Franchisee Successes

Franchisee Successes

Mike Bullinger—President, National Franchise Association

Last time, we looked at the top three reasons franchisees fail. With over 760,000 franchise enterprises in the U.S. across a wide range of industries, there are plenty of chances for mismatches leading to failure. There are also many opportunities for succeeding. Here are three reasons.

#1 Excited about the brand

Successful franchisees find an industry and a brand that excites them. For example, if you enjoy serving others, you might choose a franchise in the elder care industry. If you love learning, you might choose an opportunity that provides tutoring to students who struggle with subjects such as math. Successful franchisees remain enthusiastic about their chosen brand after the honeymoon phase wears off. Running a business comes with headaches, even with a great franchisor to provide guidance and assistance. There are always people (i.e., employee) problems and headaches with disgruntled customers. After a less-than-stellar day, when you’re questioning your sanity in becoming a franchisee, your enthusiasm for your brand choice will make all the difference.

#2 Do plenty of research

Another key trait of a successful franchisee is that they do plenty of research. Choosing a franchise opportunity in an industry that is shrinking due to declining numbers of customers would not be prudent. Or maybe the franchisor requires you to have a brick-and-mortar location but your territory is already saturated with competitors who have monopolized the best locations in town. Research must include a detailed financial analysis. If it will take five years to earn back your initial investment, you may wonder if you’re better off continuing your W-2 job and simply upping your contribution to your employer’s401(k) retirement plan. Successful franchisees do their homework. That means asking your financial advisors to help you do an analysis of the franchise opportunity you’ve tentatively chosen. It also means talking to current franchisees about their experience with the brand. If they lack enthusiasm, it may be a sign that you should keep looking.

#3 Follow a wealth creation model

Successful franchisees are committed to a wealth creation model. There are a couple of ways to build wealth. One model is to invest in additional units of your chosen brand. Two locations will generate more revenue without straining your ability to run both units. A variation is to buy

additional territories into which you can expand. One drawback with this model is that all your risks are in one industry. Spreading your risks across several industries is a formidable model for building wealth. For example, in the first year you invest in a brand in one industry. A year or two later, you could invest in a brand in a second industry. If one industry lags temporarily, the other industry will maintain your lifestyle. Overall, your wealth will continue to grow so that you can achieve all your dreams.

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