with guest Erik Van Horn #Making Bank S4E29
So you’re ready to get into the franchise game, huh? Not so fast. There are many things to consider in order to determine if this is right for you.
Buying a franchise with a tried-and-true business model can be a great way to earn a living – if you’re ready for it and you know what you’re getting yourself into. It can also be a big headache, and you owe it to yourself to do your due diligence before taking the plunge into something that could be very hard to untangle yourself from.
Asking the right questions both of yourself, franchisors, and multiple franchisees can help you understand what to expect in the short and long term and whether or not you are a good fit for this type of career. Investigating the following areas will help strengthen your conviction that a franchise business is a good match for you, or it can help you rule it out and avoid a potential disaster.
1. Are My Partners and I a Good Match?
Possibly the most important thing to know before going into business is whether or not the people you plan to work with are a good fit for you. This goes from business partners to the franchisor to any potential managers or operational people you plan to work with.
Do you share a common vision? If your group has differing visions of what the business shall become or who will have what responsibilities, you are bound to find yourself in a sticky situation.
Do you have complementary skill sets? Erik reminisced in this episode of the Making Bank podcast about initially going into business with a group full of vision but little talent in actually integrating that vision. Luckily they were able to correct that problem on the fly and put the right person in place, but this is something you are much better off squaring away ahead of time.
Make sure each entity in your group brings something to the table that is necessary and not redundant. If all of you are focused on the finance but none of you have any interest in marketing, you’re going to need to bring someone else into the fold.
Finally, just like in any relationship, make sure you communicate well. Are you with people you feel you can be honest with? People who can take constructive feedback as well as give it? This makes all the difference when confronting whatever issues arise along the way, and can help you finagle your way through areas that may not be natural strengths.
2. Who Can I Lean On for Leadership and Advice?
Are you signing up with a franchisor who has a reputation for supporting their franchisees? Do you have a network of other franchisees who have been through it and are willing to hop on a call to help you in times of need you hit a speed bump?
Having the right people in your corner can do more than just help you guide the ship, it can give you peace of mind and confidence moving forward that will make everyone’s life easier and can even have a ripple down effect on your company culture. Strong guidance leads to feeling secure which then leads to happy employees and fewer sleepless nights. Everyone wins.
3. Does the Franchisor Have a Good Reputation Among Its Franchisees?
In case it isn’t obvious: all franchisors are not created equally. Some offer great support, top-notch training, and have well-established business models, while others may still be testing things out or simply not have the resources to support you in all the ways you need.
Ask around. Ask the franchisor to put you in touch with some of their franchisees, but do your own research as well. Ask franchisees who have had success as well as those who have struggled or failed. Don’t pay too much attention to any one person, but notice the common themes. If people are generally content with their franchisor, that is a great sign, but if people are generally discontent, you need to be 110% sure that you have everything else nailed down and can handle this business on your own before moving forward.
4. Am I in a Business-Friendly Market?
You may have a strong franchisor, great partners, and the business of your dreams, but if you are in the wrong market you can be doomed before you even cut the ribbon. Is there enough of a demand for your business? Are their legal hurdles you’re going to need to jump through? Are taxes insane?
There are numerous things that can trip up even the most tried-and-true business model if you’re in the wrong market. Make sure you avoid as many of these pitfalls as possible and feel ready to take on the challenge of overcoming whatever you can’t avoid.
5. What Is the Day-to-Day Life of Running This Franchise?
And why are you getting into it? Are you assuming you’re going to hire out all the work and start raking in the passive income after you open your doors? With the right franchise, this may not be a completely unreasonable goal eventually, but for many franchises, and especially new ones, this is not going to happen.
Make sure you’re ready to show up to work and handle your daily tasks as required. This will vary among different franchises and it’s essential that you know what you’re getting yourself into. If you decide to run a food-based business but can’t stand staying on top of building maintenance, you’re going to find yourself in hot water, or lack thereof.
Getting into the franchise game is a great career for many people. It can provide you the freedom and flexibility to live your life the way you want to, and once you get the ball rolling you can earn a lot in passive income.
But knowing what you’re getting into before you bite off more than you can chew, as with any career, is essential. Ask yourself the right questions, ask your team the right questions, ask everyone you can the right questions. You’ll set yourself up for success, or avoid a big headache down the road.