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 Franchise ArticlesEntrepreneur's Opportunity...Franchise Ownership Naturally, most Entrepreneurs seek an opportunity that allows them to build a wonderful enterprise appealing to the masses with the most fabulous “can’t live without it” product or service.
Obviously, this enterprise could be a start-up, existing business or a franchise. Start-ups are of interest because you can do it “your way” and have that control we all desire. However, the Entrepreneur typically doesn’t have the patience to put all the applications of the idea into action. As the idea materializes, the details and application steps sometimes get lost in the grandiose plan and future pacing of the Entrepreneur.
Existing business acquisitions can often provide the Entrepreneur with a platform upon which to build his/her empire. Purchasing a “stream of income” can jumpstart the process and sometimes accelerate the growth curve. Finding the right one can be tedious, time consuming and difficult to negotiate. The occasional “oh, by the way” surprises can be jolting and cause severe headaches!
Entrepreneurs wish to control their own destiny. Captain their own ship. Is this Utopia?
Perhaps, but more accurately the drive to create something that is useful and/or desired by the consumer. To produce a reasonable and expected ROI and to exceed predicted growth (multiple locations, linear growth, new market channels, diversification of product or service)
The Franchise Model…
Some Entrepreneurs prefer to form their own business model. Others gravitate to a proven concept like the business format franchise model. Particularly for the entrepreneur who has never owned a business before…..the franchise model provides a stepping stone to achieving the “golden ring”. Master Franchises are a good example.
Now here’s a REAL entrepreneur’s dream. Master Franchises have been touted as the “Best Kept Secret in Franchising Today”.
The Master franchise concept allows the Entrepreneur to:
So, why aren’t more franchisors using this concept as a way to expand more expediently?
The Business Format Franchise model is more popular than ever. Considering there are 5,000 franchises spanning approximately 80 industries, it is safe to say the franchise industry is exploding with growth. Franchise “fever” is definitely prevalent and “catching”.
Many of my clients are casualties of corporate mergers. Some find they are overqualified or too old for rehire, especially when corporate America prefers the recent college grad. Forget about experience and knowledge gained from years of product knowledge, management and leadership……it’s all about money $.
Yes, there are many Entrepreneurs lurking in the carnage of today’s Mergers and Acquisitions battlefields. So what are these guys and gals doing in their next career path?
You’d be surprised how many are considering business ownership. It beats the rejection and demoralization of the job hunt for those 45 and older. Perhaps your next career path is a business format franchise. Area Development or Master Franchise anyone?
Advantages of Owning a Franchise Today, many more people are considering business ownership than ever before – it’s a sign of the times. More and more companies are merging, downsizing or simply going out of business. This causes numerous talented individuals to seek employment in a constantly shrinking job market that offers fewer positions, especially those similar to the seeker’s previous types of employment. As we experience great changes in our workplaces and work forces, as the general economy erodes, more and more people are exploring business ownership – to be their own boss and work for themselves rather than someone else.
As those individuals begin to investigate business ownership, franchise ownership is the first choice for many. For one who has not experienced business ownership previously, franchises offer many advantages:
These advantages apply only to the “right person” for the “right opportunity”.
Finding the right business is like finding the right job….only harder. Be prepared to spend several dozen hours doing your homework. If you do not feel you can afford the time, abandon your search now! A half-hearted attempt will prove to be a waste of time.
You should definitely honor your commitments of time, return phone calls and keep appointments with the franchisor representatives. Here are some important and practical recommendations for aspiring entrepreneurs:
AND, don’t forget the possibility of finding that perfect fit for you! A business that excites you and makes you want to jump out of bed every morning and go to work!
A big goal for many is finding a business which allows them to have FUN! Fun in ownership, fun in working with people and fun in the success of the business!
Obviously, there are many advantages to franchise ownership. It’s a great “first step” for aspiring entrepreneurs. Escaping the glass ceiling, corporate politics and being able to make decisions and having no one question those decisions can be exhilarating. Let your emotions guide you to a certain extent – but let your analytical side kick in and do plenty of research and justify your decisions with facts before you open your wallet! What happens when an existing franchisee decides to sell? Franchisees don’t actually “own” the franchised business. In fact, they own the “assets” of the business only. The Franchisor gave them the “rights” to use the name, marks, the operating manuals, the “system”, however the franchisee does not “own” these items. In effect, they rent them from the franchisor during the term of the franchise agreement. When existing businesses sell, the price is typically based on a multiple of normalized annual earnings or cash flow. Another common term used in the financial industry is EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization).
Typically, franchisees want to re-coup every dollar they put into the business and then some. Often this is possible assuming the business is profitable and has a track record. Two positives franchisees sometimes overlook:
But on the flip side, an existing franchised business (in the eyes of the buyer who is looking to buy a stream of income) is an existing business that happens to be a franchise. Therefore, unless the business is profitable, this buyer will probably not wish to pursue it.
The franchise minded buyer (wants less risk and likes the franchise model) will like the fact that the current franchisee has done most of the hardest work in ramping up the business. The existing franchised business will be very appealing to this buyer assuming he/she has a personality that matches the business model.
So what happens if the business is not yet profitable or is just now at break-even? The franchisee will have to decide how motivated he/she is to sell those assets. Obviously, since there’s no stream of income, the price will need to attract the franchise minded buyer. Will this buyer pay you a price higher than what it would cost to put in a new franchise? Possibly, however several factors enter into the buyer’s decision:
In the event the current franchisee has a “short fuse” on when they wish to sell – price may have to be lower than turnkey cost of a new franchise in that system. Business Ownership - The American Dream What is it that attracts more and more people to become business owners? What happens to bring that Entrepreneurial spirit to the forefront? Not only do Entrepreneurs embody the American Dream, they drive our economy and our future.
Today’s corporate mergers create additional opportunities for many to take the “big step” into business ownership. More and more talented individuals in the 40-60 age group are finding great difficulty in their search to replace the position and income they enjoyed in their previous employment. What are these “breadwinners” to do when they are too young to retire and many have one or more children in college? A high percentage will seriously look into business ownership.
As increasing numbers seriously explore business ownership, assuming they are qualified financially, we find the largest roadblock to be….RISK.
R – Research = Reward
I - Insecurity with volatile job market
S - Success is Not Guaranteed
K – Knowledge and Self Confidence to build an asset
Obviously, there are no guarantees. Of course, running a business takes talent and skill.
Reducing the risk is accomplished by research and due diligence. As with any major decision in life, an individual will at first emotionally buy the business, then justify with the facts. The fear factor is rationalized by the confidence a person has in his/her transferable skills and the vision to build something……an asset to pass on to the next generation, put a manager in place and back away when the time is right, or even sell when they choose.
It’s all about timing. I met many of my clients over a year ago. Sometimes people will interview for jobs and look into business ownership at the same time. You can’t give 100% effort by going down two paths at once. Occasionally, a client will take a position that is less than preferred, because the frustration of the search has taken its toll. However, when they are downsized AGAIN, they decide the timing is right to end the job insecurity by moving forward into business ownership. No glass ceilings, no corporate agendas, no corporate politics…..simply more independence and a chance to control their destiny…..a chance to build something by working for “self” rather than someone else. The American Dream - is it in your future? |
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