Choosing the Right Franchise

Planning for Franchise Change

Say you’ve been looking at franchise business opportunities for a while. You’ve visited locations, requested information, examined documents, asked questions, done a lot of soul searching, and finally you find the franchise that you know will be the perfect fit.

You’ve looked thoroughly into the system this franchise uses in its operations and you know that you’ll be comfortable with every step. You agree with their marketing plans, you love their product mix, and you’re ready to go.

There’s just one more thing you need to be aware of: things change.

Ancient Greek philosopher Heraclitus said, “The only constant is change.” Things haven’t gotten any more stable since then. Franchises change. Your franchise agreement probably mentions that somewhere — that things may change, even without notice.

Sometimes the changes don’t even originate with the franchsor.

Consider some of the franchise changes that have hit the headlines this year:

  • McDonald’s adds $1 value items to the menu, franchisees complain bout profit margins.
  • The National Labor Relations Board says McDonald’s and franchisees are “joint employers,” so franchisees aren’t shielded by small business exceptions.
  • Huntington rebrands, requiring franchisee investment in new materials.
  • The FDA requires calorie information inside and out of all restaurants with 20 or more franchisees.
  • Pizza Hut allows high levels of customization — some say there are now 1,000 different combinations of options — thus changing the process of pizza production.
  • Panera requires franchisees to install new technology.

This is a random sampling of changes affecting a random sampling of franchisees. You may face an entirely different set of changes. Some of these changes may have positive results and some may hit franchisees’ profits hard — some changes do both.

The key is to have realistic expectations about changes, to ask essential questions up front, and to have a plan for coping with changes.

If the franchise you’re considering is aggressive about growth, they may be willing to accept hefty costs for promotions and updates. Are you willing to accept that? Do you have extra funds that allow you to make that kind of investment? Will the franchisor help fund the changes? These are things to find out ahead of time.

If your franchisor is also your vendor for essential supplies, find out how much the costs to franchisors have changed over the past few years. The track record in recent years is probably the best indication of what’s likely to change in the future.

Ask current franchisors, too, when you call to find out more about the franchise, about changes that have taken place and how they were handled. Did franchisees get plenty of notice? Was the franchisor thoughtful about costs? How did the company respond to franchisee feedback?

If you know that change is difficult for you, you may find it easier to work with a franchisor who doesn’t make frequent changes. On the other hand, you don’t want to rely on a system that doesn’t respond to changes in the market. A strong does of realism can be your best friend when it comes to change.

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