An Excerpt of Take the Fear Out of Franchising
“Will you come and see me this Saturday morning?” he asked.
“I will,” I said. “But before we hang up, what kind of business are you in?”
“Co-operative direct mail advertising,” he stated, as though it was the only business to consider. “I’ll explain it to you when I see you.”
And that’s how I met the late John Kinch, who franchised TriMark, one of the earliest business-to-business franchises. Today, you know the concept as Valpak or Money Mailer. Every month or so, they mail an envelope full of coupons to households across the U.S. and other countries.
When I met Kinch (in 1979), and he told me how franchising worked, I was still amazed, but not as much by the concept of franchising, but by the simplicity of the idea.
“You’re telling me,” I said, as we sat in his conference room at TriMark headquarters, “that if I pay you $8,000, you will tell me everything I need to know to build a business like your business?” He had already told me how much he earned from his business, and it was four times my university salary.
“You’ll tell me where I should open the business. You’ll tell me how to get clients. You’ll show me, step by step, what I need to do to mail coupons to households in my business territory . . .”
“All that and much more,” he assured me.
He promised to introduce me to several existing franchisees, and as he did, I interviewed them to gather more information for the operations manual that I agreed to write (for TriMark). Interestingly, none of the franchisees had ever previously worked in direct mail advertising. They all came from different professions, including teaching.
Suddenly, I was absorbed by franchising, and even though I wasn’t prepared at the time to become a franchisee – I didn’t have $8,000, and I still had several years left to complete my doctorate – I started telling people about my discovery and encouraging them to become franchisees.
Here’s How Franchising Works
“It’s a simple concept,” I said over and over.
“You pay a fee – that may be the biggest challenge – and the franchise company trains you. They show you what to do. If you follow the operations manual, and listen to the franchisor, you’ll succeed,” I continued.
“Instead of you figuring out how to build a business from ground zero, someone shows you how they did it. You don’t have to worry about developing brochures and advertising – they’ve done that for you. They tell you how to set up your office.
“They tell you how to get clients. They tell you how much to charge for your services. It’s all done for you. They call it ‘following their success system.’”
And, of course, in the case of TriMark, I documented that success system by writing the company’s operations manual, the first of many that I would create during the next several decades.
Eventually, Kinch and I co-authored Franchising: The Inside Story, http://www.howtobuyafranchise.com/theinsidestory/ the first book written about how to buy a franchise. For that book, I interviewed approximately 100 people including franchisors, franchisees, franchise attorneys, and members of the International Franchise Association in Washington, D.C.
The process of writing that book gave me a deeper appreciation for franchising, and especially for its simplicity.
A Concept For Almost Everyone
To this day, I tell people that franchising is a simple concept that almost anyone can use to develop a successful business and to create financial independence. Thousands of people do so every year, not only in the U.S., but in communities worldwide. There are now at least 3,000 to 4,000 different franchise opportunities in North America alone, meaning that just about every type of business has been franchised.
“Wait a minute,” people will say to me. “If it’s so simple, and if it’s so fabulous, why have so many people failed? Why have so many people lost fortunes trying to succeed as franchisees?”
Many of these people will go on to tell me about their neighbor, or their relative, or someone they used to work with who bought a franchise and lost it all.
“But that doesn’t mean it isn’t a simple concept,” I counter. “If it works the way I explained it to you, and I know from personal experience that it does, it’s a simple concept that has led countless people from average lives to luxurious lives. You can’t deny that.”
Yet, Some Have Lost Fortunes
And I don’t deny that people have lost fortunes – some may even have lost their lives – trying to build a successful franchise despite doing what a franchisor told them to do.
I know better than to say franchising is for everyone. But I maintain that franchising is a simple concept that builds wealth for people who understand why it works and how it works, and – most importantly of all – who acknowledge several fundamental tenets that define franchising in a near-perfect world.
Unfortunately, some people, some of the time, try to turn franchising into something it was never intended to be, and that’s when franchising is likely to become a disaster. . . .
Negative Publicity Creates Fear of Franchising
Every year in America, the most advanced franchise economy in the world, there may be hundreds of negative headlines and woeful stories in all forms of media about franchising, and if nothing else they create confusion about this simple concept that so many people have used to create fortunes.
Franchise critics, often themselves failed franchisees, look for the negative publicity and add their own two cents, as if dumping on franchising makes them more important. Among the misleading and erroneous points they want you to believe are these:
“Franchisors are out to get you.”
“The franchise agreement is stacked against you.”
“You’re just buying a job when you become a franchisee.”
“You can’t make your own decisions when you’re a franchisee.”
“As soon as you start making money, the franchisor will find a way to slap you down.”
“You don’t own anything when you’re a franchisee. You’re just a pawn of the franchisor.”
“You’ll never be able to sell your franchise.”
The criticisms are often nothing more than unsubstantiated nonsense, but they serve a purpose.
They create fear!
And people should be afraid!
As I wrote in 7 Dirty Little Secrets of Franchising http://www.booksbyjohnhayes.com there are secrets that franchisors don’t want you to know; secrets that they are not legally required to share with you.
Some franchisors, depending on the circumstances, will intentionally withhold information from prospective franchisees, just as some franchise salespeople will withhold information because they need to sell franchises. Salespeople, after all, usually get paid only when they sell a franchise. . . .
Without knowledge and respect for the fundamental tenets of franchising, you should be fearful of franchising because it can take you down and under. Of course, without knowing and respecting the fundamental tenets of franchising, you are not qualified to buy a franchise, but it’s unlikely that all franchisors will tell you that, especially if you want to buy a franchise.
If you’ve got the money and the desire, you can easily find someone to sell you a franchise regardless of your qualifications.
There’s No Plan B in Franchising
But before you make a decision to buy a franchise, you should know that while it’s a simple concept, it’s not a hobby. Franchisees don’t have a Plan B. It’s not like multi-level marketing where you can spend a little money, play around with it for a while, and then forget about it if the business doesn’t catch hold. As one seasoned CEO of a major fast-food franchisor said, “Being a franchisee isn’t a job you can quit -- it’s your life.”
And it can be a great life! In a scenario where you do your part to succeed as a franchisee, you can use franchising to build independent wealth that buys you a lifestyle that you’d never achieve as someone’s employee.
If you succeed, you can own one or multiple franchises, even multiple concepts of franchises, and you can accomplish the most fabulous goals imaginable.
When all the stars line up in the franchise universe, franchising erupts economically. It creates not only wealth, but a depth of personal gratification that rewards both franchisors and franchisees and the people associated with them.
With nearly 40 years invested in franchising – as an advisor to franchisees and franchisors, as a franchisee on multiple occasions, and as a franchisor of a major American brand – I’ve witnessed the eruption more than just a few times since that day when I spoke to John Kinch by telephone. When it works, and there’s no good reason why it ever should not work, franchising is the envy of the business world.
And still, it’s so simple!
It’s a concept that works for many people, but it will not work for all.
The question now:
Will it work for you?
In the pages that follow, I’ll tell you about the fundamental tenets of franchising. More than anything else I can think of, following these tenets is the best way to take away the fear of franchising.
You can then decide for yourself if franchising will work for you.
A Useful Franchise Cost List
What do you do if the franchise you want to buy is out of your price range? There is a franchise cost list will look at the types of franchises you can buy for each given price range.
Is the Universe Speaking to You?
In the meantime, I hope you make progress towards buying your dream business before the next article. Do it for you, because it’s worth it and so are you.
Why Report Every 4 or 5 Weeks in the Restaurant Industry
It’s a best practice in the restaurant industry to have a weekly calendar and “periods” not months that that contain 4 or 5 weeks each. Many larger restaurant concepts employ this approach as it brings more consistency and comparability to the numbers.