Franchise Facts: Q & A
Article Sponsored by: DeVry
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Brian Crawford is Director of Franchising and Real Estate for Kilwins Chocolates and Ice Cream. He has more than 20 years of experience as a franchise executive and has held executive level positions with franchisors Homes & Land and Milliken & Company. Brian and his wife have been franchisees in the SportClips Haircuts system for six years and counting. Below, he answers questions from Military Transition News:
Q: What makes a good franchise?
A: A number of elements must be present for a good franchise:
-Experienced executives and team members with a history of in franchising
-A proven system; the franchise has a history of success or a clear path to success
-Market demand for the product or service; anything trendy or something that could be a fad should be avoided
-Growing same store sales year over year
-Growing the number of franchisees into the system
Also, the franchisee’s profile is obviously very important. They should be someone who can believe in and execute the operating system provided by the franchisor. Passion in the brand and themselves goes a long way toward success. They shouldn’t join a system and try to change it to fit their specifications. If you don’t believe in the brand or the people, stay away.
Q: What are some red flags?
A: Some questions for a franchisee to ask that might reveal red flags include: Do franchisees stay in the brand a long time or do they sell or exit quickly? If they are leaving there is a reason; find out why.
-Do franchisees give a positive endorsement of the franchisor? If not, stay away. How many lawsuits does the franchisor have against them? The Franchise Disclosure Document (FDD) should reveal a synopsis of issues on this front. If you can talk to the franchisees involved, do so. However, also understand that not all lawsuits are credible.
-Does the franchisor interview you, ask difficult questions and almost try to talk you out of the business? If they are not vetting you, be wary. You do not want to be associated with a franchisor that lets anyone and everyone into their system. You want to be associated with high quality business partners.
-Does the franchisor oversell the franchise model? This should be in a discovery and exploration of the business and how you fit into the system. You are not buying a car or a piece of furniture but making a major life change. Take your time! If you feel like you are being pressured, back away. Find the good, the bad and the ugly in each business. No business is perfect and never will be. Just find the one that is perfect for you.
Conversely, red flags for a franchisor when they are evaluating a potential franchisee include:
-Candidates who try to change or improve the franchisor’s system, services or product mix before ever becoming a franchisee. Franchisors are looking for people to follow the system, not invent or modify it. If a candidate gives the impression they know better than the franchisor what the market needs, they will likely be removed from consideration. Franchisors spend an enormous amount of time, energy and money in continuing to build and perfect their model. Someone giving business advice before even being part of the franchise is a turnoff to the franchisor.
-Candidates who deflect financial questions. The franchisor needs to know if you can afford the business. They do not want to waste your time or theirs. Good franchisors want to ensure you are set for success and not underfunded.
Q: Why do veterans make such good franchisees?
A: They understand the need for executing a plan to perfection and will follow a system to success. If you have a solid business model, location and franchisee, success should come.
Q: What should a franchisee expect in the first year of business?
A: Sleepless nights and lots of second guessing their decision; excitement and enthusiasm interrupted by moments of fear and panic. It can be a roller coaster ride of emotions early on. Stay the course and believe in the system you invested in. Follow direction and trust the folks who have done it before. You will work harder and longer than you ever anticipated but will love doing it!
Q: What is the success rate? Is it based on a certain demographic/region/person?
A: You must have a need in the market for the product and service, and obviously there has to be a population base to support the model. Demographics and location are critical. Don’t settle on these criteria.
Q: What advice would you give to veterans transitioning into the civilian workforce in terms of job opportunities both for ownership and as an employee of a franchisor?
A: Do your research and take your time. Don’t rush it. Take the time to make business plans and financial models and talk to current and past franchisees. Learn what works and what mistakes they made.
Can you see yourself doing this for the next ten to twenty years? Try to take the emotion out of the decision and base it on sound business logic.
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