Buying a Franchise? Here’s Something to Think About!

By Wayne Mates

One area of business that I seldom write about is the franchise.  That is mainly because I have never franchised or bought a franchise, always preferring to build my businesses.  But, for many people buying a franchise increases their shot at success.  There are many good reasons to purchase a franchise.  The odds for succeeding with a franchise far exceed those of starting your own business from scratch.

You need only to look at McDonalds as one of the most visible and successful franchising machines.  From the McDonald brothers small stand to Ray Kroc’s vision and drive to bringing McDonalds worldwide.  It has all been driven by the franchise element of business.  Virtually every major hotel chain is a franchise operation.  Food chains like Subway (the most popular franchise) depend on franchising.  Watch most national ads on TV and you are looking at franchise operations.

Why are they successful?  They may not necessarily have the best products, but they have some of the best marketing.  I don’t mean best as in quality, but as in you see them everywhere…. TV, radio, billboards, everywhere.  Their messages are generally irrelevant except to pull on your emotions and to get you to remember their name.

A number of years ago, I looked at buying a franchise.  I liked the business model of the franchisor and paid a visit to their headquarters.  I was shown around and met all the people who would support me in my business.  I learned how they would support me and I learned what they expected from me.  It was all a very impressive sales pitch.  Afterwards, I met or spoke with several franchisees.  They were, of course, quite successful.

It was a wonderful story.  One price included everything to set up a turnkey operation with full support.  There was the business plan, the equipment, the mentoring, and help in determining location.  It all seemed so great.

As I reviewed with my attorney and accountant, I started to realize that even with all the support, I was the one putting up the money, making all the sales, hiring all the people I needed to make it work.  I would be paying for a name, a business plan and little else.  I would also need to pay a royalty and marketing money to the parent company.  I would be held accountable to their rules.  RULES?

I hated rules and still do.  Rules were and are stifling to creativity and success.  I would not be able to add products or modify my sales plan nor do anything the way I might think it ought to be done. I looked at the amount of money I would spend for a franchise and development and sales costs and decided I would make this happen without paying franchise and royalty fees.

And so, after researching the market, I opened my business, Voice Mail USA.  We sold voice mail services and systems before companies knew what voice mail was. This would start a revolution in not only telecommunications but communication as a whole.  I added a franchise no no in reselling long-distance and 800 services.  I would not have been able to do that under the franchise agreement I would have had to sign.  The reselling of LD services led me to another business which I founded after Voice Mail USA was sold.  But that is a post for another day.

I also added wholesale channels with agreements with telecom equipment dealers to resell my services.  I would not have been able to do that wither as I would have been confined to a territory under the franchise agreement.

There are many good reasons to buy a franchise and I will cover that in my next post.

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