If I Could Get OUT For What It Cost Me To Get IN, I’d Be Happy!

It happened again today! I was talking to a franchisee about her chances of selling her franchise business and she came out with the statement I hear so often from franchisees – “If I could just get out of it for what it cost me to get in to it, then I would be happy”.

I hear this so often from franchisees struggling to make a profit in their business. Usually they are in a retail situation in a shopping centre. After a few years they realise that the only people making any money are the shopping centre owners and the franchisors. In effect, the franchisee is working to keep the shopping centre owners and franchisors in the lifestyle they have come to expect!

Unfortunately, once you are IN and have invested the money, it can be very difficult to get out and recover your costs. And if the lease is in the franchisees name then they are stuck with that as well.

The first piece of advice I give anyone considering buying a franchise is “Find out how are you going to get out of it?”  They normally laugh and ignore my advice.

If you really must buy a retail franchise business in a shopping centre then do your homework first. In Australia we have such a strict Code of Conduct for Franchisors – as part of the Trade Practices Act – there is no excuse for a prospective franchisee NOT doing their homework before signing up. At least speak to existing franchisees and see how they are going, and if possible, franchisees who have left the franchise. Under the Act the franchisor must provide details in their disclosure document for you to do this.

To view the Code of Conduct for franchisors CLICK HERE and I recommend page 29 onwards.

Regards
John
“Committed to helping business owners realise their life’s dreams through buying and selling businesses!”
Thinking of buying or selling a business? Then attend my workshop on the 6th August – click on WORKSHOPS tab above.

Franchises: Why You Can’t Have It Your Way

In spite of my last few posts, I still get labeled as not liking franchise businesses. Well, that’s not true. I just dislike businesses (as far as selling them goes) which are not good businesses – franchise or not. In fact, I currently have a franchise business listed for sale. I was very comfortable listing it because the franchisee is making a very good net profit for a fairly relaxed 40 hours a week, Monday to Friday. The franchisor seems very supportive and they have “stringent” operating procedures and a training regime.

One of the challenges I have in selling this business, as with any franchise business, is finding the right kind of person to buy it. Franchises are not for everyone. They are certainly not for anyone who is creative or entrepreneurial. You have to operate a franchise within very strict operating procedures. That’s what a franchise is. A tried and tested set of procedures based around a good product or service which can be replicated over and over again.

A couple of quotes about franchise businesses which I believe sum it up. “With intelligent systems you don’t need intelligent employees.” I have heard that associated with Ray Kroc of McDonalds fame. Not sure about that. The other quote, no idea of the original source, is that the ideal franchisee is a retired airline pilot. Why? Because airline pilots are trained and conditioned to follow procedures – not matter what!

At the end of the day, provided that the product and systems are tried, tested and proven to deliver something useful to the market – then the success lies with choosing the right person to be a franchisee.

For more on this, I recommend you read the latest article from Dr John Hayes (How To Buy A Franchise blog) which is titled

Why You Can’t Have It ‘Your Way’ When You Buy A Franchise. Get This: It’s Not A Democracy!

Just click the title above to read Dr John’s words of wisdom.

P.S. If you are in Perth Western Australia consider registering for my latest half day workshop on “The 7 Key Steps To Developing Your Business Ready For Sale” – just go to the navigation bar at the top of this page and click on “Workshops”.