You have done your research and decided that buying into a franchise system is the right course of action for you and your family. Franchising is a proven business model that offers the chance to be in business for yourself - but not by yourself! But before you sign on the dotted line, let me offer you a final check list of things that may make or break your franchise:

 

*   Strong Demographics  - It sounds almost elementary, but make sure there are enough customers in your protected territory. Depending on what franchise system it is that you own, it takes a lot of customers to make a profitable location. 

 

*   Recurring Revenue  - Don't try and reinvent the wheel, or be talked into something that is not proven. Look at the top franchises over a long period of time. They almost all have one thing in common: customers that come back again and again. Franchises that have a high Customer Long Term Value (also referred to as CLV) have sustainable business models. 

 

*   Competition -  Make sure that you are bringing a new and exciting franchise business into your market. Creating the pre-opening buzz will get you off to a strong start. If there are already lots of businesses doing what you are doing in your market, then you're banking on the fact that your franchise differentiates itself enough to steal loyal customers from those other businesses. And that may be harder then you think! 

 

• * High ASI Ratio - Simply put, you want to own a franchise with a high Average Sales to Investment Ratio. The higher this ratio, the higher the return on sales. Look for a ratio of at least 2 to 1. So if Your build out cost is $200K, then this would be  $400K in revenue.  

• * High ROI - You will want a good return on investment.  If you can determine what the average Net Income is then divide that by the your investment ($50,000 Net Income/ $200,000 Cost) - this gives you a return on investment (ROI) - if this is really high, it may be that although you may have a low ASI ration - the investment is still worth it.  And Vice Verso - if the ASI is high - looking at the ROI is important as this could still be low even with a high ASI.  Normally higher return on investment means that you will need to be more involved with your business.  So when evaluating your ROI make sure and take into consideration the amount of work you the owner will have to do.

 

If you have a passion  for business, franchising is an exciting way to create income and accumulate wealth for yourself and your family.  Additionally, if your franchise has these four business metrics you should be well on your way to owning a successful business! 

 

When you buy a franchise there are lots of things that the franchisor will teach you. The systems that a franchise has and how well you follow those systems may ultimately be the difference between your success or failure. One area that you will have the most control over is your staff and employees. Your franchisor will help you with build-out, initial and on-going training support, marketing, even guidance on getting to break even and beyond, but you will have to manage your staff. Your Human capital is one of the most vital parts of your franchise operations for a number of reasons. Your employees deliver your product, they are the face of your business, they create the fabulous experience that brings your customers coming back, they create those little interactions that make your customers think, " Wow, this company really gets me". Developing a great staff doesn't happen over night, it takes time. Additionally, if your new hires don't have the following two attributes, getting your franchise to where you want it to be is going to take longer than planned. 

* A Work Ethic - You can't teach someone to have a work ethic. Work ethic is a tricky thing, some people have it out of need, they have a family and need to support and provide for their family. Some people learned it from there parents and are modeling it. But one thing is for sure, if you are going to put together a great team, having employees with a good work ethic is critical. 

* Attitude - I have heard people say, "That person needs an attitude adjustment", and you know I have seen that work, but only on a temporary basis. You know what behavioral psychologists will tell you, past behavior is the best predictor of future behavior. Companies spend a great deal of time and money working with and trying to fix people with bad attitudes. Find people with a good attitude about your company right from the beginning, nurture and train them, show them there valued, and your people will work together as a team. 

Getting your staff to work together as a team to create a fantastic customer experience is crucial to your franchises success. During the interview process you can ask questions that will give you clues on whether your candidate has these two important attributes. You are going get to where you want to go a lot faster if you can find candidates that have these two attributes. 

There are lots of moving parts to a franchise, including your franchisors opening assistance, training and ongoing support. All of the aforementioned are important to your success as a franchisee, and the best way to measure these are to talk to current franchisees. 

I was recently reading a Franchise Times magazine and stumbled across an article about someone who had built up several franchise systems. He had grown to where between the two he had over 700 Units! As I continued to read, it just so happened that he was a neighbor of mine in Overland Park Kansas.  I connected with him on LinkedIn and was not surprised to learn that he had the one trait that EVERY single successful franchisee I have every talked to has, a Determination To Succeed. You can buy into the greatest franchise concept ever invented but without the determination to succeed it may not be enough. Some other pearls of wisdom that he shared with me. 

- You may not get it right the first time 

- Focus on the one thing that you can change - the customer experience 

- Keep learning as you go along 

Franchising is a proven business model and the amount of money spent at franchises every year is staggering. But it's still hard work, and there will be times when the only thing that will push you through and get you over the hump is that one thing that all successful franchisees have, the Determination to Succeed 

I know this sounds counter intuitive to every thing that you have heard about building franchise systems. Last week I wrote about my neighbor who had grown his two franchise systems to over 700 units. But there are times to step back and NOT grow your franchise  business, here are the 5 top reasons

* Increased Risk - With growth becomes more financial obligations to both your businesses and your team. Build a cash flow model and make sure that your revenue can support the additional obligations that you will be taking on. 

* Increased Workload and Stress - Growing a business is tough, on you, your teams, your family. It means working longer hours, bigger responsibilities, more complicated structure, more supervision and more complicated operations. 

* Drop in Quality -  Growth unfortunately can come with a drop off in service quality. You have worked hard to build up an A team, can you keep finding those A players while you grow that deliver that fantastic customer experience? 

* Increased Cost - More revenue is almost always accompanied by increased expenses. Whether in time or money, growing a business will cost you. Financial planning is crucial.

* Loss of Direct Control - Taking on more staff, growing your customer base, extending your network of suppliers, will all put additional stress on your systems and processes.  Being able to delegate duties to the right people and having them follow through may prove challenging. 

Here's the bottom line, if you like to control every aspect of your business, have trouble delegating responsibility or you are not consistent in following your franchisors system's. It may be best to step back and NOT grow your franchise, at least until you feel comfortable that you understand what it's going to take to grow successfully!