In the midst of all the uncertainties that have characterized the business and finance world in 2020, one of my biggest surprises has been the increasing number of people seeking out advice on franchised business ownership as a career option.
In addition to their desire to explore creative business opportunities, many of my clients have been motivated by a wish for greater control of their financial security in their work and professional lives but they are also concerned about the inherent risks of business ownership. As I explore the risk/opportunity balance with prospective franchisees, these are some of the factors we discuss regarding how to minimize the risk side of the opportunity equation.
Government Regulation: Franchisors are required by federal law and by 14 states, including Maryland, to provide prospective franchisees with a Franchise Disclosure Document (FDD) written in simple language that gives them extensive information about the franchisor, its systems, its financial performance, and much more. Thorough due diligence is the key to starting any business and the FDD provides much of what prospective franchisees need to know!
Proven Business Models: While the range of franchising is broad and innovative, this diversity also includes many franchise brands with decades of successful experience and hundreds, sometimes thousands of operating units. Prospective franchisees can be reassured by what has worked for others —especially in uncertain times.
A Broad Range of Industries to Choose From: Franchising is not just food and retail! Approximately 3,600 franchised brands cover 90 industries, so no matter the industry of interest, there is probably a franchise already doing it. Prospective owners are often surprised to learn that franchisors may even PREFER that they know nothing about their industry. The key to success in franchising is to follow the proven system. Business owners who are willing to work hard, take care of customers and employees, and demonstrate good business practices can count on franchisors to teach them how to run the business.
Availability of Recession and Pandemic Resistant Businesses: For those concerned with economic turmoil, there are business opportunities categorized as “essential” services or which are largely unaffected by recessions. Damage restoration, health-related industries, residential and commercial services, automotive maintenance, and senior care provide a few examples of the franchised industries that can survive disruption in the market place quite well.
Validation of Franchisor Claims: One of the most important due diligence actions, and one that can confirm (or refute) the claims of franchisors is the willingness of current franchisees to speak to prospective franchisees. My experience is that current owners are happy to talk about what it’s like to own the business as well as their relationships with the franchisor. To this end, the FDD provides contact information for all current and past franchisees. Franchise owners can also be protected by having an experienced franchise attorney review the contract (Franchise Agreement) with them.
Adapting to Changes in the Market Place: Perhaps one of the least appreciated aspects of franchised business ownership is the ability of franchisors to adapt their business models to long- and short-term changes in the business environment. This includes the recent challenges presented to small business owners during the COVID pandemic. Many systems were able to use technology or other adaptations to make it possible for franchisees to keep from failing during the worse of the business slow down.
No one can guarantee your success as a business owner — but, as far too many people have learned, working for someone else is also no guarantee of financial security. For people seeking new avenues that can combine opportunity with safety, franchised business ownership may help to mitigate the risks and improve chances of professional, financial, and personal rewards.
Richard Bock is the Market President of Frannet of Maryland. Frannet is the oldest franchise consulting firm in the nation and provides coaching to individuals who wish to explore franchising as a career option. www.Frannet.com