With so many franchise opportunities available in Canada, it can be overwhelming to try to pinpoint the franchise brand that will allow you to make your dreams of business ownership become reality. That’s where the experts come in.
At the Franchise Canada Show in Toronto this past February, franchise consultant Gary Prenevost, president of FranNet of Southern Ontario and Eastern Canada, outlined his top nine rules to help prospective franchisees find the right franchise match. Here, we share the highlights from his presentation to help you make the best possible franchise investment decision.
Rule #1: Know Thyself!
Before you get too far into the research process, it’s important to undertake a self evaluation, so you have a better understanding of your skills, interests, resources, and circumstances.
You should ask yourself:
- What types of work do you excel at, love to do, and that you want in your business?
- What types of work do you dislike doing that you don’t want to do?
You should also take stock of your financial resources, including what initial investment you can make, the business working capital you’ll need to break even, and the personal working capital you’ll need to break even (the point where revenues are high enough to cover operating expenses).
It’s also important to examine the ‘why’ of your franchise plan; the lifestyle you want and how you plan to get there. What financial and lifestyle goals are you trying to solve, that can’t be solved through corporate employment?
Rule #2: Ride Only One Horse!
The first 12 months of business ownership are critical, and it’s during this time that the business will need the most from you. There will be a steep learning curve in the first year, where you’ll learn: the franchisor’s systems and processes; how to market your business; who your customers are (and aren’t); how to hire, train, coach, and manage staff; how to manage inventory and schedules; how to manage revenue and expenses; and the difference between profit and cash flow.
Perhaps most importantly, you’ll also be learning how to manage your work-life balance throughout this ‘sacrificial’ year that will be devoted to getting your business up and running. During this time, you’ll need to be completely focused on your business, and won’t be able to be distracted by other major commitments, including any other part-time work.
Rule #3: Avoid “Shiny Things”
Don’t get ‘seduced’ by the opportunity and make a decision too quickly, or that isn’t right for you: just because others have found success with this opportunity doesn’t automatically mean that you will, too. If the following are true in your case, you need to slow down and do more research:
- You’ve only talked to the franchisor and are excited about the concept
- You want to buy an existing franchise and are only looking at that unit’s performance
- It looks like a good concept, but you can’t substantiate your income goals with existing franchisees
It’s imperative that you research, research, research, and investigate before investing!
Remember, it’s totally normal to be afraid of failure as you get started. You can manage and reduce this fear, however, by doing your research and making fact-based decisions. You can’t allow fear to drive your decisions; don’t make judgments based on your perceptions or any uneducated opinions. Make sure you have the facts!
Gary’s franchise success formula:
“A”: The franchisor’s systems and processes
“B”: The franchisor’s initial AND ongoing training and coaching
“C”: Your strongest transferable skills
“D”: Your passion for this type of work
“E”: Degree of financial and lifestyle success
A x B x C x D = E
Rule # 4: “Date” a Little, Not a Lot!
The search for business “love” is complex and takes time. Passion is an essential component of franchise success, but it’s the passion for the types of work that drives success, not a passion for the product.
When you meet your franchise match, you’ll have:
- Conviction for the value proposition of the product or “solution suite” (not just loving the product)
- Confidence in the franchisor’s ability to support you through launch, as well as ongoing support
- Culture fit with franchisor
- Culture fit with the majority of the franchisee base
You need to avoid the trap of making an emotionally charged decision, and then trying to justify that decision logically thereafter.
You also shouldn’t immediately put all your eggs in one basket. You need to see what else is out there before you commit to one franchise, so investigate multiple concepts at the same time to ensure you’re not missing out on an opportunity that could be a better match.
Rule # 5: Do Some “Dancing”
Before you make your investment decision, you need to talk to at least eight to 10 existing franchisees to learn more about their experience with the system. You can’t, however, just talk to the top-performing franchisees: one third of calls should be to those top performers, while one third should be to middle performers and the last third should be to unhappy franchisees.
Through these conversations, it’s important to get their perspectives on their relationship with the franchisor, what it takes to drive success, and what a day, a week, and a month in the life look like as a franchisee in this system.
Once you’ve carried out this validation process, you need to ask yourself: Can I do it? Will I do it?
Rule # 6: “Fall in Love”
Before you move forward with your decision, you need to make sure that the logical and emotional components are aligned.
- Financially affordable
- Can enable you to meet your financial goals
- Goals can be achieved in the timeline you need
- The business can run effectively in the weekly time available
- You love the work (critical roles) it takes to drive success
- You have conviction in the value proposition (not just love of the product)
- You like, trust, and respect the franchisor’s leadership team
- You like and relate to most of the franchisees you spoke with
Rule # 7: “Meet the Parents”
Don’t just base your decision on the franchise salesperson; you also need to meet with as many members of the franchise team as possible to get a more complete picture of what it will be like to join the brand.
You should attend a Discovery Day, where you’ll meet the leadership team, along with the training and support team. Through this day at the franchisor’s head office, you’ll also be able to assess the infrastructure they have in place and be better able to determine if the culture of the company fits well with your expectations and needs.
All decision-makers should attend this Discovery Day, as this is where the final negotiations will take place. Throughout this process, remember that you’re looking for reasons why you should say ‘no’ to this opportunity, and hoping that you don’t find any. You won’t be making a final decision while you’re there – you’ll be able to return home and take any final considerations into account before signing the franchise agreement. This decision is usually made within five to seven days after attending the Discovery Day.
Rule #8: “Prenuptial Review”
It’s essential that you enlist the help of franchise professionals in reviewing all documentation from the franchise, including the disclosure document and overall franchise agreement. You need to work with a franchise lawyer, not a regular business lawyer, because they have an in-depth understanding of franchise law, and will be able to advise you on:
- your rights and obligations
- the franchisor’s rights and obligations
- any legal deficiencies in the disclosure document
- negotiation recommendations
Rule # 9: “Get Married”
Signing a franchise agreement means that you’re entering a “business marriage” with the franchisor. This is a long-term relationship that involves a lot of work from both parties, with multiple options for renewing the agreement in the future. You wouldn’t enter into a personal marriage without being one hundred per cent certain that you were marrying the right partner, so don’t sign your franchise agreement without doing your research and ensuring that you feel completely confident in your business future.