My Dad is an amazing writer....Not that I am an amazing writer but I do think I have a little of his talent when it comes to writing.....
Here is one of 3 Articles my dad is writing for "Select Living Magazine"
Hedge Your Bet: Buy An Existing FranchiseA franchise is by no means a guarantee of success -- but it's a good place to start
By Jack G. McLeskey Managing Director Century 21 Select Commercial Sales Group……. Citrus Heights Ca.
The franchise concept is an incredible one. Bring together the ingredients specific to a business and create a recipe that can be duplicated over and over again by anybody. When someone uses the term a "turn key" operation, the most likely example is a properly orchestrated franchise. Although the recipe has been established, it still requires the input and management of the owner (Franchisee) to ensure an individual location is successful.
Just because you own a franchise is by no means is a guarantee of success. A new franchise is basically a start up with a head start. The Franchisor will do the demographic and marketing studies that analyze the potential customer base, drive by traffic. etc., the only thing they can’t do is guarantee your success nor will they document any specific revenues or profits.
The Franchisor usually uses - salespeople or a broker to represent what the “opportunity” is. The presentation is usually well rehearsed and very polished - but so what? It's really just an educated guess about what could happen. When all is said and done, new franchises are to a certain extent, a "build it and pray they will come" strategy. Plus, a new franchise can sometimes mean waiting a year or longer for your location to be launched.
Franchises can be a good place to begin an entrepreneurial career. If you want to greatly improve your success quotient then buy an existing franchise. Take advantage of a business that's already established and successful. This way, you combine the best of both worlds; a franchise concept coupled with the track record of an existing business. For some individuals it just makes sense.
While it is not always easy to find franchises for sale, there are plenty of them around. The best way to find one is to address your search on three levels: call the Franchisor and ask if they can provide you with a list of resales in your area. Second, go through a local business broker and check online listings as well as the classified section of the newspaper. Third, approach any current owner and ask him/her if they know of any units that may be for sale. They will probably tell you that theirs is "for the right" price. In any case, chances are you will get leads to pursue. The other good part of buying an existing franchise is that you can implement all of the same strategies for identifying, negotiating and financing the purchase as you would when buying an existing non-franchised business. As such, it's wise for you to get as educated as you can on buying an existing business and always work with a knowledgeable “business broker” if possible.
Probably the most attractive advantage of buying a franchise from the buyer's point of view is that you can investigate any franchise much easier than an existing non-franchised business. The reason is that you will be able to look at other franchises under the same banner. You can speak with other franchisees in the area and they should be a wealth of information for you.
There is also a disadvantage conducting Due Diligence on a franchise…. you have to do it on two fronts. First, you have to check out the business itself of course but of equal or greater importance you have to evaluate the Franchisor to be sure that they will deliver everything they committed to.
The Franchisor's agenda is to open up as many units as possible. While they may all say that they will not dilute the market, rest assured that unless they are contractually obligated to do otherwise they will keep compacting the territory. As more and more locations open you wind up competing with your own brand. Once a customer of yours finds another location to be more convenient unless you have a solid relationship with that individual you will lose their business.
The best way to build equity in franchising is to continue opening or buying other locations. If possible, stick with one banner or within an affiliated group of companies. This way, your leverage with the Franchisor increases and you can remain focused on running one particular type of business. Remember you can't dance at all of the weddings so opening up new locations too quickly can cause growth problems. However, as soon as the first one is on track, look to acquire another one.
Each state has different regulations/laws related to franchising that are usually quite involved. Additionally, the Agreement (Uniform Franchise Offering Circular…UFOC for short) between the Franchisee and Franchisor differ between companies and many contain clauses that you would never think exist. As an example, if a Franchisee wants to sell their business, most often the Franchisor has the first right to buy the business. The reason is that they want to insure that the market doesn't have too many resales available (it hurts the Franchisor when they are trying to sell new franchises if potential buyers see too many existing locations for sale). Secondly, they want to protect themselves if they don't feel the potential buyer is right.
Hire a Broker and consult with an attorney who specializes in franchise law and before you take a second step with any resale franchise, make sure you get a copy of the UFOC between the Franchisee and Franchisor to properly evaluate what you will be faced with along the road.
In summary, franchises can be ideal for many people. If you want to improve your success rate, then buy an existing location. It will provide you with all of the benefits of a franchise along with the added security of historical data and a proven track record.
About the Author: Jack McLeskey has been helping Buyers and Sellers of businesses achieve their goals since 1982. Mr. McLeskey is a Certified Business Appraiser, a lecturer, an Author of numerous articles on Business Sales and Acquisitions, past President of the NCABB, current member of the National Century 21 Commercial Advisory Board and Managing Director of the C-21 Select Commercial Business Group.
