The Decision to Purchase a Franchise
The year was 1997.
We had been married twelve years, we owned our (small) home, we owned two cars, a boat, and an old camper. I think we may have had one car loan but everything else was paid off and we had some savings. Both of us had decent jobs, but neither one of us has a degree.
We were doing well enough, but we had a dream of owning our own business.
My husband worked 7:30am to 3:30pm in a factory, and they were fond of coming up to him around 3:00 and telling him he had to work until 7:00pm. At one point, he had to work twelve hour shifts six days per week, sometimes seven days, and that went on for several months. The overtime was nice, but he really didn’t want to work that much, and it was interfering with our boating time in the summer. It was not a union shop, so there was nothing he could do about it if he wanted to keep the job. His job was extremely boring, and he hated it, but the pay was good.
I worked in an office, and I liked my job, although they did ask a lot of me for what I was paid. About once per year or so, they would have a “black Friday” where they would lay off a bunch of people. Over the years, I was fortunate not to have been one of the ones who were laid off, but I was very tired of having extra work dumped on me because of the lay- offs. For a while, I was doing my job plus parts of three other jobs. At least it made the day go fast! When I left there, I think they were surprised at how much work I was doing.
So, here we are. No business degree, no experience running a business. I was very good with budgeting and working with numbers and spreadsheets, but that was about it.
What kind of business would we open? We were doing okay, and we had savings, but we did not have a whole lot of money to invest. We thought of opening a retail beer brewing store (our hobby), but that seemed risky. Most new businesses fail within the first two years, and we had no experience.
Then we hit upon the idea of purchasing a franchise. We could choose a business with a proven history and established procedures. Plus, we would have people to teach us and advise us.
I don’t remember why exactly, but we decided to go with a food service franchise. We started looking at different franchises, but we found the franchise fees to be out of our reach for the larger, more popular chains, and we did not really want a full-service restaurant. We looked at a few smaller chains that were pretty much unknown in our area, but they did not seem very profitable, and some of them had not been around for very long.
A co-worker of mine had purchased a sandwich shop franchise and was doing very well with it. Then, a few years later, another co-worker invested in the same franchise, so we thought, well, let’s look at sandwich shops.
We found that most sandwich chains looked very simple to operate, mostly because there was no real cooking involved, and you would not need all that many employees. There would be no need for a grill, a hood system, or a fire suppression system. As we continued our research, we also found that the franchise fees were quite a bit more affordable, and so we decided that was the way to go.
Back then, there were not as many choices as there are today. We decided to look more closely at two franchises.
The first one we looked at had been around for quite some time, but they did not really have that many stores. When we met with them, we discovered that their franchise fee was very affordable, and their royalties were not too bad. They did not seem like they were very interested in growing the number of locations they had, and a big red flag was raised when we discovered that not only were you required to purchase absolutely all your supplies from the franchisor, but you were also required to use their accounting services. (Today this franchise only has 100 locations in the US)
Okay, no thank you, on to the next.
The second franchise we met with had also been around for a long time, they had quite a few locations in Ohio, they were interested in growth, and they had a great support system. The franchise fee was affordable, but the royalties were a little high. You were required to purchase your food and supplies from approved vendors, but not directly from the franchisor. You were free to use whatever accounting services you wished, but you had to authorize automatic withdrawals of the royalty fees from your bank account.
We decided to go with the second one.
If you need some inspiration about which franchise you may be interested in, or you just want to know more about the franchise industry, I found the magazine “Franchise Times” to be very helpful. You can find them at www.franchisetimes.com.
Key Insights:
If you don’t have much business experience and you would like to get into something that is already established, with people available to guide you, then purchasing a franchise may be right for you. But keep in mind, even though you will have your own business, and you are entirely responsible for that business, you will still have a “boss”. The franchisor will tell you how to do everything that has to do with running the business and you can get yourself into trouble if you fail to follow their guidelines.
Next Week:
Now that we have decided on a franchise, what’s next?