President’s Corner: 2 Common Questions I Get About Franchising

Is a franchise a good fit for you?

I recently found some clarity in answering two questions I get from friends or acquaintances that know of my background in franchising but are outside of the industry themselves.

I thought my perspective could be helpful to others in the franchise biz, so here is my two cents, on these two common questions:

Question 1: “Is buying a franchise a good idea?”

Super simple, but it’s the same thing I’d ask if I were in their shoes.  Since it IS general, I make the assumption that they want me to compare it to starting a non-franchise / independent business in a similar industry.

My answer:  For most people – yes.  This is not my franchise-biased opinion, it is a fact that overall, it’s much less risky to join an established brand and pay royalties. There are exceptions, of course, and sometimes starting from scratch can have a bigger upside.

Also, there are inferior franchise brands, so choose wisely. But, net-net, a franchise is a particularly good idea comparatively. Much like Warren Buffett’s advice that most people would do better with index funds vs. picking individual stocks, it is all about managing risk.

I will say, seeing people take less risk and experience more frequent success buying franchises with their hard-earned money is the main reason I chose to start my company and help this business model expand!

Question 2:  Should I use a franchise broker/consultant?

Answer: It is a rather good idea but is ESPECIALLY good if they are open to considering emerging / early-stage franchise brands. If only considering large well-known brands, it is less necessary because there is more public data available and more opportunities to validate relevant performance with existing franchisees in their system.  Of course, there is also the issue of saturation in those cases. 

The big advantage of having a franchise consultant is that they have a real motivation and proven process to match an individual with a brand that fits them in a multitude of ways.  Sure, they are paid by the brand when a successful deal is signed, but this generally does not skew their motivation – because most broker/consultant systems represent a few hundred brands.  The compensation to them is similar regardless of where they place the candidate, so overall it’s a pretty good setup and really does benefit the franchise buyer at no cost to them.

It’s also a great shortcut to spending what could be hundreds of hours on research, and still not getting the wisdom of an experienced franchise professional.  Despite being in franchising for nearly 15 years, I didn’t have much experience working with them until we began providing several with leads last year, which has grown to be a major part of our business. 

From my experience with the franchise brokers/consultants we do business with, they have been deeply knowledgeable, ethical, and enter transactions that are mutually beneficial for all parties.

All and all – I fully endorse this idea!

Feel free to reach out directly on LinkedIn or at alex@prospectdirect.com with any comments or questions.

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