Steps to Investigating A Franchise
Printed in USA Today
by Nancy Rathbun Scott
Roger Block, executive vice president of Carlson Wagonlit Travel Associates, knows just what he's looking for in a new franchise owner: a high level of commitment, a can-do attitude, enthusiasm about the travel business, an outgoing personality, and organizational skills. "Travel business knowledge is the least of the important things," says Block, whose company provides everything a prospective franchise owner needs to get into the travel business. What turns Block off? "We'll decline a franchise for insufficient financial strength. Or, if during the background check, we find out the person can't keep good employees. In our type of business, that's all the assets we have."
At Super Coups, the story sounds similar. "Usually a franchise owner comes in with a track record and you can judge prospective owners by what they've done to get to this point. Franchise owners that are buying Super Coups right now all have some type of business experience, sales management background, and money to invest."
Scott Simcik, founder of Inches-A-Weigh, says owners who reach success fastest are idealistic, decisive, and cooperative.
Clearly, franchisors know what they are looking for. But what about the potential entrepreneur's side of the equation? What should that prospective owner look for-and demand-in a franchisor business partner?
First, Look Inward
Prospective entrepreneurs often think they know what business would make them happy. Often they're wrong, says Terry Powell, who owns a company that helps prospective franchise owners assess their options. "At The Entrepreneur's Source, we've been doing this for 14 years and over 95 percent of our clients end up in businesses that they admittedly would not have looked at on their own or had looked at and discounted prematurely."
The mistake lies in thinking of a business as a job or a series of tasks or duties. Business ownership is different, says Powell. "It's about managing market and promoting successfully; not about every-day work. That's a big difference."
That's why Powell and most experts advise prospective franchise owners to begin their search by taking a very close look at their own strengths and weaknesses.
Decide What You Want and Pursue
"An entrepreneur is somebody who just has that desire-who doesn't want to be 80 and look back and not have gone for it," says Steve Kraner, a Sandler Training Institute franchise owner who made up his mind about Sandler and went for it. Kraner was a successful corporate salesperson making deep six figures when he decided to jump the track into being his own boss with Sandler, a franchise company that trains corporate executives. "I was a Sandler client," he says. "I loved the stuff so much that I bought the company."
That doesn't mean that he dove right in without asking questions. "My 'due diligence' was to personally review the contract and meet the people," he says. Kraner rounded out meetings with Sandler's corporate staff with interviews of franchisees who both succeeded and failed in the business. "It became very clear to me that it was the business I wanted to be in because they all said the same thing. Those who succeeded would do it all over again; those who failed blamed only themselves."
Kraner says he also asked specific questions about costs and revenue. Then he met with existing franchisees in his targeted territory in Northern Virginia. "I wanted to know the rules of engagement before I felt comfortable coming into the territory."
For those investigating a franchise, Kraner recommends two other steps. First, do a literature study of your franchise in the franchise trade press to see if the press is positive or negative. Second, if you're going to buy a business, bring on a lawyer early in the process. "From day one, you need someone for hire, on retainer, to act as your general counsel," says Kraner. Now in his fourth year as a Sandler franchise owner, Kraner says, "I'm glad I went for it and I'm glad I made it."
Talk to As Many Owners As Possible
Franchise disclosure law requires that prospective franchise purchasers receive a list of all franchise owners in the system. Most experts recommend talking to as many as possible. That, says Terry Powell, is the best way to get a reading on franchisor support. "One franchisor may deliver a whole different level of support than another."
Also, different individuals respond differently to the same franchisor-one may need a lot more support in marketing and management systems, for instance. "We get the prospective owner to interact with the franchisees and talk with them about the kind of support they've received from the franchisor. What have they been able to rely on? Have their needs been met in those areas and how?"
Mike and Carol Beattie, who bought a Precision Tune franchise, say the support they hoped for makes all the difference. "We knew we wouldn't be alone out there because of Precision Tune's impressive product support, with its point-of-sale-to-warehouse inventory control system networked among all the shops in the country." With the input they get each week as to what's moving, what's not, and what they need to stock, the Beatties say they can rest easy.
Look for Support In All the Right Places
Memphis Subway franchise owner Sedrick Turner got turned down by over ten banks before he clinched a loan that enabled him to build his franchise store. "I was young, straight out of college, didn't have any start-up money and didn't have any business experience," says Turner, who bought a Subway franchise in 1993 and opened his first store in September 1994. But he campaigned for support and got a lot of people to back up his loan application. "I worked with every small and minority business organization in Tennessee and had the mayor of Memphis and other civic leaders backing me. The bank tried to give me some headaches about it, but every time they pulled, I pushed harder and harder."
Subway's development agent and the Subway board of franchisees put their stamp of approval on Turner's chosen site. "I called the loan officer every day until the bank finally gave in. My business plan showed them I was serious. I was consistent in everything that I did. I had no doubts and I had patience."
At age 26, Turner now owns three Subway stores and has received Tennessee's Young Entrepreneur of the Year Award. "I'll tell you who supports me is my community. This is a 100 percent minority neighborhood and it's a cooperative effort between me and the community-employees and customers."
Believe You Can Do It
Franchisors appreciate the sort of stick-to-it qualities that Sedrick Turner demonstrated on his way to Subway franchise ownership. McDonalds franchise owner Gordon Thornton, who started out working behind the counter in 1976, demonstrated the same measure of determination in proving that his dreams were possible. "I had received a job with the government, but it was going to be a couple of months before I started work so I took the job with McDonalds as something to do. I got in and just loved it. I loved the pace-frantic, but controlled, and very organized."
Even that first year, Thornton knew franchise ownership was for him. But how could he afford one of the most coveted-and costly-franchises in America? "By managing my personal expenses, saving money, purchasing McDonald's stock through various employee incentive plans, and through the company's profit-sharing program. I knew it would take at least ten years, but I was willing to commit to the management side until I could buy my own franchise."
In the late 70s, Thornton met the woman he would marry, working under the same golden arches. Sharnan bought right into her future husband's dream and, in 1993, Thornton bought his first McDonalds. Today he and Sharnan own eight.
Tuning In To The Right Franchise
Everybody comes in because they want to see the infamous smile I have," says Mike Beattie, who just opened a Precision Tune franchise store in August. Word about town in St. Marys, Maryland, points to Beattie's smile as the sign of satisfaction. "It really has been better than I thought it could be," says the former power plant engineer.
Mike and his wife Carol decided they wanted a franchise after doing extensive research and homework. "We talked to a lot of people that owned franchises and independent businesses, from EconoLodges to mom 'n pop hotels," he says. "I felt a franchise would give us the best chance to succeed."
In the search, the Beatties consulted business brokers, the Internet, library books and trade publications, and attended franchise shows on and off. Some things got close but just never really felt right. In fact, about eight years passed before the Beatties settled on Precision Tune. "We just kept looking until we saw something that made sense. We looked at almost everything under the sun, outside the automotive field as well."
They contacted Precision Tune in response to a newspaper advertisement. Mike immediately liked what he saw. "I didn't feel we were dealing with a salesman."
A personal visit with the local representative and another with the people at the corporate center in Leesburg clinched the Beatties' intuitive feel for Precision tune. "The thing that really got it for me was the support they have for the franchisees," says Mike.
He also was impressed with the knowledge base behind the Precision Tune's operation. "They have a big research department where they investigate new products and machines that are coming out. Joel Burrows 'the car doctor' takes those machines apart and goes right into how they work, what they are doing to the car. When you sit down and talk with him, look at all the equipment in this big garage, it's pretty impressive."
Mike says this demonstrated body of knowledge made him comfortable. He also liked Precision Tune's training department, where he could attend the same classes that the mechanics take. "I don't really know a whole lot about cars. I'm an engineer by trade and have always played with cars, but not to the point where I feel I am that knowledgeable."
Once they spent a day at Precision Tune headquarters, the Beatties didn't feel they needed to do much more checking, although they did talk with a few franchise owners. "I felt it was something that would be successful in its own right," says Beattie, "not that it was just for me."

® copyright 1999 Nancy Rathbun Scott
Do not reprint without permission