Bullish Q&A: Is a Franchise a Good Way to Start a Business?

Bullish Q&A- Is a Franchise a Good Way to Start a Business-

I have a full-time job now that’s pretty good, but not amazing. I’ve always been an aspiring entrepreneur, and made a few real attempts to start something while still working full-time, but I’ve never been able to get anything off the ground. I’m now looking more into buying a franchise, since you get automatic brand recognition and a clear path to follow instead of having to do everything on your own. The particular franchise I’m most interested in offers a service that is definitely aligned & complementary with my professional experience. A close friend of mine owns a franchise (although in a completely different industry), and I’ve had a few conversations with her about the experience. She says if you want to be creative and come up with your own products and promotions, then it’s not for you, but if you want to be an investor, and work with the corporate reps to met quality standards, but take ownership of one branch, it could be a good fit. I definitely see myself as more the “investor” type than the “creative” type, but at the end of the day it’s still a big risk. What are your thoughts?

 

I’ve looked into franchising on occasion — Entrepreneur magazine seems to have a lot of ads for franchises, some of them stretching the meaning of “franchise.” That is, you can spend $150K setting up a fast food restaurant, or you can buy a $12K “franchise” that’s more like, “Here’s a book we wrote and a logo you can use to start your own vending machine rental operation.”

But one great thing about franchises is that they are extremely heavily regulated – and there’s public information about costs and success rates. Obviously you don’t get that with your own business.

Interestingly, it turns out that failure rates for franchises are pretty similar to those for independent businesses. But the overall franchise rate isn’t really important – you just need the failure rate for the franchise you’re considering. (It turns out starting a Super 8 Motel is one of the safest bets out there.)

It does sound like franchising is a good match for your interests and personality! And you do get to make some decisions (we’ve all been to some Dunkin Donuts that are way better than other Dunkin Donuts). It might even be enjoyable for some personality types to have someone (franchisees the next town over) to engage in friendly (?) competition with. I mean, there really are plaques from national headquarters that are like “Best customer service in Indiana!”

To me, the only real disadvantage — other than the sizable initial investment and ongoing fees — is that I don’t really have that … frisson of possibility. You are not going to change the world, or become the next Bill Gates. You will not be profiled in Inc. magazine for your amazing ideas. There is a cap. And for some people that takes the magic out. Like, pardon the example, but say you want to hook up with someone just for fun. For some people, it’s that simple. But for some people, you want there to be at least some tiny possibility, however unlikely, that your casual hookup could go somewhere — maybe they’re The One, and wouldn’t that be crazy? The hookup isn’t fun without that one-in-a-million chance. But some people just wanna hook up and it is what it is. It doesn’t need a hint of the ineffable.

I like the entrepreneurial magic — or maybe I’ve been deluding myself all this time! There are certainly some parts of running a business that I’m not great at, and have no built-in support or answers for. With a franchise, you don’t quite own 100% of your business, but it’s probably better to be a partner in something sizable and functional than 100% owner of an impossible dream.

Based on what you’ve said, this sounds like a great option for you. The only downfall is the risk. You can get quantitative answers to just how much risk this is (and just how much sweat equity you’ll have to put in before you see a return). Talk to franchisees far enough away that you won’t seem like a competitor. Find some who are struggling and see if maybe you have something they don’t. All this information is available.

The other question is, what is the risk of NOT doing it? Boredom, stagnation, regret? What are the chances you’ll get to where you want to be doing what you’re doing right now?

If the answer is 0%, then there’s risk in doing nothing. There always is.