BY MARC KIEKENAPP | August 21, 2012
As you start your journey investigating franchise opportunities, its imperative you know some of the secrets that will allow you to make a better choice for you and your family. Let’s explore some of those secrets.
1. Understand your Goals for Franchise Ownership: Have an understanding of your short and long-term goals for the investment. Buying a franchise is much different than investing in real property. Property is a passive investment with little or no control of future values or cash flow. As the economy goes so does your investment. To an entrepreneur that’s like going down the river in a canoe without a paddle. On the contrary, an investment in a franchise allows you direct control of your investment. The decisions you make everyday, whether its inventory related or a decision regarding your staff or even marketing, will affect your bottom line. Have a goal and make every decision count.
2. Risk Taker or more Conservative: The nature of a true entrepreneur is a person that is willing to risk capital and resources to create personal wealth through their own efforts. Don’t take this secret lightly. How do you react to pressure? When researching franchise opportunities you will soon realize that some concepts are only a few years old and others have been operating for years. Risk Takers will generally move towards a new exciting franchise business because of the upside potential and also become instrumental in building the brand. More conservative entrepreneurs will find comfort with more established brands with a household name.
3. New Franchise Opportunities vs. Established Brands: The secret to start-up franchises is when you join a system early in the brand growth cycle you have unlimited opportunities with the brand. You may be taking a bigger risk but you also have the opportunity to help build the system and have potential access to prime territories that may be available.
Established franchise brands offer more safety, more franchisees, and a proven track record. Established brands sometimes offer the most profitable franchises with one downside. Prime territories are usually taken. A plus for an entrepreneur that wants to get started quickly most likely will have the opportunity to purchase an existing franchise business.
4. Understanding your Market Area: You own the secrets to your market because you live your life there. You are part of the community on a daily basis and can observe where people shop, traffic patterns, and what retail centers are busy and at what time of day. You also understand the needs of the community and know what services aren’t being provided.
5. Family Support: Involve your immediate family to join you in the research process. Owning a small business affects the family in several ways. Your time commitment to the business is important and having a household that understands and supports you through the first few years of operation is imperative. You will have situations that will keep you from participating in family activities including vacations. A key benefit to having your family involved is their support after having a really bad day.
6. The Amount of Money You Should Invest: Just because you’ve set aside $200,000 for a top franchise opportunity, you don’t need to spend it all! If this is your first franchise venture you should consider a lower investment franchise to make sure that entrepreneurship is right for you. A home-based franchise can be one of the most profitable franchises you can own if your market area needs that service. Don’t discount franchise opportunities that are low cost or home-based until you do thorough research.
7. Personal Living Expenses: Even the most profitable franchises take time to ramp up to profitability. Make sure that you’ve set aside funds to take care of your monthly overhead for at least 6 months to a year. The biggest mistake a new franchisee can make is to start drawing money for personal expenses from a new business. In my opinion the number one reason for failure!
8. Lifestyle Needs: Your family remains the most important consideration in choosing the right franchise opportunity. Make sure that the hours and tasks required to be successful will blend with your family needs. You will need a complete understanding of the hours of operation and time commitments with the franchise opportunity you choose.
9. Transition from Current Income and Employment: Don’t be too quick to exit your current employment. Since all franchise businesses have a ramp up time you should stay employed as long as you can, This allows you to conserve capital for your personal and business expenses. This is hard to do when you’ve made the decision to own your own franchise, but hang in there, you’ll appreciate it later.
10. Don’t Rush: I think this speaks for itself. Don’t be pressured by a salesperson to make a decision for some arbitrary reason that isn’t important to the BIG picture.
Marc A. Kiekenapp
*Marc Kiekenapp is Founder and CEO of Kiekenapp & Associates, LLC, a National Franchise Consulting Firm assisting franchisors in qualification and selection process of quality candidate ideally suited for the franchise concept. Marc has over 30 years of franchise experience. He has been a master licensee, owned and operated multiple national franchise units as a franchisee. In the spring of 2000 Marc was recognized as one of the top three franchise executives by Franchise Update Magazine. With over thirty years of experience in franchising, Marc is requested as a frequent guest speaker on franchise development topics for the International Franchise Association, Franchise Update Magazine, The Restaurant Finance national convention, and franchisor national conventions. Mr. Kiekenapp is currently serving on the IFA Supplier forum board and is active in many aspects with the International Franchise Association. Marc has assisted thousands of franchise seekers to find a business that meets their financial and family goals by matching the skill levels and financial capabilities with the correct franchise system. When not pursuing the franchise industry, he is an avid golfer and enjoys flyfishing and tennis.