The Question I Wish I Had Asked Before Buying A Franchise
Published in USA Today
by Nancy Rathbun Scott
Mary and Tommy Allen know the pitfalls a new franchise owner can expect to encounter. Having gone through the process five years ago, it's easy to look back and see what they could have done better.
Mary was an educator and Tommy a deputy sheriff in Los Angeles County when they decided to purchase a franchise. They read up on franchisors, investigated offers, and weeded out companies that didn't fit their personal plans. The Allens even got their financing together. They planned to use a combination of bank and Small Business Administration loans. Finally, they settled on Express Personnel, an employment service. With everything in place, Mary took a leave of absence from teaching.
Then came the heartbreak: the SBA denied the Allen's loan request, without explanation. "We were told to put our dreams on hold, but we couldn't because we had the building already," says Mary.
Because of their substantial investments, the Allen's decided they had no choice but to move forward. Mary returned to teaching to keep the cash flowing, and Tommy continued working at the Sheriff's office. Express Personnel was supportive throughout the process and Mary says she and Tommy wouldn't have gotten through the ordeal without their franchisor's help. Looking back, though, it's easy to see what they should have done differently. "Get the loan first," says Mary.
Before launching on the franchise journey, it pays to get a good roadmap, say those who've travelled the same route. Reputable franchise companies like Express Personnel offer an excellent source of help, as do organizations like the International Franchising Association, In its booklet, "Investigate Before Investing," IFA cautions potential buyers. "There are countless examples of successful franchisees, but buying a franchise is not a guarantee of riches. Every business faces obstacles to survival and franchises are no exception."
Learn the business
Chuck Gorley had been a successful business executive long enough to know the importance of thorough research when he decided to buy a Petland franchise in the Atlanta suburbs. "I did an extensive search for almost two years before deciding on Petland," he says.
He wanted a company with good growth potential, as well as a business to which he could apply his year's of experience working in the entertainment industry. More importantly, he wanted a store where employee's could be well-trained and then allowed the lattitude to assume day-to-day responsibility for running the store.
That's why every time a business trip took him to a city where there was a Petland store, Gorley visited that store to talk with the owner. He had seen at least 15 stores before he made his final decision. Even so, he thinks he would spend even more time in the stores, given the opportunity to do it all over.
"I think it would have been a good idea for me to go and work there, free for awhile," Part of Petland's two-week training involves one week of in-store, hands-on training, but Gorley says he would have benefitted from time to learn at a more relaxed pace. "Petland supports you very well, but I think I could have jump started the learning curve," he says.
Know your market
"Make sure there is a need for the product," says Mary Allen. "When we opened there was a recession in Los Angeles county, and we didn't take that into consideration."
In fact, the Allen's say that the unemployment rate was eight percent in L.A. county and significantly higher in their location, the hotbed of the aerospace industry. Many of the companies were closing and downsizing, so the market was flooded with people looking for work in an extremely competitive environment. The Allen's say it wasn't a totally bad situation-and they are now doing very well-but the recession was something they had not factored in.
Know the people
Roger Thomas decided to up his learning curve by getting to know the people he would be working with. Having spent the previous 15 years running a hardware store, Thomas stumbled on Ohio-based Epmark, a franchisor that develops condo communities for active, pre-retirees.
"I called a couple of the franchise owners, people who had been doing the projects," says Thomas. "I wanted to see if you could do what they promised."
What Thomas found was that, franchise-wide, people were more than willing to talk with him and share information. Having developed one successful project, Thomas is about to begin his second and couldn't be more pleased with Epmark. In retrospect, he notes that "You can always be more thorough," but he's glad he invested time talking with current owners.
Buy into the system
Another lesson Thomas learned is that buying a franchise means you must buy into the company's system. "I think it's pretty typical when you buy into a franchise to want to tinker with it," he says. "You want to change the system, or do things that aren't part of it."
Thomas soon learned, though, that the value of purchasing a franchise is that someone before you already has "been there, done that," working out the kinks and making the mistakes. "That's a big help, because it would be easy to do things that aren't necessary or appropriate for the market."
Mary Allen agrees that a franchisee should be prepared to use the franchisor's system. "You give up some of your freedom and modes of expression to work within this framework, but it has been proven to work," she says.
Now that things are humming along, she's glad they made the decision to buy. She's not even complaining about those early loan problems. "Who knows what's good and what's bad?" she shrugs. "Besides, we don't have an SBA loan to pay back."

® copyright 1999 Nancy Rathbun Scott
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