Never Open A Franchise If This Is The Reason Why!

Published on November 09, 2016

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Live the American Dream! Be in business for yourself but not by yourself! Great marketing pitches are designed to get you to want to buy a franchise. If someone tells you there’s this turnkey business that’s just waiting for you to invest into and it’s a proven business model and can’t fail – run away. Every business, including franchised businesses have risk. They are not turnkey. If you are opening a franchise for one of these reasons – stop. Reconsider!

  1. You just love the taste of the food!

You ate at this amazing restaurant while you were on vacation. The lineup was out the door and when you ordered your meal it was heaven in a box. Now you’re home raving about this cool place you ate at. You figure if this place is doing well there, so I’ll open it here and I’ll be successful. That isn’t always true!

The hallmark of a successful business is how much money you can put in your pocket at the end of the day. After all your utility bills, operating expenses, employee wages, debt payments, lease costs, lawyer’s bills, royalty payments, advertising costs, and on and on, what’s left for you? Because you are the last one to get paid. If there is not enough money at the end of the week you and your family go hungry.

Just because this amazing restaurant has a line up out the door does not mean it makes a profit.

Brand awareness is key. If no one knows about the brand then how successful will it be. If you own one location in a city of millions, who is going to say to their friends “hey, let’s go here”. Your potential customers see a Chipotle every day. They drive by ten McDonalds on their way into work. These brands are comfortable to them. They know the menu and they know what type of meal they’ll get. They don’t know about your one little restaurant because they’ve never heard of it before. Brand awareness in a new market is hard to build. It takes time and costs money. Do you have time and money to spare?

  1. You’ve got a passion for this hobby or lifestyle.

You’re an avid runner or you love pets. You have a passion for helping children or you have personal experiences with dealing with ailing parents.

All of these emotional triggers drive people to invest into a gym, pet store, day care or home care franchise. First, your passion doesn’t mean you can operate a business. And a franchise only provides some support – they do not hold your hand for every step of the way.

Have you ever hired, managed or fired employees? When you are passionate about some cause would you be too compassionate to poor performing employees? They will negatively affect your profits and can sink a business.

Have you ever managed and tracked all expenses? Operating a business means squeezing out every penny you can. Everyone and everything gets paid before you. Your utilities, employees, royalties, and all operating expenses are paid first. You are past last. If you don’t track every penny, your pockets could be empty at the end of the week.

A passion is great. It will keep you motivated through the hard times. But without a business sense, buying a franchise based on your passion will tend to create those hard times instead of helping you through them.

  1. You Hate Your Job

It’s Monday morning. Your car doesn’t start. Your show up to work late and your boss yells at you. What a way to start the week. Yes, you’re not in the corner office looking out over the park. But that doesn’t mean you should cash in your 401k and start a business.

When you invest into a franchise you’ll be struggling to break even for the first year or two. This means your current lifestyle may be affected.

Do you like going out for dinner on the weekends? Going to the movies or concerts? If you own a franchise, your luxury comes second to all bills and expenses.

Do you get three weeks’ holidays at your current job? They’ll be gone. You will take a holiday when hell freezes over. Taking a week off from you new business can be more stressful than working that week. Your livelihood depends on things going smoothly. When your money is on the line, a relaxing vacation is not remotely possible.

  1. You Dream of Making it Big

Franchising has this appeal – be in business for yourself but not by yourself. This implies you’ll be very successful. Your success is dependent on two things; a) how much money you can spend and b) the franchised business model.

You will not be living on a yacht tomorrow sipping margaritas when you invest into a $50,000 franchise. Expect to earn a profit that is in line with the initial investment.

Your future is dependent on the franchise system’s success. Your success is not just how well your location performs. How is the franchise system growing? Is there brand awareness? How does the franchisor make money? How do they spend their advertising royalties?

There are millionaire franchisees. But they weren’t millionaires overnight. Most own more than one franchise and have been in the business 10+ years, working hard to grow their portfolio.

Buying a franchise is a life changing opportunity.

If it’s done for the right reasons and you buy the right franchise you have a great chance at success. Avoid buying a franchise for any of the above reasons.

About the Author: Jeff Lefler
As the CEO of FranchiseGrade.com, Jeff understands that there is no Silver Bullet or sure-fire, simple way to pick a guaranteed franchise system winner. However, by using a little science and a lot of hard work, Jeff and the team at FranchiseGrade.com have developed a sophisticated research, analysis and comparison model to help potential investors and existing Franchisees assess a realistic value for any franchise system relative to others. It's called a Franchise Grade. With over fifteen years of small business experience and ten working in franchising as a multi-unit Franchisee, consultant and Franchisee Association President, Jeff has a good understanding of the level of hard work, dedication and commitment that drives a successful franchise system. As part of his ongoing involvement with the industry, Jeff also served as a Member of the Strategic Committee of the International Association of Franchisees and Dealers. Get in touch with Jeff to see how your system measures up at jeff.lefler@franchisegrade.com.


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