deep, there are always surprises).

Be realistic with themselves what it means not only to be a business owner (with the skills required to do it), but also to work within the confines of a franchise.

A core advantage of a franchise is the processes and systems. A core disadvantage of a franchise is the processes and systems, if you do not want to work the system. Franchises are not for the shotgun ‘cowboy’.

Due diligence cannot be understated. It is the responsibility of the candidate to research, talk, interview and poll, etc. the potential franchisor, franchisees, and all aspects of the business they are considering. The franchisor is obligated to provide full disclosure, so be prepared with a very long list of questions for them covering every aspect of the business (and engage help to formulate that list if needed). That all said, the franchisor definitely needs to be completely open with full disclosure. They need to show their warts and highlight their strengths. Believe it or not, some folks are okay with warts if they understand the potential in the company (even the best corporations have warts).

Franchisors do need to do a better job at qualifying candidate owners. They have to raise the bar to ensure they get high quality and prosperous owners signing up. Awarding franchises for the sake of new franchises will cost the franchisor more in the long run and definitely in the short term.

Franchisors, your main objective is to grow revenue, expand footprint, and extend brand awareness in the marketplace. Therefore do not take short cuts in the awarding process, qualification standards should be high.

Franchisors have to fully understand and admit to the gaps they have to fully service their franchisees. Then they need to hire, outsource or contract it! It is in the best interest of everyone (even if it comes with an additional cost). They will recover the costs if they have productive, profitable, and HAPPY franchisees, growing revenue, and expanding footprint.

Franchising is a great retirement plan and can make many people successful. It is up to BOTH the franchisee and franchisor to do their part to get the returns on the investment that will provide them prosperous retirements.