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I speak with people every day who tell me they are interested in business ownership but are not interested in franchising. When I ask why, either they don’t know, or they say something about the fees involved. Yes, there are both franchise fees, which is one-time, and royalties, which is normally a monthly fee. There are also marketing, software/technology, and sometimes a fee for a call center.
While these can cut into your profits to some extent, there can also be a lot of benefits associated with a good franchise. I have seen franchises that average higher profit margins than the national average for the industry due to their systems, processes, and procedures. If the national average for net profit to the owner is 12% but you can net 20% after all expenses and fees, you realize it is not what you spend but what you keep.
There are other benefits most people don’t think about. For one, if you are a business owner, you are an island. Every other like company in the area is your competition, not your friend. They would rather see you go out of business so you don’t take customers they could end up with. But in franchising, not only is the Franchisor on your side, but every other franchisee in the company is your friend and ally.
If you have a franchise where the brand is owned by a big national conglomerate like Premium Service Brands which owns, I believe it is eleven different franchise brands, all those brands in your area are also your allies. They are potential referral partners. You will go to the annual conventions and get to know other franchisees doing what you do. Lifelong friendships are developed and you learn from each other, there are strength in numbers.
Did you know that if you go get a job today, the average tenure for a man is 4.1 years and 3.6 years for a woman. Less than 50% of people who get a job today will still be working that job in five years. If you go into franchising, you have between an 87-93% you will still be successfully running that franchise after five years. You have approximately a 300% greater chance of still owning your franchise business than staying in a job for 10 years or longer.
Consider this, franchises are for the most part “Proven Brands” with systems and processes already in place. They provide training and ongoing support, plus they have a “vested interest” in you, your path to profitability is typically significantly quicker.
You have heard it said that it can take up to three years to turn a profit in a new business. It never took me that long, but you can easily go well over a year before you start seeing profits. In franchising, I have seen many times where a franchisee will become profitable in a few months. I have seen franchisees recoup their entire investment in less than a year.
Based on internet searches about selling businesses and franchises, it was shown that franchises often sell for 1.5 times more than an identical business not associated with a franchise. Franchise businesses are safer to purchase due to the oversite from the franchisor. Private Equity groups and other investors know that when you purchase franchises, they are getting consistency. If they purchase 10 of the same franchises, they will all have the same systems and processes. They will be predictable.
These are just a few of the benefits you receive when you become a franchisee. Yes, there are franchises out there that are not as good as others but this is also why you work with a professional franchise consultant to help you navigate the waters.
If you would like to schedule a time to speak with me, contact me here, or schedule a call with me.
By Rick Schell
