How To Determine If Franchising Can Be Your Path To Independence
This Independence Day, in between the barbecues and fireworks displays, a lot of people are going to be reflecting on their personal desire for career independence.
Taking the plunge and becoming an entrepreneur may seem impossible, but then again, so did the idea that a small group of backwater colonists could successfully win their independence from the most powerful nation on earth.
In this spirit of independence, and piggybacking on Forbes’ “2018 Best and Worst Franchises To Buy” feature, thought I’d share an excerpt from my latest book, “The Enlightened Franchisee” (which is available for free here).
I’m a big fan of the humanities, and I often look to the philosophers of the past for inspiration in this modern, hyper-connected world. When it comes to advising people on becoming a franchisee, I often fall back on this simple quote from Socrates: “The unexamined life is not worth living.”
The maxim derived from this is simply “know thyself,” and it’s a concept that has withstood the onslaught of the millennia. Self-awareness is, above all else, the very foundation of success.
When people fail to recognize and be open about the things that cause stress, anxiety, and negativity in their lives, problems arise. In fact, I believe that the majority of conflicts in both life and business arise from a lack of self-awareness.
Self-awareness is a journey and something that requires a conscious effort each and every day.The lessons that it teaches are subtle and easily missed, but extremely powerful.
It’s not an easy thing to learn, but I cherish the experiences that have brought me to where I am today. It’s the precursor to self-improvement, and it should be something that everyone, regardless of age or experience, should strive to achieve.
So, before you look to franchising as your ticket to career independence, start out by evaluating yourself and being honest about your desires and goals.
Do I want to work in a business or work on a business?
The first, and by far most important question you must ask yourself is “Do I want to work in my business or on my business?” It may sound cliché, but it’s a valid question.
The answer will help guide you toward either an artisan model wherein you “buy a job” and work in the business each day or toward a semi-absentee model where the franchise is viewed as more of an investment than a job.
When you work in your business, you’re always on the front lines and your primary focus is on tactics.That is, operating the business on a daily basis, engaging with customers, and delivering your product in the most efficient way possible.
When you work on your business as a semi-absentee owner, you take a more hands-off approach and are primarily concerned with the big-picture strategy playing out behind the scenes.
Neither approach is fundamentally better than the other, and it isn’t exactly an “either or” scenario. Many successful franchisees adopt a blended approach that incorporates both tactics and strategy.
Ultimately, it all comes down to your personal preferences, passions, and personality. It is important, however, to know which scenario is most attractive to you, as it will serve as a filter for the brands you’ll want to look at.
Can I follow a system?
The second question that you must answer is “Can I follow a system?”This may sound silly, but you have to remember that when you buy a franchise, you’re buying a system.
Someone else has blazed a trail that you can now follow. For some, the structure that franchising offers is a godsend. All they have to do is follow the system and they have a good chance of being successful.
For others, myself included, the prospect of following the rules is anything but attractive. These types of people like to innovate and have a high tolerance for risk and failure. Of course, this perspective doesn’t lend itself to the franchising model particularly well.
When you enter a franchise location of any business, you expect consistency. If a franchisee is constantly experimenting, consistency is difficult to guarantee.
Now, keep in mind that being a franchisee doesn’t mean that you’re prevented from innovating. It simply means that you have to engage corporate throughout the process. In fact, there are many examples of franchisees introducing game-changing innovations to their system.
The best example of this is the invention of the McDonalds Big Mac, which was created by early Ray Kroc franchisee Jim Delligatti, who operated several stores in Pittsburgh.
After recognizing the need for a flagship product that could compete with Burger King’s Whopper sandwich, Delligatti approached McDonalds corporate with the idea for the now iconic double-decker burger.
Corporate granted his request in 1967, but with one important caveat: he had to use ingredients already available in McDonalds restaurants. Delligatti complied with their request, for the most part.
When developing the bun, he ditched the standard offering for a locally-baked, sesame seeded alternative. It proved to be so successful that corporate turned a blind eye to his act of defiance.
Delligatti created what is perhaps the most iconic sandwich in the history of the world, and he did so by working with his franchisor rather than striking out on his own. It’s a good lesson for any would-be innovator looking to buy a franchise.
What is my exit strategy?
The third question I advise people to ask themselves revolves around their exit strategy. As an entrepreneur myself, I know all too well the desire to build a business and then sell it for a big payday.
If that’s what you’re looking for, franchising may not be the right fit for you. It’s not to say that there isn’t a market for selling an established franchise; there certainly is.
The issue is that you’re unlikely to get a huge multiple for an individual franchise location. Instead, most franchise businesses with under ten units are cash flow businesses, meaning that once established you reap the post-royalty profits generated.
Once you reach a certain number of units owned, however, the story changes. The number varies, but there are numerous buyers interested in well-run, cash- flow generating multi-unit franchise systems. It simply takes time to build up your own empire of franchise locations, so keep that in mind when planning for the future.
Preparing for the road ahead
Self-assessments can be difficult to undertake, especially when you’re excited about a new business opportunity. However, they represent an important step that needs to be taken before determining if franchising is the right opportunity for you.