When it comes time to start your own business – Beware the know-it-all Let your due diligence guide you

You know the type. You tell them your great new idea, and they tell you they know all about that type of business. They will tell you “I heard a friend of a friend say they knew someone, who had a terrible experience…” You get the picture.

The best advice of all is to tune them out, because odds are they don’t know the whole picture. They may have heard one story, but you will want more than a single data point before you make your decision.

One of the great reasons to go into business with a franchise is you can find plenty of evidence to help you decide whether a business is worthy of your time and effort or not.

The beauty of the franchise concept is hundreds of people have trod those steps before you and they’re there to tell you how it’s all gone and how it works. Franchisors are also required by federal law to disclose a great deal of information in the Franchise Disclosure Document (FDD) that can tell you everything from upfront costs to details about its operating systems.

In addition, experts can help you further hone your final selection, whether the business matches your financial wherewithal, as well as whether the numbers add up. So plan on spending several months on research, then when you’ve made your selection, consult an accountant and a franchise lawyer.

The process of narrowing down your choices from around 3,000 possible franchises across some 75 industries can seem daunting. So here’s what you need to know before making a decision.

How much does it cost?

And that means everything, including the franchise fee, any marketing fees, costs to set up your business, including equipment and supplies, plus working capital to keep the lights on until you start earning a profit. Most of the answers will be found in Items 5-8 in the FDD, but it’s always good to talk with franchisees to learn if they’ve had additional, unforeseen costs.

How extensive is the franchisor’s training and support program?

You should get all the support you need to get you going in a new franchise business. The training should more than make up for any limitations of your own background in a business where you may have very little experience. If for any reason you consider the program insufficient or its executives less than accessible, there may be a problem – so certainly pass by that franchise.

How many franchisees are in business?

You will find a list of franchisees in the FDD, but the franchisor can answer: How long have their franchisees been operating? How time-tested is the system? How well individual franchisees are performing is best answered by the franchisees themselves.

The franchisor’s obligations

Better to find out early what the franchisor will cover as part of its fee and what will be your responsibility. Does the franchisor help with site selection and/or lease negotiation? How much marketing/advertising support do they offer?

Is there a franchisee network of support?

Many franchisees say these types of support mechanisms, whether a formal mentorship program or franchisee network, provide the best source of assistance to get their new businesses up and running. Look for ways the franchisor helps connect you to fellow franchisees.

Restrictions on the franchisee

You should know the renewal and termination terms. Will your territory be exclusive? And you need to know upfront what rules apply if you want to sell the business. Legal advice is always a good idea.

How much income do I need to cover my requirements?

A franchise allows you to know all your costs before you sink a dime of your own into this business, so if, when you’ve done all the math and added up your expenses and figured out your likely income after six months, one year, two years and longer, and you still won’t achieve earnings necessary for your lifestyle, this business may not be for you.

What type of marketing support does the franchisor offer?

Will you have to run your own local marketing program? These costs can add up.

Doing a thorough due diligence can mean the difference between success and failure. For starters, it will help you choose the right franchise for you, and, more importantly, it helps you separate the winners from the losers. So when it comes time to invest in a new business, you know way more than any know-it-all!

Ready to make your dream of becoming an entrepreneur come true?

Get your free evaluation today!

Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484)278-4589.

© Dan Citrenbaum 2020

Want A Business With A Proven System? Shop For A Good Franchise

The attraction of a good franchise is its proven system for making money. You plunk down your money, and the franchisor shares the secrets of the trade: follow these procedures and you, too, can have a successful business and earn a good living.

The tricky part is finding a franchise whose system is truly proven. This is why buying into a new franchise can be risky since they may still be working the kinks out of the system. After all, the franchise company learns more about the business model from the process of expansion. By the time, they’ve got a dozen or more franchises that have been operating successfully for at least a few years, the franchise has a proven track record. But not before then. And because we would never recommend buying a franchise where you didn’t have the opportunity to interview plenty of existing franchisees, this process tends to eliminate those systems that haven’t yet passed the test of time.

3 Simple Questions To Help You Separate The Winners From The Losers

How long has the franchisor been in business?

There are actually two parts of this question. First, when did the franchisor first start the business? They may have operated for years as a single unit operation. Or they may have originally started off with the idea of franchising. How long have they been franchising? What is their franchisee success rate?

How many outlets are there?

If the operation is mainly centered in the region around their headquarters, and you’re in a different part of the country, you may not want to jump into this without a lot more investigation. Learn about their process of expansion. If most of the expansion has occurred in the past year, their system may not be fully tested.

Are there regional differences in the system?

A good franchise is always experimenting. They may find some products or services are more popular in some places than others. For example, McDonald’s sells the McRib sandwich more often in the South than up North. Do you see evidence of creative flexibility? Once you have a solid assessment of how well the franchisor’s system actually works, you can move forward with your next set of questions. First and foremost: Can you follow this system? Assess yourself honestly. Even though it works for others there may be a multitude of reasons why it may not work for you. If this is the case, walk the other way. If, on the other hand, you like the system and it is a proven money-maker, you also need to know if you think you can you work well with the franchisor’s support team. Whatever you do, as you go through your due diligence, don’t let wishful thinking and romantic visions of a particular business bias your thinking. In other words, don’t fall in love with a franchise before you learn everything there is to know about it.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-5489. 

Want To Own Your Own Business But Hate Sales? Fear No more!

Just because you don’t like sales doesn’t mean you can’t own a business. That’s right. Contrary to popular belief, you can be a successful entrepreneur even if your strength doesn’t happen to be cold calling and glad-handing. If you visit a McDonalds the owner probably is not trying to close you on buying a burger. And the same holds true for many other types of businesses.

Related: Ready For A Career Switch? Consider A FranchiseOpportunities abound with businesses whose customers are drawn in by an effective marketing campaign, a great location, or strong advertising. And you don’t even have to be an expert in a particular business to get going. All you need is to connect with a good franchise operation that matches your interests and skills, and you can get all the marketing and advertising expertise to help you get going. The trick is to capitalize on your strengths and let the franchisor fill in the gaps. Some large franchise organizations rely on national advertising and marketing programs to generate business. In addition, customers often actively seek out a conveniently located operation, often without realizing it’s an independently owned franchise. Just to give you a taste, here is a small sample of franchise types that fit these categories:

  • Electronics sales and repair
  • Fitness and Gyms
  • Sandwich shops
  • Hair Salons
  • Residential painting and maintenance
  • Pack and Ship businesses
  • Massage therapy studios
  • Academic tutoring

The trick is to make a good match with a franchise that has an established record of working to develop new franchisees into successful and profitable businesses. That’s where working with a franchise coach can help you use your time most efficiently. Let a franchise coach direct you to operations that have the best time-tested systems and a solid track record. Best of all their services are free since they’re paid by the franchisor. You would then be responsible for talking to as many franchisees as possible. Use their experiences and advice to help you determine if an operation is, in fact, a good match for you. The franchise coach can also help you with pointers on the essential due diligence you will need.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-5489.  

How To Evaluate A Franchise

The best thing about starting your own business with a franchise is that it comes with everything you need to succeed. So long as you choose a good company with a system that suits your strengths.

This is why your selection process becomes the most critical aspect of your work. When people fail with a franchise, the problems can invariably be traced back to before the beginning. Either they chose a franchise that required skills they didn’t possess or they chose a franchise system that was not ideal, for whatever reason. After years of experience reviewing franchise companies and working with franchisees, I have developed a process that has led to a near perfect success rate among my clients. All you need is to set aside some time over a period of several months and start researching.

What To Learn From The Franchise Disclosure Document

Every franchise is required by federal law to disclose the details about their business in the Franchise Disclosure Document. You should read all 23 items, with particular focus on the following:

The backgrounds of their executives, litigation and bankruptcy

You want to find out about the executives’ business experience. Have they or the company been involved in any litigation or bankruptcies. All are red flags. Items 1-4

Upfront costs

Clearly, you want to avoid getting in over your head. You need to know all your costs, exactly what is included with the franchise fees and what you may have to kick in yourself. Sufficient capitalization is one of they key prerequisites to success. Items 5-7

Franchisee’s obligations and restrictions

You should know right at the start exactly what will be expected of you. If you don’t like what you read, steer clear. Likewise, if the restrictions on operations strike you as particularly onerous, this franchise is not for you. You have to be prepared to follow their system for it to work. Items 8-9, 15.

Renewal and Termination terms

You need to know how easy it is for the franchisor to terminate its agreement with you. Likewise, if for some reason you want to get out of the business, know what rules apply. Legal advice might be helpful here.

List of franchise outlets

This is where you get the contact information for the franchisees, as well as franchisees who have left the system is the past three years. Contact and interview as many as possible. (see below) Item 20.

What To Ask Franchisees

Why did you choose this franchise?

Does they have anything in common with you? Can you see yourself in their shoes? Listen for clues about what skills are necessary for this business.

Have you been satisfied with the level of support and training from the franchisor?

Was it all that the franchisor promised? Do you like the support staff and executives of the franchisor? Are they easy to work with?

What do you like best and least about the business?

Get a good feel for what running this business is all about. Maybe the best thing is the social interaction with customers. Only problem is you don’t want to deal with the public. Choosing a business can be a lot like choosing a spouse. The match has to be particular to you.

Would you purchase this franchise again?

If the answer is no, find out why. These reasons may not hold for you.

How long did it take to reach break-even?

You need to know how much capital it would take to get this business to profitability.

Are you able to earn six figures with this business?

While you may not be able to get specifics on earnings, press for as much as you can to see how it aligns with the franchisor’s sales pitch.

Ready to make your dream of becoming an entrepreneur come true? Get your free evaluation today! Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a business coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-5489. 

Ready for a Franchise? Identify the Top Performers

When it comes to buying a business, there’s no truth that doesn’t require verification.

As everyone knows, if it sounds too good to be true, it probably is. Yet every day the newspaper has stories about people who got tricked into a deal that turned out to be mainly smoke and mirrors.

So how do those “lucky” folks find their way to the good business deals? First of all, luck has nothing to do with it. Rather, it’s about finding out as much information as you can and triple-checking everything you know before you even get started.

Doing your due diligence is the most critical part of the process.

That’s why a franchise presents such a great opportunity because it’s the only type of business in which you can learn everything about its nuts and bolts before you buy.

Not only does it come with a tried-and-true operating system, but it also includes complete training and ongoing support to help you make it past the start-up phase for long-term success.

Federal law requires franchisors to disclose almost everything you need to know. And what’s missing from the Franchise Disclosure Document (FDD) can be learned from franchisees. That means you can find out about all the red flags, upfront costs and whether the franchise has the potential to offer you the kind of income you desire.

In addition, another layer of vetting can be obtained by consulting with a franchise coach or two. Their no-fee advice can help you navigate a gigantic universe of some 3,000 different franchisors.

A good franchise coach can save you precious time by steering you to franchise systems with great track records that you may have otherwise never found.

So, to find a top-performing franchise, start with a franchise coach, then select a few whose business models best mesh with your skills and experience, then start to read the FDDs and call franchisees to get the ins and outs of their businesses.

In the end, you have to decide if you would rather put all your hard work and drive into building a future you can control or sticking with the steady job that may not last the rest of your career.

Stay tuned for Part II: How to evaluate a franchise

Ready to make your dream of becoming an entrepreneur come true?

Get your free evaluation today!

Contact Dan Citrenbaum to help you create the career you’ve always wanted. As a franchise coach, Dan brings years of experience helping people select and buy a franchise or existing business. You can reach Dan at dcitrenbaum@gmail.com or at (484) 278-4589.

© Dan Citrenbaum 2020