What to Research When Buying a Franchise
Whether it stems from the desire to leave corporate America or to expand your arsenal of entrepreneurial endeavors, the decision to buy a franchise must be followed up with a plan of action. Below we discuss our recommendations and insights into how buying a franchise works, who can do it, and what to look for if you’re buying a franchise.
When researching buying a franchise, you should:
- Decide why you want to buy a franchise, whether it’s to leave corporate America or to live your entrepreneurial dreams
- Familiarize yourself with brands within the franchise category you’re interested in online
- Identify the franchises brand culture and if it aligns with your own values
- Determine how motivated the brand is to support their franchisees
- Find the network of a company’s franchisees and discover how they work together
Making the Decision to Buy a Franchise
For those not yet familiar with the world of entrepreneurship or, perhaps, do not quite understand what a franchise is, Charles N. Internicola recommends enlisting the help of a franchise broker. This professional wields invaluable industry knowledge to help you find brands that align with your financial portfolio and personal values. Brokers also maintain relationships with franchisors, enabling you to speak directly to brand owners and executives and voice your questions.
He adds, “Most of us who are generalists into franchising end up with a franchise broker because [they] have a good inventory. They’re able to say, “I don’t know what I’m passionate about”, and the broker community has done a great job at capturing those candidates to be able to coach them through.”
Like franchise broker Lisa Welko once told Charles, ‘no one wants to buy a franchise’. You want to own a business. The time and money invested into a broker provides you with the resources to figure out what it is you want out of a brand and which brands afford the best opportunity.
Becoming Familiar with Franchises Out There
Assuming you have chosen your category (whether it’s coffee, gyms, etc.), start with a Google search and pay attention to the page one search engine results – both ads and organic.
You will find ads and frequently viewed pages in your category, introducing you to some of the more well-known brands out there. Another tool with expansive resources is ‘Entrepreneur’ magazine, whose yearly 500 ranking showcases a large selection of brands by category. The magazine also groups together franchises best-suited for certain lifestyles and experiences (e.g. veterans, work-from-home).
After you have become familiar with the brands in your category, narrow down your top 3-5 choices and hone in on their websites.
Nick Powills recommends taking a deep dive into comparing each brand you’re interested in.“I might even chart this out to try to create an apples to apples comparison, number of units they have in the market that I want, how many units do they currently have, and who are those franchisees I might go to,” says Powills.
Charles N. Internicola points out the information you can find on a franchise before reaching out can be very telling of how organized a brand is and what their franchisee culture may be like.
“For me, the brand mission of the team coupled with unit economics is what’s going to motivate me,” he says.
How does the company present themselves and position their opportunity? If they are on LinkedIn, who are their leaders? Do they have a team dedicated to franchisees?
Aligning Brand Culture with Your Values
These questions segue into the next crucial consideration: what is the culture of the brand? When it comes down to picking between brands with comparable stats, the deciding factor is your understanding of each company’s culture.
Franchise culture has two parts. First, is the brand identity. What is the brand’s mission? Do they have clearly-stated values? And what makes them stick out? All of these factors encompass a brand’s ‘why we exist’. The ‘why we exist’ of a franchise with a solid identity should permeate everything the company does from service offerings down to the product names.
An impressive example of a franchise that clearly states their brand identity and mission is the coffee chain, Biggby. Biggby’s Co-CEOs, Bob Fish and Mike McFall, differentiate their brand from the rest by spotlighting their dedication to charitable donations and community engagement. Franchisees collaborate with locals and are known to sponsor events. These activities are perfectly summarized by the brand’s slogan: “We exist to love people”.
Powills explains, “Our conversations with Biggby wowed me. I’m like even if I don’t want to own a coffee business, those guys make me feel confident that they’re going to have my back. So, if I were to buy a building for our company and operate a coffee shop downstairs, I might reach out to the Biggby folks.”
Not only does Biggby appeal to the public-spirited extrovert, but they are also dedicated to their franchisee’s success. This is where the significance of the other half of brand culture comes in. How does the brand treat their franchisees?
He further explains, “[There are some companies] that I would never buy a franchise from. Some of those are on the franchise development side, not the executive leadership side. They chase the dollar so hard that it just wouldn’t align with me culturally.”
Perhaps a brand has a solid identity and share your values, but they offer few resources to ensure their franchisees’ success. This is where many franchisors fail. They put more effort into selling the franchise than starting a conversation. Charles chimes in that good franchisee culture does not have to be “flashy, cheering sessions” like parties and conferences.
Sylvan, an education brand, for example fosters a culture of franchisees being on the same team. This tutoring company elects representatives to the ‘Sylvan Franchise Owners Association’ where they voice concerns and ideas to franchise executives quarterly. Additionally, corporate holds monthly town hall calls for each district and assigns each territory a corporate representative for day-to-day contact.
For the Franchisor
When it comes to getting franchisees in the door, the journey starts with the brand website. Information available to potential business owners must include ample statistics about franchise profits and costs, while also painting a picture of the face of the company: you.
“Where franchisors fail is they try to do too much in that first interaction. That first ad, that first website. They’re trying to sell a franchise as opposed to start a conversation, so I would be looking for the brand that is really equipped and thought through the conversation,” Internicola explains.
Franchisees want to know who they are working with, as the relationship between the two of you does not end after successfully selling the franchise. If you have a separate franchise management team, it is important you brand them as an engaging and insightful source for your franchisees. Even better, a franchise may boast a close network of franchisees.
Additionally, something many franchisors struggle to concede is that there is no pleasing everybody. Any company that tries to market itself and its values in a way that appeals to everyone will inevitably end up with a generic, tasteless brand that, ironically, will appeal to nobody.
Charles points out, “It’s so easy for [franchisors] to bypass culture and put it in a category or team. ‘Oh we did our vision statement, here is our core values, so our culture is done’. That’s not culture. The power of a great culture is it’s genuine. Where
brands don’t get it right–or they’re culture is not as genuine as it can be–it’s not because they’re not good people. It’s because they may be distracted on other things.”
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