1. If I ever have a problem, all I have to do is pick up the phone?
2. Since the franchisor has a marketing plan in place, I won’t have to worry about getting lots of clients/customers?
3. I am lowering my risk a lot, by investing in a franchise business, as opposed to a pure start-up?
4. I’ll make my investment back quickly?
5. Getting a small business loan won’t be difficult, because after all, it is a proven business.
Now, allow me to inject a healthy dose of reality concerning these five items.
1. Well, there is one thing that is 100% correct about this expectation. There will be problems! But “picking up the phone” (to call the franchise company’s headquarters) to get an immediate solution to the problem, as pleasant as that sounds, probably won’t happen. You are probably not the only franchisee that has called that day with a problem, so you may have to wait your turn. Also, what kind of problem is it? Are you suffering from a lack of business? Is there a problem with the software that came installed on the PC that was part of your franchise package? Is your advertising not getting the job done? Please realize that the franchisor cannot, and will not solve every problem that you have. Being a small business owner, franchise or not, means that you are now an official problem solver. You’ll have to find solutions for some things, yourself.
2. Marketing. Yes, your franchisor, in most cases will have a formal marketing plan. But, is it a good one? Is the franchise you invested in fairly new? Is the franchisor still trying to figure out the “marketing” part of the business? If that’s the case, you may have to get really creative, and figure out a way to get to market yourself! What if the franchisor is more seasoned? Their marketing plan might be a stellar one! If that is the case, that means you have one less problem to deal with, and can concentrate on the other ones.
3. Franchise success/failure statistics have been bandied around for decades. While I do believe, in my heart that investing in a franchise that is right for you, and that has been researched correctly, does lower your risk compared to a pure “I have an idea for a business” type of start-up, there are no guarantees. Read all about franchise statistics. Investing in a franchise of your own is not a magic bullet. Sometimes though, it does give you a better shot of making it as a small business owner.
4. If you are used to working for someone else, that means you are used to getting a steady paycheck. (Or if you were in sales, a fairly steady paycheck!) I feel that the most difficult part of transitioning from an employee to a small business owner is that you will not be getting a steady paycheck. As a matter of fact, the 1st year in your franchise business may not yield you a paycheck of any size. This is why I always recommend that you have some funds set aside for your household expenses. Building a small business means that you are starting at zero and it’s hopefully uphill from there. I feel that it’s worth the short term financial pain.
5. In normal circumstances, I have found that lenders are more enthusiastic about loaning money to a franchise business, as opposed to a pure start-up business. These are not normal times. Lenders are looking at small business loans on a case by case basis. Your franchise loan may not be approved automatically, or quickly. The strongest business plan you can present will go a long way in these troubled times.
If you decide that a franchise is for you, please make sure that you have realistic expectations. The right franchise for the right person can be a wonderful thing. Good Luck!
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