Conor-Patrick

Franchisees have different reasons for getting involved in their business. Some believe that owning a franchise is a path to financial independence. Others feel they need more control in their lives and that owning a business provides this control. For others, it may be the need for greater flexibility. And yet others may feel that the new business is complementary to an existing business.

In an effort to better understand these reasons, the National Franchisee Survey asks respondents why they first got involved in franchising. We believe that the first step to understanding franchisee satisfaction is to understand the reasons for operating a franchise.

The most common response to this question, by far, is that individuals perceived franchising as a path to financial independence.

We looked closer at this by considering the number or years a franchise has been in operation, the gender of respondents, ethnicity, region of the country and other criteria. Regardless of the breakdown, financial independence remains the top response for each and every category of respondent.

The two tables presented here are typical of others that were reviewed for this article. In all instances, over 50% of respondents cite a desire for financial independence as a reason they first got involved in franchising. Depending on the correlating criteria (ethnicity, region of country, years in operation, etc.), the percentage of respondents citing a desire for financial independence exceeded 70%.

Looking deeper, there are some subtle differences noted by correlating data between two independent questions. These differences suggest possible trends that we hope to follow in the coming years. The responses we have seen suggest that there are differences between what men and women perceive to be important. More women, for example, state financial independence as being a reason for becoming involved in franchising. They also report flexibility as the second most important reason. In contrast, men are more likely to consider franchising as a solution to being unemployed or as a way of having greater control.

Looking at this information based on the number of years a franchisee has operated their business presents quite different information. Interesting, if not yet definitive, is that franchisees in operation for “1 to 4 years” and “10+ years” report similar percentages for three of the five reasons cited. These two time periods roughly correspond to the current and last economic slowdowns in the USA. It may also be relevant to note that franchisees in business the shortest period of time (under 4 years) are less likely to report either unemployment or greater control as reasons for getting involved in franchising. We anticipate reporting on this trend as the economic climate improves to determine if these similarities are consistent during contraction and growth periods in the economy.

With a Master Franchise, you own an exclusive territory which allows you to receive franchise fees from the franchises sold and then receive ongoing royalties or residual income and perhaps overrides on product sales.

This can be a low overhead business with very few employees needed and yet can be built to where the Master Franchise is worth millions of dollars.

What is the Concept?

Imagine coming up with the idea of a new franchise concept that explodes in your area with dozens of new units opening up.  Imagine having control of this concept and receiving royalties and franchise fees on a consistent basis.  Imagine having access to the best business experts to help guide you  in your new venture to build your organization to last.  This opportunity is extremely rare, yet there are such businesses available if you know where to look.  This unusual highly successful opportunity is called master franchising.  With master franchising you get all the benefits mentioned above but without the expense of having to develop the concept from scratch.  You get control of the successful franchise system in a specific geographic area, a proven track record that works, the brand name and even a partner in the form of a corporate office and other master franchisees to give you the valuable support, latest innovations and businesses expertise when you need it.

Why is Franchising so Powerful?

Franchising as a whole has a 92% success rate for business owners.  For franchisees who own multiple units, the rate goes up to 97%.  Increased market share equals increased profits and franchising is the best way to gain market share.  Right now, retail franchise business represent only 8.3% of the businesses on the street.  However, the sales from those franchises represent 40.9% of the total retail sales in the United States.  Franchising is the best vehicle for capturing market share.  One of the best ways to increase profits is to increase market share.  The typical franchise, when compared to an unaffiliated business, is more profitable.

As a result of their extensive surveys, the International Franchise Association Tells us that:

• 93% of the franchisees say that a franchise gives them an advantage.
• 88% recommend a franchise over a non-franchised business.
• 83% are happy with their franchise.
• 65% would purchase the same franchise over again.
• The average yearly net income for a franchisee is $91,630.
• The average net income for a single unit franchise is $76,000
• The average net income for a multi-unit franchise is $142,000!

For more information about franchising you can contact Sean Murray at 317.919.3351 or e-mail at sean.murray@conor-patrick.com.

Contact Us
Our services are provided at no cost to you! There is no harm in learning about what franchise business opportunities are available to you. The first step is to reach out through an e-mail contact to our principle sean.murray@conor-patrick.com or phone call at 317.919.3351.  Once that has been submitted, we will contact you to verify your information. During this initial conversation, the Franchise Categories that interest you the most will be discussed.

Consultation
During this stage, we gather the necessary information to determine what your capabilities are and which business models will be a good match for you. Our first objective is to understand who you are (i.e. what are your past skills, what type of lifestyle you desire, and your overall goals). The ultimate goal of any reputable franchise business is not to “sell” a franchise to just anyone willing and able to buy their brand, but to “award” a franchise to candidates that are highly qualified and will thrive in the operation of their business model. Your success is their success!

Evaluation
We will introduce you to the respective Franchise. You will gain valuable knowledge on each of these great business models. Expect to hear about some exciting, name brand franchises, in the categories you expressed interest in. Keep an open mind, evaluate all the business models, compare and contrast them, and be careful not to discount a business until you have all the information. Often the first glance at a business does not paint the whole picture. Learning the numbers and examining the operation of a business is likely to reveal some impressive potential that you may, at first, overlook.

Review of Franchise Documents (FDD)
Once you have received an FDD from a franchisor, you will need to thoroughly examine the contents and seek answers to any questions you may have. The franchisor will readily assist you in finding the answers to any questions. The FDD will also contain a list of franchisees and contact information. It is highly recommended that you speak with the franchisees in order to gain an understanding of what it’s like to operate a franchise unit in their system.

Call Franchisees
It is essential to ask the right questions of the existing and past franchisees. We will supply you a list of question to assist in this process. This is a great opportunity to learn valuable information from those with the experience. This is your opportunity to validate the franchise opportunity and get an idea about the profitability of the franchises.

Consultation with Attorney and Accountant
We cannot overemphasize the necessity of consulting with a competent attorney and/or accountant before purchasing any business. It is very important that both professionals have a background in franchising, to ensure that you are covered in every way to benefit your position. If you don’t already have these professionals in place, we can make recommendations.

Attend a Discovery Day
Most franchisors have a Discovery Day where they invite prospective franchise partners to visit a specific franchise location and see how the franchise is run. You will not only get crucial information to assist in making your decision, but will get to meet the staff that will be supporting in the operation of your franchise business.

Decision Time
Once you have gone through all the previous steps, it is time for you to make a decision. Should you choose to own a franchise, you can be confident that you have taken the necessary steps towards controlling your own life, by owning your own business!

In the course of my business, I am often asked “When I buy a franchise, what do I get for my money?” The short answer is “a business model.” A business model is a framework for creating economic value, in other words, it’s a system for making money.

Many first time entrepreneurs confuse the investment in a franchise as a purchase of physical property, when what a franchise represents is intellectual property. The capital equipment, inventory, furnishings, fixtures or the cost of building out the location is part of any business be it franchised or not. The real value in a franchise is that you get a fully formed, proven business model. An effective business model is the difference between success and failure in a business.

The old maxim that most businesses fail because they are under capitalized is rubbish. Most of these businesses wouldn’t have been considered under capitalized if they would have had an adequate business plan. Every year thousands of well capitalized startups with brilliant ideas for a product or service fail. This not for lack of money, it is because they eventually burn up all of their cash while trying to develop a system for delivering their product into the hands of a paying customer. All business models are initially perfected by trial and error – this is a very costly process that most small businesses cannot afford to live through. That is why so many private startups fail where franchises succeed.

The costs associated with perfecting a business model will almost always eclipse the cost of paying a franchise fee. The average franchise fee is about 25k. Most starts up waste more than that in advertising costs alone while they experiment with different marketing strategies. The advantages of having the learning and cost curves reduced to a fraction of the “learn as you go” method, are very significant to say the least.

The other cost component of a franchise is the royalty. This is a fee paid for on-going support which of course includes continuous improvement of the business model, access to vendor discounts, product R&D, marketing and advertising programs, etc. Typical support royalties are between 6% and 8% of revenue. This fee usually pays for itself due to the savings realized when the franchisee purchases goods and services for the business at below market, national account rates. Additionally, most franchisees will experience much higher sales than they would as a private company – greatly in excess of 8% higher – because of the franchisor’s well designed marketing strategy.

A franchise may not be right for everyone and they are certainly not all created equal, but a good business model can lower the risk factor and accelerate one’s potential for long term success. As always, the key is finding the right match between the model and the operator.

Conor-Patrick can help you realize your dreams of business ownership with a successful franchise business.

Have a question about business opportunities? Send it to sean.murray@conor-patrick.com. Sean Murrayis President of Conor-Patrick Franchise Advisors, an international franchisee recruiting firm headquartered in Noblesville, IN. He can be reached at (317) 919-3351 or on the web at www.conor-patrick.com.