Things You Need to Know About Buying a Franchise

Things You Need to Know About Buying a Franchise

2020 is proving to be a volatile year for the economy, job market, politics, and more. Potential entrepreneurs looking for their next investment are wise to explore franchise opportunities since they are sometimes virtually immune to recessions

Is now the right time for you to explore buying a franchise? Read through this piece to see if it’s the right business option for you.  

Why Buy a Franchise?

Owning a franchise provides numerous potential benefits. Forbes wrote a whole article on this, but we list several here, including:

    • Less risk as you enter the startup phase
    • Clear investment expectation in terms of cash requirement and the potential return on investment
    • The benefit of built-in brand awareness
    • Training and operational processes, procedures, and policies are pre-defined.

Now, you may be looking for a step-by-step process for how to buy a franchise. As with most things, you should know that purchasing a franchise includes nuance, so you should leave space for that. The nitty-gritty details are where Raintree flourishes in our niche. That being said, there are some components you should consider as factors for success. 

Below is a list of helpful hints and tips for entrepreneurs who want to open a franchise.

1. Perform Due Diligence

It sounds obvious, but you would be surprised how many people take what is presented to them at face value. When buying a franchise, you don’t want to be “sold.” You want to enter into a business deal with a full scope of understanding and disclosure as a partner. You can enlist the help of others who have been through the process or who specialize in the buying and selling of franchises, and we’ll dive into that more later. You should do your part to review the documentation provided to you and pursue and identify information accessible on the internet, which is in abundance in this day and age. 

Between online research, the assistance of a supportive person or team, and requests for information you make directly to the Franchisor, you should be able to identify any potential red flags and accurately assess the financial health of the business opportunity you are researching. 

2. Know Thyself

Plato may not have been talking about owning a franchise when he coined the phrase “Know thyself,” but it applies here nonetheless. Not everyone is capable of entrepreneurship, and not every entrepreneur makes a good Franchise Owner. Try to think through some of these personal reflection questions to determine whether this is right for you.

      • Have you delivered results as an entrepreneur?
      • Have multiple people told you they see you as entrepreneurial?
      • Do you have the cash required to launch a franchise, not to mention the appropriate level of risk tolerance?
      • What sort of business works with your lifestyle?
      • What model suits your skills and interests while also aligning with market opportunity?

Let’s say you are presented with an opportunity to buy a franchise that seems like a great opportunity, but it requires more scheduling flexibility and expertise than you have. Do you take the plunge and try to plan for contingencies, or do you strategically research opportunities that meet your requirements? We would not recommend asking questions about franchise opportunities if you haven’t asked them first. 

3. Understand Why You Buy

Okay, this one dovetails slightly from our previous point, but we think it needs to be addressed directly in more depth. Having the desire to be a business owner, and identifying companies that fall in your price range is only a small piece of the puzzle. As we said, you should know yourself well enough to know what unique value you bring to the table in owning a franchise, and this knowledge extends to a strategic market position. 

For instance, did you know women are increasing in number as Franchise Owners? Why not leverage the position by looking for financing opportunities that might be unique to women-owned businesses? Further, what if you researched a company whose market is women but is owned by a man? What could you bring to the table as a woman buying franchises that could give you and your business an edge? 

4. Interview Other Franchise Owners

What better way to gain an in-depth understanding of what Franchise Ownership looks like than to speak to a Franchise Owner? We recommend spending some time accumulating general knowledge about owning a franchise from a current Franchise Owner, even if it is in a different industry. These conversations can yield helpful, generalized information about Franchise Ownership, lessons learned, and expectations.

If possible, we strongly encourage you to have a conversation with a current or former Franchise Owner of the company you’re considering purchasing. While some geographic market factors may leave room for nuance, they will provide a depth of insight that you can’t get anywhere else. Franchise Owners are a great source of information. Use this time to ask pointed, direct questions about their experience, recommendations, satisfaction, and success level.

5. Perform a Cost Analysis

State and federal laws vary as to the requirements of specific franchise contracts, so you will want to thoroughly understand what is required on your part in terms of financial contribution, capital investments, and varying costs and fees. Be sure everything is laid out and carefully defined in any written agreement you sign. Franchise fees can vary widely depending on the brand and what is included in the franchise package. Couple this with operational investments and ongoing costs, and you’ll need to ensure you have the cash outlay necessary to get up and running.

6. Enlist the Help of a Professional

As knowledgeable as you may be, enlisting the help of a professional agency can provide supplemental expertise and manage some details, which frees you up to focus on your strengths. Raintree has an extensive network of brokers, in-house sales, consultants, and marketing experts who are well-rounded professionals in the franchise space. You will be working hard and spending vast amounts of time and money in the initial start-up phase. Allow Raintree to research and speak into the nuance of segmented market availability and strategic digital marketing. 

Let’s Recap, Shall We?

As you know, there are no free lunches and very few guarantees in life. The level of return you may see when buying a franchise is contingent upon your knowledge, skill, entrepreneurial spirit, cash flow, due diligence, and ability to put forth the time to make it a successful endeavor. 

Franchisors have an interest in your success, which makes the agreement mutually beneficial. Therefore, it’s in your best interest to understand one another, the business model, the opportunity, how it aligns with your contribution, and engage support when you need it. 

Franchises are historically successful at least partially because they have a profitable model and process that is repeatable, which requires a spirit of entrepreneurship tempered with the desire to repeat what already works. 

You’ll still need to bring your business acumen and grit to the endeavor. If you’re ready to do that, it’s time to move to the next step. Call Raintree at 720.295.2744 today!

Featured Image: Shutterstock / Fizkes

Introducing September’s Consultant of the Month: Scott Diener!

Introducing September’s Consultant of the Month: Scott Diener!

Our September pick for Franchise Consultant of the Month, Scott Diener, is a 30+ year veteran in franchising and franchise ownership. From building multiple brands from scratch beginning in 1989, when he helped launch the Unocal76 gas station brand into franchising, to starting a franchise concept, Scooter’s Jungle, with his family, Scott shares his unique point of view from the Franchisor’s needs to the multi-unit owner’s requirements and continues to run his franchise consulting business today. 

Scott’s Journey of Franchise Ownership, Education, and Consulting 

As Project Manager with Unocal76, Scott was instrumental in overseeing everything from strategy, design, ground-up real estate, and launch of franchise operations. During this time, Scott also received his MBA from USC in Entrepreneurial Studies, where he still volunteers as an advisor to students. After accomplishing the goal of 200 new open Unocal76 locations in two years, the company’s retail division was sold to Circle K. This was Scott’s first introduction to franchising and building brands. From there, he moved on to work in franchise business development for Baskin Robbins, Dunkin Donuts, and Quiznos, focusing on the corporate side of things and nurturing the people management skills that proved instrumental in building his current career as a franchise consultant.

While Scott enjoyed working with Franchise Owners, he found that his “corporate road warrior” role with each company came at a cost, keeping Scott away from his family. After years of helping others start a business, Scott got bitten by the entrepreneurship bug. Together with his wife, Sharon, Scott founded a private birthday party concept called Scooter’s Jungle in 2002. The business was a major success, opening three corporate locations. Even with all this activity, being an entrepreneur offered Scott the opportunity to transform his old business travel into longer trips abroad with his family. 

After six years of building a replicable business model, Scott transformed the business into a franchise offering for the Southern California market. The insights he had gained by working with Franchise Owners were invaluable from his new perspective as a corporate owner. 

After spending years mentoring MBA students and working with Scooter’s Jungle Franchise Owners, Scott wanted to get back into the business of helping others connect with their ideal business dreams. Scott further developed his “why,” and franchise coaching was the natural fit. He could use the experience in all aspects of franchising, business development, and ownership, and pair them with his desire to guide and mentor others toward achieving their goals. In 2014, he joined The You Network and International Franchise Professionals Group and has thoroughly enjoyed developing relationships and helping people ever since. 

Franchise Consultant Scott DienerScott’s Recipe for Success as a Franchise Consultant

Scott attributes his success in relating to his clients as someone who has walked in their shoes and speaks from both firsthand experiences and the heart. He is transparent with his clients and can talk knowledgeably about the hard work and dedication needed to be successful as a Franchise Owner, setting realistic expectations without sugar-coating anything. Transparency builds trust that is imperative for fostering the deep client relationships necessary to help them discover the perfect opportunity. He asks the tough questions and makes sure that they understand this will be a profound lifestyle change for them and their family.

Scott emphasizes getting to know his clients by allowing the client to share their journey, their background, and their “why” that prompted them to begin their search. By diving deep, Scott can help his clients accurately identify the pains they are experiencing and how they can be solved. As a franchise consultant, he understands it’s essential to be agile to adjust to clients’ changing needs. 

Finally, Scott recommends joining peer groups with seasoned consultants who challenge each other to grow. At times, it’s easy to become complacent or even lazy, getting into a routine of doing the same thing every day. Surrounding yourself with inspirational consultants with varying opinions who are doing it right is incredibly beneficial. They are the best resources! 

What Does Scott Look For in a Franchise Concept to Present?

First, it must be the right fit for the client!  Scott also breaks it down into two main categories:

1. Development Team

“I am handing over my client whom I have just invested a significant amount of time building a relationship with over to a reputable development team that I must trust to take care of my client. Raintree is a great example where I have high confidence in the professionalism of the education process of any of the Raintree brands. I appreciate extra communication from the development team to ensure consistently updated on my client’s progress and honesty. If I send over someone who is not a great fit, tell me and why! We all learn and not waste an individual’s time.”

2. Leadership Team & Validation 

“Having been a multi-unit owner, I understand the significance of a great leadership team and strong franchisee validation. Current franchise owner satisfaction build’s the brand’s story, the track record of success, and the ability to speak to the franchisee support received from corporate. The training program, launch, and ongoing support from leadership is vital to the long term success of the business as well.”

Congratulations, Scott Diener, on being recognized as Raintree’s September Franchise Consultant of the month! Thank you for letting us share your story.