Finding the best franchise to own for you is NOT necessarily the best franchise for someone else. However, after answering these nine questions, you will begin to synthesize the right industry. Question 10 will answer how to find the best franchise inside that industry.
When buying a franchise, your role could be hands-on, passive or CEO style.
Let’s explore each of these options.
As an example, a home inspection franchise or a blind installation franchise will most likely require the franchisee to inspect or install the product initially. This type of franchise typically will have higher margins but it is slower to grow.
Because when you are working in the field, you are doing little to grow the business.
Do you prefer a passive role in the business? These franchise models are not the norm. Some fast food and convenient franchises like Coffee Service Franchise offer this type of opportunity.
Passive income is a great option, but it comes with limitations. For example, a typical Subway costs about $250,000 and brings in around $40,000 – $60,000 in net income per year.
A third option is operating a business as the CEO. You wear many hats in the beginning stages, but none of them require you to do the physical work. The involvement of the CEO-style franchisee is to grow the business through leadership.
Storefront franchises, like restaurants and beauty salons, have limited seating capacity.
If you want to scale a storefront business, it will require you to buy additional storefronts.
On the other hand, home-based franchises give you a specific territory. In this scenario, you or your staff is going to the customer. This gives you control over deciding if a job is worth the drive.
FYI – Home service businesses have widely different territory sizes, even in the same industry. For example, most painting franchises, such as CertaPro, have territories under 250,000 people. Klappenberger & Son franchises are typically between 500,000 and 800,000 people.
On an aside, if scalability is vital for you, look for franchises that offer multiple services. For instance, some franchises only patch drywall. While others, like Klappenberger & Son, offer drywall patching, painting, and remodeling. The more services you can offer, the more opportunities there are to grow.
Some franchises are seasonal, such as Liberty Tax or Mosquito Joe. These franchises are great for someone who wants seasonal work. Other franchises are part-time endeavors. They will give you the flexibility to focus on other things in life besides work.
Most home-based franchises come with no initial customers. Getting these franchises up and running takes time and commitment. Therefore, a part-time approach will not be sufficient. Even if the franchisor has a robust marketing plan, it still takes time to develop a solid customer base.
I wouldn’t go shopping for a house without getting pre-approved for a loan. The same logic is valid for buying a franchise.
Franchises cost anywhere from a few thousand dollars to millions. Check with your financial advisor, bank, or SBA to find out what your options are. I recommend that you invest no more than 50-70% of what you are capable of investing.
First, not maxing out your credit will give you peace of mind.
Secondly, it is crucial to have a reserve for emergencies.
Finally, you will sleep better and focus on growing your franchise.
Storefront franchises where customers gather are undoubtedly an attractive lure for franchisees.
It’s fun to see people socializing at a Starbucks, especially if you own it!
But many times, the actual properties are leased and not owned.
In addition to a $5,000 per month lease (which adds up to over $600,000 over ten years), annual remodeling fees can reach six figures.
Secondly, a competitor (or two) can easily move across the street. If you have a great location, why wouldn’t a competitor want to be right next to where customers are already heading?
Having customers come to you sounds excellent for so many reasons.
First, it saves you time.
Secondly, it’s exciting to have people who want to come to your place. They can eat, drink, and socialize for business and pleasure.
However, as with all good things, there is a downside. People will only travel so far for your service. If you own a Minute Man Press, at some point, the customer is going to say,
“That’s too far to drive. I’ll go to Office Depot because it is so much closer.”
Most storefront businesses have geographic limitations.
Territory restriction aside, if you drive to the customer’s house, it is up to you to consider what is too far. When you or your team go to the customer, you have more control of the growth.
Having employees is a big important question. If you want a scalable and valuable franchise, you will need bodies to get there.
I understand that you are looking to buy and not sell a franchise; however, one day down the road, you will be thinking of an exit strategy. It is therefore important to purchase a franchise that increases in value and is sellable.
Having a staff operating different responsibilities allows you the freedom you ultimately wanted from the start. However, you need to consider the tasks that come with a staff. In addition to kissing many frogs, you have to take time to hire, train, replace, and repeat.
People are messy, and you will need a great deal of patience and leadership. If you are up to the task, there is potentially a big pot of gold, a lot of stories, and battle scars in store for you.
Grocery Stores, liquor stores, cosmetics, and home services are among the most effective franchises during a recession.
Moreover, the businesses that are hardest hit during a recession all have storefronts.
Who would have thought to ask this question before COVID? Not me. However, we are now in different times.
I can tell you firsthand that painting and remodeling were affected negatively for about two months. The remainder of the year was quite strong.
Bloomberg has an article entitled
Whatever industry you are looking into, please do your due diligence.
Great question. So far, the first 9 questions have given answers to which industry might be worth exploring or avoiding.
Regardless of how you answered the questions, you should be pointed in a particular direction.
So, how do we find the best franchise in a particular industry? My franchise, Klappenberger & Son, is in the painting and handyman industry. The evaluation process I am going to show you applies to any industry.
Every franchise has a document called a Franchise, Disclosure Document, or FDD for short. The FDD is divided up into 23 Sections called Items. Every franchise has the same information in each section (Item). For example, if you want to compare franchises’ royalties and other fees, you will find it in Item 6 in the FDD.
Consider this: if a franchisor charges 1 to 2% more than another franchise, it will likely add up to over $100,000 during the contract’s life.
In other words, if your gross sales are $1,000,000 per year, each percent is $10,000 out of YOUR NET PROFIT.
As you take a close look at these comparisons, it is easy to see that there are vast differences in:
Guarantee: No one else offers a Franchise Guarantee, and ours is a doozie!
If you follow our system and fail to gross $500,000 in your first 20 months, we will refund your franchise fee in full.
Training: In addition to our 4 weeks of training, we offer 2 additional weeks of training in your territory. This shows a commitment to you that no other painting or handyman franchise offers.
Decreasing Royalties: Klappenberger & Son’s royalties drop to 5% after the franchise reaches $700,000 in gross sales. Furthermore, it decreases to 4% after $1,000,000 gross sales per calendar year.
It is not a sexy industry. Telling your friends that you own an Acme Burger Joint sounds so much cooler than a painting and handyman company; however, it costs $500,000 and generates $115,000.
“I hate to paint, and I am not handy!”
Exactly, and you are not alone. More than ever, fewer people can make repairs and are willing to tackle painting projects. It makes the industry recession-resistant.
“I don’t know anything about the handyman or painting business!”
Most of our franchisees had no previous knowledge before owning a franchise. In addition, all of our franchisees came from white-collar jobs.
“If I buy a franchise, do I get leads or estimates provided to me?”
Our website provides our franchisees with leads. Many of our franchisees get multiple leads every day. Typically organic lead generation takes a few months.
To have a successful and robust business, additional marketing systems will be necessary.
The Pros & Cons Of Starting A Painting Company Or Buying A Franchise Are you weighing the options of starting a painting company on your