Article

Instant Entrepreneur

Is Owning a Franchise Right for You?

Melanie Johnson

May 6, 2013


Buying into a franchise can offer a more reliable path to becoming a business owner than starting a business from scratch—it provides an opportunity to join an organization with industry experience and a track record of success.

Joining a franchise, however, is more work than simply paying a fee and opening a store under a particular brand. The framework is in place to hit the ground running, but being a franchisee requires significant investment and commitment.

 “When you go into franchising, you really are entering into a partnership,” says Scott Abbott, CEO of Five Star Franchising. “You are buying a business from the franchisor and they become your partner in your success moving forward.”

What things should new franchisees know before purchasing their own franchise? Consider the following:

Get Plenty of Capital

Buying your own franchise doesn’t come cheap. The initial franchise fee can range from $30,000 to $50,000. If you’re operating a service-based business, the startup costs can escalate to $70,000 to $80,000 and sometimes up to $100,000 when you factor in opening a store, securing a lease and marketing your new business.

Just to hit the ground running requires a significant investment. The advantage of pouring that money into a franchise rather than starting an independent business is that it gives a business owner more power. In many cases, finding suppliers, achieving brand recognition or securing a favorable location is arranged by the franchisor, and this can allow for a better profit margin. 

 “Buying power is important,” Abbott says. “One painter cannot affect prices. One hundred and twenty painters buying together can make the prices come down.”

Follow Your Passion

Shauna Sloan, owner of BaseCamp Franchising, says a potential franchisee should consider if they are passionate about the industry before buying a franchise.

 “One of the things they want to look at is if they enjoy the business they are looking into purchasing,” Sloan says. “With any job, you want to like what you’re doing.”

Sloan followed her own advice when setting up her first Kid to Kid store. Building a retail outlet focused on reselling quality merchandise was an interest that drove her. Sloan threw herself into laying the groundwork to turn it into a franchise within two years.

Now she has more than 80 stores from California to Virginia and has even expanded her resale concept overseas to Portugal.

 “I opened my first Kid to Kid store in 1992 and I knew from the get-go I wanted to franchise the concept,” Sloan says. “Everything I did as I worked in the store, I tried to figure out how to make it franchise-able so somebody who wasn’t an expert in the children’s resale industry could be successful.”

Talk to Other Franchisees

Talking to other franchisees can help you figure out if you fit the franchise culture. You can get an idea of what the franchisor requires and whether or not it is a good fit with your own business goals. Asking candid questions of franchisees can help you understand if franchising would be a positive experience. It is important to find a franchise with a good support network because it will help you navigate the right course.

“The great thing about being in a franchise is that you can draw on the experience of both your franchise company and your fellow store owners,” Sloan says. “You can learn from the successes of other owners and you can learn from their mistakes.”

Obey the Rules

Being part of a franchise does not permit the same freedom as owning an independent business. Each franchisee must follow a template set down by the franchisor.

“When you join a franchise, you are committing to follow the system,” Sloan says. “One of the things about being
in a franchise is there is a system that is the same in every location. Our
most successful franchisees say over and over again, ‘I just follow the system. That’s what makes me successful.’ It’s our job as a franchisor to create systems that work.”

Often, franchisees receive direction on how to design and layout their store and receive specific computer systems to run their business. Everything from how they market the business to the prices for their merchandise can be guided by the franchisor.

“There’s definitely some things that are taboo,” Abbott says. “There’s certain brand requirements and marketing requirements you’ve got to follow. You can’t just go ahead and make your own ads up and put whatever you want on there or change the price. Certain things you can’t do, but there’s other things you can do.” 

 

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