If 2007 is like the past several years, over 65,000 new franchises will be sold in the U. S. and Canada, one every 8 minutes! More and more displaced, outplaced, disgruntled or disappointed people are looking at franchising as a solution to their Career Pains. Whether insecurity, financial limitations, corporate politics, life balance or any one of many such pains, they feel “There must be something better out there”. And they may be right.
However, too many people who take the step to business/franchise ownership find out too late that their problems as business owners are more serious than any they faced as employees. No income, a constant drain on savings, a disappearing vision of success and long, long hours are just a few of the factors that make some new business owners wish they had never taken that step. Franchise ownership offers no guarantee of success.
In my business, working with people who are considering buying a franchise, I am often asked “What are the biggest reasons people fail?” And some of these people listen intently, then go off on their own and completely disregard what they have been told. I have actually had people say to me, “Well, I can see how that is true for most people but…..” and then go on to say how “different” they are; how their experience or intelligence or “connections” will make them immune to these issues.
Part of the reason for being unable to grasp the importance of what they are told is that the reasons for failure, on the surface, sound so simple. As an example, reason #1 “People don’t know what they want”, makes the buyer seem pretty stupid. However, it is easy (and natural) to have an idealized vision of a business based on information that is completely invalid for you; the fact that a neighbor or relative is successful; that a particular franchise is “hot”, or perhaps the business is seen as an extension of a hobby you have always enjoyed. Because it seems so simple, people assume they have their answers and go forward, only to find out, too late, what they should have known. It is only when the reasons for failure are examined closely and deeply that one can understand how very intelligent, successful people make these mistakes.
1. “People don’t know what they want”
Prospective franchisees need to spend a great deal of time compiling a list of attributes that complete this sentence: “To meet my personal and professional goals, my business must…….”. This list must go much further than “enable me to make $100,000/year” It should include issues such as “provide time with family”, “offer a creative outlet”, “allow me to manage the business, not run it day-to-day”, etc. Until that list is complete, they really do not know what they want and can not possibly begin looking.
2. “People don’t know what they are buying”
With the above list in hand, prospective buyers now have questions for franchisors and franchisees of the prospective franchise that focus on their specific issues. The calls to the franchisees are of utmost importance; these are the people who know the realities of that particular business and the best source of information on what you’re really buying. This step must not be skipped.
3. “People run out of money”
Even though the Uniform Franchise Offering Circular (required by the FTC to be given to prospective franchisees) is fairly specific in terms of the capital needed to get the business up and running (The Total Investment), without discussions with many franchisees who have done it, many new franchisees just run out of money. Find out from franchisees (1.) how long it took to get to “break even” and (2.) if the Total Investment in the UFOC proved to be valid. Do not assume you can get to break-even sooner than the average or that you can get by with less capital. You cannot!
4. “People don’t use the system for which they paid money”
Usually, people seeking their own business have been successful in their previous careers. Unfortunately, that success seems to breed an attitude that “I know a better way”. So, in spite of having paid tens of thousands of dollars for a successful business system, many new franchisees do not follow that system and they fail. The best advice is “Follow the system to the letter until you are successful; then you may have the luxury of innovation.
5. “People don’t know how hard it is going to be”
It seems that no matter what they are told, people always under-estimate how hard it is going to be to start their business. As one who has done it several times, take my advice “This is going to be harder than you imagined”. You may be smarter, more experienced, more talented than most. It will still be harder than you think.
In closing, it should be noted that after I give the “Harder then you think” advice, I always follow with “but if you are successful, owning your own business can reward you beyond your wildest expectations”. That is, after all, why we do it.
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