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As a franchise consultant, I have a plethora of different franchises available to me. Right now, over 600 franchises in 30-40 different industries. Yes, they are “available” for me to put candidates with, but that doesn’t mean I would consider them all a possible good fit for the majority of the people I work with.
So what are these businesses you ask? Well, there are several non- starters for me, and there are others I would only recommend under a very specific set of circumstances.
Complete Non-Starters
Some of the biggest reasons you want to have your own business are to build income with no “limit” and create an asset you would later sell, restructure into an absentee or semi-absentee owner business model, or pass to your children. In all cases, you are building an asset. But there are franchises out there (Chicken Company not to be named) that you never “own” your location. If you ever leave, you don’t have anything to sell, you just have to walk away.
I have a franchise in the healthcare industry that strongly promotes a Master Franchise model. It was a very attractive business model, and the franchisee could build their own region. They would receive a portion of the franchise fee from all of the franchisees they brought in and then they would get a percentage of the Royalty. It was a strong business model. The problem is, I was talking to someone from their home office, and found out their intention was not to renew the master
franchise agreement past a certain point, and just “take back” the region and have it become corporate-owned. This meant that the person who invested their time and money to build a successful region was out on their ear. That was the very last time I referred them to any of my candidates.
Restaurants
In most cases, I do not refer restaurants to my clients. The only exceptions are when they have prior restaurant experience or if they really, really want a restaurant. Even then, I try to talk them out of it. The reasons many of the people I talk to want a restaurant is that they LOVE to get on the grill on Sunday and they make a really good steak.
What they don’t take into consideration is that making a meal for their family is very different from having to cook a hundred and fifty meals each and every day, manage staff, and run the business, all at the same time. Restaurants have a low success rate. Over 60% fail in less than four years and 20-30% actually fail in the first year. The average small business sells for approximately $900,000, whereas the average sales price for a restaurant is around $190,000.
There are so many other businesses with a smaller initial investment that grow to profitability much quicker, and the profit margins are significantly higher.
Dry Cleaners
Dry Cleaners are a very high-risk business. Purchasing an existing dry cleaner carries many issues when it comes to environmental concerns. You can be responsible for Remediation costs for even third-party risks. Dry Cleaners have very high failure rates. When you purchase a dry cleaner, you are taking on equipment with a very short life span in comparison to many other industries. You have large ongoing expenses, and when you sell, Dry Cleaners bring very low multiple
valuations.
These are not the only businesses I would stay away from, and there are a lot of businesses that are going to depend on your background and experience.
The best thing to do is to work with a competent franchise consultant who can help you weave through the maze of options. The Enterprise Group can help you figure out options that would have a high chance of being a good fit for you.
If you would like to learn more about this or any other franchise industry and brand, contact me here, or schedule a call with me.
By Rick Schell
