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If you are considering starting your own business, you have undoubtedly considered the prospect of franchise ownership. There are many undeniable benefits to hitching your wagon to a proven winner, but there are no guarantees and everything comes at a cost. So how do you decide if franchise ownership is right for you, and what are the realities of franchising?

Financial Considerations

Starting a business is never cheap. The costs of equipment, labor, advertising, building and property all add up very quickly. It can be overwhelming for even the most savvy businessman with the most solid business plan. When you take on a franchise you also take on additional costs that can be a real drain on your budding business’s earnings.

Franchisor’s provide a solid service, providing you with a proven business strategy and a network of support, but they do so at an associated cost. You will be expected to cough up a franchise fee as part of buying into the franchising organization. Beyond this additional initial cost, there are long term financial commitments to your franchisor, as well. A percentage of your monthly earnings over the life of your business will have to be paid back into the franchising organization. Royalties for use of the franchisors trademark, and ongoing fees (such as those for marketing) can be a significant drain on your returns, especial in the tumultuous initial period of developing your new business.

Lack of Autonomy

When you buy a franchise, you surrender a significant degree of control over your business. As a franchisee you do not have the final word in how your business is run, but rather are constrained by your obligations to the franchisor. You are playing their game and must abide by their rules. While it is true that franchisors want their franchisees to succeed, and thus gear their guidelines toward the overall success of the business, the lack of autonomy provided by franchising can prove frustrating and at times detrimental. If one of the appeals of business ownership is the ability to do things your way and in your own time, then franchise ownership is probably not for you. As a franchisee, you will always be ultimately accountable to an authority greater than yourself.

Inflexibility

Franchise ownership also offers a very limited degree of flexibility in the day-to-day operations of your business. When you contract with a franchisor, you agree to run your business according to their game plan. There is often little or no room for variation as to the procedures regarding products and services. The franchisor is motivated to provide a uniform front across the entire range of their franchising territory and expect you to follow their specific guidelines to ensure brand uniformity.

To further this uniformity, franchisors often require franchisees to obtain supplies for pre-approved sources. This means that you may end up having to pass up the most cost effective or convenient supplier to go with one approved by the franchisor. Such loss of flexibility can be an added financial burden on your business. With all of the obvious and alluring benefits of franchise ownership, it is imperative to keep a realistic view of franchising when deciding what type of business would most suite your individual needs. It is important to know exactly what you are giving up for the franchising security net. Whether as a franchise or as an independent business, there are never any guarantees of success, but the constraints of franchise ownership are certain.

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A potential customer called a fence company for an estimate on a split rail fence he wanted installed on residential property. The representative stopped over, gave the client his price, and remarked that it was a minimum size job. The agreement was signed and the salesman promised the work would begin as soon as the homeowner obtained a permit. The homeowner obtained the permit, called the fence company, and left a message for the salesman to notify the work crew to begin as soon as possible. Repeated calls from the potential customer ended in frustration. Obviously, the salesman was very busy, and it was a small job, thus he never bothered to arrange for the work to be done.

A similar situation often happens in a restaurant. The waitress tells two customers just having coffee and discussing their business issues isn’t enough to justify serving them. She says they will have to leave because there are too many people waiting in line for a full lunch. It is pure ignorance on behalf of the franchise owner to allow this type of customer treatment to exist.

Borg’s Rule:Never ignore a small order-it can cost you big money.

Let’s examine the psychology behind that rule. First, even though the job that the customer requested was small, it could be the beginning of a potential relationship that would bring repeat and/or referral business. Second, every customer knows other people. Anytime he is pleased or disappointed about service, he talks to friends and acquaintances. On the average, a customer will tell 5-7 other people of a good experience he has had with a particular business or organization. Good advertising can result from good service. An unhappy customer will tell 9-16 other people of the poor service he has received. Bad advertising usually results from bad service.

How can we avoid offending the customer who has a small order? First and foremost, train your employees to give the same kind of service to that customer as they would to a customer with a large order. If that is impossible because your franchise is just too busy, then I suggest you find one or two smaller businesses to use as referrals for this type of customer. By doing this, you will give the customer the kind of service and respect he or she deserves.

When it comes to service, far too often the employees of a company or organization make the decision to short-change the customer because they don’t see the whole picture.

Remember some franchise owners approach their operation as if it were a 50 yard dash. They don’t realize that they are running a 26 mile 385 yard marathon. Unless their employees change their focus, frustrated customers and lost business will result. Contrary to popular belief, there is not an infinite number of eager customers wanting to buy your product or use your service. In addition to that, there are a growing number of competitors who are vying for those customers.

As a franchise owner or manager, make it a point to educate your employees on the value of each customer. Make it clear to them that their paycheck depends on long-term satisfied customers. In the end, your customers, your employees, and your business will benefit.

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