Buying a Franchise

Meeting Franchise Business Requirements

ABFsnapshotIt’s exciting news — Starbucks is franchising. Unfortunately for Americans looking to get into the Starbucks business — you can’t. Starbucks, which traditionally has only company-owned locations and special licensing arrangements, is now looking to franchising to expand their business… but only in Europe.

Starbucks began as a single store in Seattle, but was bought and expanded by an entrepreneur whose vision for the chain was informed by his experiences in Italian coffee shops. European Starbucks franchises are in a way a return to the company’s roots — under strict company control.

The requirements for franchisees are also very strict. To become a Starbucks Euro franchisee, you must have the following characteristics:

  • Have £500k in liquid assets, or almost $700k
  • Live in Europe
  • Already own a multi-site business and have food and beverage experience
  • Be ready to open 20 stores in the next 5 years

Compared to other franchises, that’s a very demanding profile. Why is Starbucks being so selective? The Starbucks brand is one of the strongest in the world and they want to keep the level of quality very high while spreading their brand. The 45 new stores Starbucks has opened through franchising in the last year in England are all owned by just 9 franchisees. By being selective and requiring each franchisee to open a large number of stores, Starbucks is really building strong partnerships with their franchisees.

While few of us can become Starbucks franchisees, their franchisee requirements have a lesson for anyone considering becoming a franchise business owner. 

Stringent requirements for becoming a franchise owner can be frustrating when you’re looking for a franchise business opportunity. You may feel that net worth or experience requirements are freezing you out when you deserve a chance.

Think again.

Starbucks is looking for strong business partners to become part of the Starbuck’s enterprise. The franchisors you’re considering, although they might have different requirements, are looking for the same thing. The lists of requirements for franchise business opportunities are not hoops to jump through. They’re the characteristics of successful franchisees, based on the experience of the franchisor.

While only half of all new businesses survive for five years and only a third make it to their ten-year anniversaries, according to government figures, almost 90% of franchises renew their terms after their initial contracts (usually seven to ten years) are up. Even if the figures are not directly comparable, it’s clear that franchises have a higher success rate than independent start-ups.

One reason is that a franchise business has already been through the trial and error. Franchises have proven systems and a track record of success. They often have national or regional name recognition and great support systems.

But another reason is that franchise businesses choose their franchisees carefully. If you start an independent business, you are likely to be undercapitalized and to have areas of inexperience that you don’t even realize you have. When you start a franchise, you will already have demonstrated that you have the resources and the capacity to succeed.

America’s Best Franchises gives you the option of searching by investment — looking only at those franchise opportunities that suit your financial situation. You can also search by industry, looking where you have experience and knowledge. And of course you can browse through all the possibilities, using our Franchise Snapshot to narrow down your options.

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