August 19, 2008

3 Min Read
Read This Before You Buy Into A Franchise

By Mitch York 1

Lots of IT-focused franchise opportunities are popping up. But experiences will certainly vary from franchise to franchise, and industry to industry. I’ve been in a national franchise for over six years. The franchise isn’t IT oriented, but my lessons learned may help VARs and solutions providers weigh their own franchise options.

My business has been a long, sometimes painful, but now increasingly rewarding experience.

The franchisee base of which I am a part is a bell-curve of success–some people are killing it, some are getting killed by it, and most are somewhere in the middle. In the past week there has been an email thread going around from some of the people who are on the left side of the curve. One asks if anyone is interested in initiating a class-action lawsuit against the franchisor for selling them “a bill of goods,” for “disclosure issues,” for lack of support.

Over the years, many prospective franchisees have called me and asked my opinion of the franchise. They want me to tell them whether it’s a good idea for them to become a franchisee. My answer is always the same. I try to discourage people from buying this or any franchise. Not because I don’t like the business–I love it and it’s a big success for me. But people who seek affirmation from strangers to make the biggest financial investment of their lives are getting themselves in too deep. So it’s easier for me to tell people who are interested in this franchise (or others), one or more of the following things:

  • Why do you want to buy this franchise? Are you running away from something?

  • You’re going to invest $300,000 or more (for those who decide to open a retail store). How long will it take you to make that back, and what percentage return on that investment do you expect? How does that compare to taking the same money and buying a no-risk Treasury bill? Are you just bored? How about getting a job you like better than the one you just took a buyout from?

  • Have you ever in your life done anything entrepreneurial? If not, what makes you think you will be successful with a franchise? And if you fail, what happens then? Will you lose your house? Your 401(k)? Your marriage?

One franchisee, who has become a valued business partner of mine doing profitable projects together, saw the email exchange and asked me, “What the hell is going on!?” I told her this: “Ignore stuff like this. Negativity = Failure. Positive attitude + action = Success.”

It is incredibly easy to psych yourself into a tailspin when you own a business. Or to raise yourself up and keep going until you find the formula, the business model, the customer set that works.

I’m a collector of franchising stories, so if you have one, good or bad, feel free to share.

Contributing blogger Mitch York is a personal friend of The VAR Guy. York coaches executives who are evolving into entrepreneurs. Find York — and his personal blog — at www.e2ecoaching.com.

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