Buying A Franchise Isn't Like Buying A New Car

http://www.flickr.com/photos/dugasj/ / CC BY-NC-ND 2.0

How do I know? Because I was in the car business for more than a decade. The emotions involved in a new car purchase are quite intense.

This question, asked by every automobile salesperson, sometimes brings out feelings that the new car buyer hasn't experienced for years;

"What color do you like?"

Do you remember the last time you purchased a new car? Would you agree that it was an experience that you don't really want to repeat more than you have to?

Let's for a moment imagine the feeling one might have purchasing a franchise business. A legitimate franchise will cost one at least $75,000, with working capital, inventory, office space, and computer equipment. That's a lot more than most new cars. It's also a life-altering decision, in most cases. It's way more intense, and a lot more complicated than purchasing a new car.

This is not a "Would you like the purple franchise with the gold pinstripe, or would you prefer the green one, with the sunroof?" type of deal.

If you've been a regular reader of this blog, you know about "The Franchise Of The Month" column I write. It's part of my article marketing service, and it puts the spotlight on a different franchise concept every month. (December is still open. Hint Hint.)    

After hearing about the newest in a series of franchise brokerage ideas, I'm thinking of adding a new column to this blog, myself. It will be called;

"The Most Idiotic Franchise Concept Of The Month"

I'm serious. Here's what it looks like;

(A woman thumbing through a franchise brochure)

Yes folks. A "retail" franchise store. Do you know how exciting this will be?

When you go to one these new stores, you'll be able to actually touch real franchise brochures!

This is cutting edge stuff, my Royal subjects!

So, consumers will be able to shop for franchises in the comfort of a 1,200 sq. foot store with some nice brochure racks as a backdrop. (The only brochures displayed are from the franchise companies that these storefront operators get paid a fat commission to sell, by the way.)

Now, I'll get serious. This is a franchise brokerage. That's all it is. It just has a different look. Folks can go in there, sit down with a salesperson (That's what they are-don't kid yourselves) and thumb through a few brochures. They'll probably be given a fancy-schmancy personality test or two to decide what kind of franchises they should buy, but this is just marketing-plain and simple.

The fine folks that own these individual franchises will tell you that they "aren't salespeople." Fair enough. But if they aren't salespeople, why are they handing out sales brochures? (I don't hand out brochures in my franchise consulting practice.)

This is a classic case of making something look different than what it actually is.

It gets better. I know you may find this hard to believe, but it looks like the franchise corporation that thought of this brilliant concept actually may be selling franchises to people with absolutely no franchise industry experience. Can you believe it? No way, King. Yes way, Royal subjects!

Do you feel that I am being way too hard on this franchisor? Do you feel that I should go easy on them? Should I go easy on a franchisor that may be selling these stupid storefront operations to unsuspecting, possibly even unqualified people, who just want to have a chance at the American Dream?

Here's what I think;

• I think it's time that franchise companies start coming up with concepts that will last more than a couple of years.
  
• I think that franchisors should only sell (Award) franchises to people that are really qualified for the opportunities being offered.
• I think that the franchise industry as a whole, needs to change the way they do business.
• Franchise industry insiders know the winning concepts, and also know the below average ones. They should promote the winners, and launch the losers into the abyss, or get them some help.
• Franchisors need to make sure that they tell prospective franchisees that there are no guarantees, and that they may fail. Once again, tell them that they could fail.

In this age of transparency the franchise industry-my industry, has two choices;

1. Be more transparent about everything they do, both right and wrong.
2. Pretend that transparency is a fad, and ignore it.

Franchise concepts like the one mentioned above, will fade into the background within a couple of years.

That's not good for the franchisees that have just invested $150,000+ of their life savings into this stellar concept, nor is it a good thing for our industry.

(I refuse to link to-or mention, the name of the franchise concept discussed above. They don't deserve a link from me. Heck, this whole story could be my first attempt at fiction)

Your thoughts are welcome.

Comments

[The Franchise King]

Jamie,

Thank you for stopping by. You may be right about that.

Who knows what "franchise qualifications" these new franchisees have. I'm guessing-none.

The Franchise King®

[Jamie Tibetan]

The concept is a 'virtual' franchise store selling the 300 franchise concepts that this franchise consultant have as a clients for the "lead generation service", so franchisors pay for that service and the leads go to these new franchisees that do not have any idea about what is to sell a franchise..."

[Sean Kelly]

"The concept is a 'virtual' franchise store selling the 300 franchise concepts that this franchise consultant have as a clients for the "lead generation service", so franchisors pay for that service and the leads go to these new franchisees that do not have any idea about what is to sell a franchise..."

This sounds like a great concept for anyone interested in "virtual" success.

[The Franchise King]

Jonathon,

Great question, and one that should be answered so that prospective franchisees know the differences;

1. I'm transparent in my dealing with prospective franchise owners; I'm a franchise consultant-broker, and they know it. I'm not involved in some schlock operation disguised as a "friendly place to shop around." The operation in question IS a retail franchise brokerage. Period.

2. I don't hand out brochures. That's for the franchise companies to do. You see, they are actually "selling" the franchises. I'm making the match. Handing out brochures makes me the franchise salesperson, and that creates a red flag that measures about 1,500 square feet. (The size of one of these "franchise stores."

3. I don't have $3,000-$4,000 in expenses going out every month, like a franchisee of one of these operations has. I don't want it. The pressure to sell goes up a lot, with expenses like that.

I would share 4-5 more things, but I don't really want to help the franchise company that's out there selling these goofy stores to unsuspecting, mostly non-franchise experienced folks.

My friend, Don Sniegowski, over at http://www.BlueMauMau.org, is going to have a field day by the end of the year with this one.

One more thing;

The gals over at http://www.unhappyfranchisee.com/ are already chomping at the bit.

The Franchise King®

[Jonathon Rice]

other than the lack of retail store front and brochures how is this any different than what you do for a living?

[The Franchise King]

Sean,

Thank you for your insights...

Is the "Success Fairy" a relative of "A Turn-Key Business."

Lots of folks that have seen my blog, along with some of Sean Kelly's blogs like UnhappyFranchisee.com, and Paul Segreto's franchisessentials.wordpress.com/ may think that guys like us are slamming franchising.

That makes no sense since guys like us make our living from the franchise industry. We just want to make sure that things are more transparent.

We aim to protect unsuspecting prospective franchise business owners from "opportunities" that just may not be opportunities.

The Franchise King®
Joel Libava

[Sean Kelly]

Some really good points here Joel. Let me key in on one: "Franchisors need to make sure that they tell prospective franchisees that there are no guarantees, and that they may fail. Once again, tell them that they could fail."

This may seem self-defeating, but it's not. If a franchisor truly is looking for good franchisees (instead of hunting for suckers), a frank and realistic assessment will sell better than pie-in-the-sky promises of success. It's better to have a franchisee go into the venture ready for battle rather than one who thinks the Success Fairy will smile on him because it's a franchise.

[The Franchise King]

Unhappy,

Thank you for thoughts on this waste of a franchise.

Why don't some of these franchisors talk to US, before they launch these ideas?

The Franchise King
Joel Libava

[Unhappy Franchisee]

Good post. Like your bulleted list.

This concept was tried back in the early 90s, I believe. Someone set up a Franchising Center in downtown Chicago where franchisors had booths, brochures, presentations, etc. It failed dismally.

Today, this is even a worse idea. That was pre-Internet and in a major market - it almost made sense. But now it is even more of a loser idea. These franchised franchise broker deals are worse on their own - without adding retail overhead. I'll look for their franchisees at unhappyfranchisee.com, the final resting place of ill conceived franchise ventures.

[The Franchise King]

James,

Thank you for your comment, and of course, for your support.

I not only see you on Twitter, but I see that you help me spread franchise information around that I provide.

If you look in the blog archives(Button on top) you'll find some posts about franchise personality etc.

Again, thank you!

The Franchise King
Joel Libava

[James Deck]

One of the hardest thing for a franchise system is finding quality franchisee candidates. Qualifying candidates based on their interest in pursuing "some type of franchise" and/or them having the means to write the cheque is a recipe for disaster.

To me, it is a sure sign the franchise system will be short lived and that the franchisor is only there for the quick buck.

Franchise systems I respect are very picky with granting franchise licenses and also make minimal, or no, profit on the initial franchise fee. The business model for a successful franchise system should expect to make profits from on-going royalties (therefore there is an incentive to pick the right candidates and help them to succeed once they start their franchise business).

I would love to see some posts on the best ways to find successful candidates, the personality of an ideal candidate, and warning signals to look for when interviewing candidates.

Oh yeah, great post :-)

[The Franchise King]

Josan,

Thank you for trekking all the way across the Atlantic Ocean to comment on my blog!

It just can't be true!

Virtual franchise store.

Google translated your blog for me. Nice work!

Amazing.

The Franchise King
Joel Libava

[Josan García]

It´s amazing, but just right now in Spain we have a discussion about a similar franchise concept launched precisely by the considered "most prestigious" franchise consultant ( in fact everybody knows that it is not, but amazingly people considere it). The concept is a "virtual" franchise store selling the 300 franchise concepts that this franchise consultant have as a clients for the "lead generation service", so franchisors pay for that service and the leads go to these new franchisees that do not have any idea about what is to sell a franchise...it sounds familiar for you?

best

Josan