Interested in buying a business? Have you ever considered purchasing a franchise? In many respects, franchises are the backbone of our economy; there are more than 750,000 franchises in the US today. Buying a franchise can be a very good choice for a first-time business owner. Franchises tend to be the product of a proven concept. They are often turnkey with the product or service already clearly defined. And their operational processes are established, honed and documented. Buying a franchise is very much like having a mentor who will guide a new business owner in how to successfully operate the business.
If you are looking for a highly structured playbook and are willing to adhere to it over the long haul, then buying a franchise might just be a great idea. At the same time, a franchise is not for everyone.
FIRST, CONSIDER THE FRANCHISE MODEL
If you’re considering buying a business – and looking for a proven concept with plans and tools in place to help you be successful – a franchise may be a perfect fit. Take the McDonald’s model, for example. While not necessarily an easy franchise to purchase (the franchisor has high standards and high compliance requirements), you rarely see a McDonald’s go out of business. That is because McDonald’s has brilliantly and effectively honed their franchise model over the years. They guide, mentor and require compliance from their franchisees in every aspect of business such as opening, growth generation, sales and marketing, customer satisfaction, accounting and reporting. Their secret recipe goes far beyond their sauce – they have truly created a roadmap to success for their franchisees.
WHY A FRANCHISE MIGHT NOT BE THE RIGHT CHOICE
Highly creative individuals who want to bring their own personal touch to a business are probably not a good fit as franchise owners. The very management qualities that are imperative to franchise success – things like standardization and compliancy – simply don’t allow for imaginative business owners to deviate from those standards. Regardless of the validity of or rationale behind a franchisee’s proposed changes or “great new ideas”, corporate standardization and compliancy always win. Of course, this is why you can visit any McDonald’s or Subway and pretty much know what is on the menu, how much a sandwich will cost and how late they are open – before you even enter the building.
Another potential drawback to owning and operating a franchise is that many of these businesses may feel more like buying a job. A franchise owner is not an entrepreneur – and without that entrepreneurial risk, so goes the probability of making the big-big bucks. Someone may be able to provide for their family by owning a franchise; but, with few exceptions, will in all likeliness not become extraordinarily wealthy doing so.
NOT ALL FRANCHISES ARE WINNERS
It is important to understand that just because a successful business decides to franchise their concept, it does not guarantee that it is going to be a successful business. It may not even be a great or proven concept. Just about any business can be structured to include franchising; however, it is important to note that franchise businesses actually have a worse survival rate than independent businesses. Suffice to say, it is essential to do your homework when considering purchasing a franchise.
MAKING THE DECISION TO PURSUE A FRANCHISE
Franchises can be excellent opportunities for a new business owner; they are scalable, based on a proven model and can help a business owner maintain a good living while running a business.
Since not all franchises are created equal and no two people are the same, here are a few things you should understand about yourself and a franchise you may be considering:
- Are you comfortable following and executing others’ instructions?
- Are you okay with not putting your personal imprint on the business?
- Are you more likely to want to follow a documented process rather than creating one yourself?
- Do you see yourself being successful and enjoying working in your chosen franchise environment?
Know the Franchise
- How long has the company been in business and when did they start offering franchises?
- How many franchisees do they have in the U.S. and in your state?
- How strict are their guidelines for business operations?
- What training do they provide and for how long?
There are many other questions that you will need to explore when considering a franchise. Your business broker can help navigate the waters so you can make the best decision for yourself. Do your homework, understand your business strengths and weaknesses and then decide if franchise ownership is right for you. Please reach out to us if we can answer any questions or help you in your search for a franchise or other business.
Gregg Kunz is a Colorado Business Broker. He has both CBI and Master M&A Intermediary designations. Prior to becoming a business broker, Gregg held executive leadership positions in Fortune 500 companies where his responsibilities included building and growing successful sales organizations. He is the principal broker at Rocky Mountain Business Advisors, a Denver Business Broker, and is widely considered an expert in Mergers & Acquisitions. Contact Gregg at 303.474.5582.
Please note: If you’re looking for a “business broker near me,” our office is in Denver, and our business brokers cover all of Colorado and the Denver metro area, including: Centennial, Aurora, Englewood, Littleton, Highlands Ranch, Lone Tree, Denver Tech Center, Lakewood, Wheat Ridge, Arvada, Golden, Brighton, Commerce City, Thornton, Broomfield, Northglenn, and Westminster. We also represent buyers and sellers in New Mexico and Wyoming.