Do I Really Need To Read The Franchise Disclosure Document?

The franchise disclosure document, commonly referred to as the “FDD” is a legal document which a franchisor must give to a potential franchisees in advance of the buyer paying any money or entering into any agreements with the franchisor. It is chock full of useful information about the business opportunity, which the Federal Trade Commission has required to put the prospective franchisee on a more equal footing with the franchise

Nevertheless, from time to time, prospective franchises will question, “Do I really need to read the FDD?” That is like asking if you need to wash your hands after handling raw chicken. It is not absolutely required by, but it is probably a really good idea.

Despite it being a good idea, prospective franchisees (perhaps, even you) have their excuses for not wanting to read a FDD.

  • “But my attorney is reading it.” Great. That is what you are paying her for. You still need to read it, however. While your attorney is no doubt looking out for your best interest, she is reading the FDD from a legal perspective. The FDD, however, is loaded with business considerations. These items you need to factor into your strategic and operation plans. You need to read the FDD.
  • “But it is such a simple business. I won’t glean anything new from reading it.” Really? Nothing? The FDD is loaded with information (legal, business, market analysis, competitive landscape, etc.). There is something there. You need to read the FDD.
  • “The investment is small; it is hardly worth the effort.” It’s true, there are low cost franchise opportunities that you can get into for only a few thousand dollars. But who can afford to lose a few thousand dollars or at least not make the most of it? You need to read the FDD.
  • “I don’t have the time.” When you get into business (whether franchised or not), you are embarking on a huge committment. Even if it is only a parttime franchise opportunity, you will invest a considerable amount of time running the business. Given that, you ought to be able to find an hour or two. You need to read the FDD.

There are plenty of excuses for passing on a good reading of the FDD. Unfortunately, none of them are very good. There are lots of great reasons to comprehend what the franchisor has included in its FDD. Find the time. Take the time. Read it.

The White Knight

Wouldn’t this be great? You meet that person who just reeks of success at a networking event (or just out-and-about). After a short conversation, you hit it off and this person takes you under their wing – feeding you all sorts of great business referrals, valuable information and wonderful business contacts.

Admit it, when you head out amongst others, this is a hope. Here is the reality: Everyone has this same aspiration – a white knight coming along to rescue them from the struggles of business (and there are lots of struggles in business).

So if everyone is busy looking (or at least, hoping) for the White Knight, no one is actually the White Knight. Hmmm? Sort of makes you feel silly, huh?

Now, none of this is to suggest that you stop networking or attending networking events. It does suggest that you ought to stop looking (or hoping) for the White Knight.

But here is a thought, rather than looking for the White Knight, why not become the White Knight? Think about it. When you head out to the next networking event (or whenever), rather than looking for something, be the one giving it. Focus on being the source of great referrals. Share valuable business information. Be the connector of business contacts.

Do you know what the neat things are about this change of approach? First, you set yourself apart. As everyone else is looking for the White Knight, you are the White Knight. That makes you unique and special.

Second, as everyone else is looking for a White Knigh, they are in reality looking for you. Sounds neat, huh? And if you consistently carry this persona, in time you become known as “that special person” and then everyone wants to meet you.

Finally, as you serve your role as the White Knight (providing referrals, information and contacts), you inspire others to want to give back to you – referrals, information and contacts. You see, as humans we are hardwired to help those who are helping us. So as you help others, they are compelled by tens of thousands of years of conditioning to help you in return. In essence, as a White Night you will ultimately get what you were hoping for when you were trying to find one.

So next time you venture to that networking event (or any time you are interacting with others), throw shoulders back, raise your chin and embark upon it with heroic confidence. You are here to say the day. Find someone and make their day. Remember you are the White Knight.

Becoming Interesting

Do you long to be considered an interesting person by most anyone you meet? Who wouldn’t? Average people are soon forgotten. Interesting people seem to be indelibly etched on the minds of those they meet.

Interesting people are the ones people look forward to encountering. Interesting people tend to generate more support (which would include business referrals) from those around them, as compared to that average person (um … what was his name?).

The key to becoming that interesting person, however,  has very little with what you have to say. So put away your word-of-the-day book. Do not worry another moment about the eloquence of your elevator speech. Stop searching for that memorable story that casts you in positive light.

Becoming interesting is a function of getting the other person talking about themselves. Counterintuitive as that may seem, it is that simple: question; then listen … question again; listen some more … question further; listen on.

Everyone has a story. They have a professional story. They have a personal story. They have a story of their past. Not only do they have a story, but they love to tell it. Furthermore, they have a secret affinity towards the person who coaxes these stories out of them and truly listens (so secret they may not even realize it themselves).

So before you head to that next networking event (or any gathering of business professionals), prepare yourself with series of questions intended to get the other person talking. Such as …

  • What do you do? How long have you been doing it? How did you become interested in that?
  • What are some of the projects or assignments you are currently working on?
  • Outside of work, what occupies your time? Family? Hobbies? Interests? Activities?

Work through these lines of questioning (or something similar) and then listen. As you do, listen for look for areas of common interest or connection. Share something and then ask another question and listen on with genuine interest.

As you do this, you will see them beam with enthusiasm. When this happens, know this: Inside they will think of you as a wonderfully interesting person.

For an electronic copy of the AmSpirit Business Connections conversation primer, Converse click here. If you would like a copy of this in convenient pocket-sized mini tri-fold, send an e-mail to admin@amspirit.com with your physical address and we will send you one via first class U.S. mail.

Is That Low Cost Franchise Really Low Cost?

You might have hesitated to consider buying a franchise because you felt you needed a seven-figure net worth to afford it. Don’t. While there are some franchises where that is the case, a great many do not require an investment equivalent to a “king’s  ransom.”

In fact, there are plenty franchise opportunities where you can own a franchise for a few thousand dollars.

That is an exciting thought. For an amount that is about as much as your credit card limit, you could own a franchise with all the rights and privileges of any other franchisee.

Often franchisors declare these to be “low cost” opportunities. Just because a franchisor categorizes something as “low cost” does not make it so. Usually they make this claim just because the initial investment is relatively small compared to other franchise opportunities.

The initial investment fee, however, is just one aspect to consider in determining the financial potential of a franchise. Thus, just because you can get into a franchise “on the cheap” does not mean it is low cost. Sometimes, franchises will attract prospects into the opportunity with a low initial franchise fee, but make up for it in other ways. So before you fully commit to that “low cost” opportunity, you should examine all the aspects of the franchise. At a minimum, you should consider:

  • Ongoing Royalties: The initial franchise fee may be low, but what are the ongoing royalties associated with the opportunity? If the ongoing royalties are excessive relative the ongoing support, what you did not pay on the front end, the francisor intends to make up (and then some) over time.
  • Training Fees: The initial franchise fee may be low, but what does that include? If the initial franchise fee only gets you the rights to operate the business and you still need to pay for (and attend) required training, the franchise opportunity may not be as low cost as you thought.
  • Ongoing Support: The initial franchise fee may be low and the ongoing royalties a good value, but you also have to take into account what the franchisor is and is not doing for you. For example, if the business model requires that you have a website or sophisticated billing system, and you need to build those from stratch, you need to factor that into your determination. Low cost may not be as low as you thought.
  • Equipment And Supplies: Some proclaimed “low cost” franchise opportunities have a low initial franchise fee, reasonable ongoing royalties and no training fee. They do, however, require that you, the franchisee, purchase all equipment and supplies from the franchisor. Not surprisingly, the franchisor sells these items at a hefty profit.
  • Franchise Term: When you purchase a franchise it is generally only for a fixed term, which varies from franchise to franchise. When that term expires, the franchisor generally requires you to pay a renewal franchise fee or you forfeit your franchise rights. While this payment is generally only a percentage of the initial franchise fee, it is important to consider. If the franchise term is short, a franchisor can make up for  low initial franchise fee with an unusually large renewal fee.

No, you do not need to risk your first born child to own a franchise. There are many low cost opportunities available. It is important to remember, however, that not all low cost franchises are created the same. As a potential buyer of a franchise, you are best advised to do your homework before you fully commit.

The Professional Service Franchise … Three Great Extra Benefits

Franchises come in all shapes and sizes. There are retail goods and wholesale goods franchises.  There are full-time and part-time franchises. There are professional service and blue-collar service franchises. There are franchises that are home-based, others that require brick-n-mortar and some that operate out of a van.

Also, there are combinations of these. There are the part-time, blue collar, retail franchises. And the full-time, wholesale franchise that operates out of a van. There exist a franchise for most any business type or industry.

Now, every franchise type has its benefits … great financial potential … cutting-edge industry … easy to master. The professional service franchise, however, has unique benefits. These are franchises where the services are often deemed to be white collar in nature (consulting, coaching, etc.) or perhaps require a professional degree (such as accounting, finance, legal, etc.). These benefits include:

  1. Lower Required Franchise Investment: Generally speaking, there is not a tremendous amount of required overhead involved with owning a professional services franchise. These franchise opportunities do not have many fixed assets and may not even require a separate office or place of business. Therefore, you would have a lower overall investment as compared to many other franchise types.
  2. Business Synergies: If you are someone who already has a professional degree or accreditation (or an aptitude to using your intellectual skills to help others), it can be much easier for you to step into a professional service franchise as opposed to learning a new trade, skill or specialty.
  3. Value Beyond: If you get into many franchise operations, the skills and techniques you learn are unique or specific to that business or industry. Thus, when the time comes to sell your franchise and move on to something new, much of the intellectual capital you have relative to that franchise does not transfer and is lost. With a professional services franchise, however, while you will not be able to compete against the franchise, the development you generated during your tenure sticks with you and will serve to benefit you on your next business adventure.

So, while every franchise holds great benefit, a professional service franchise has some unique benefits that you ought to consider as you ponder your franchise investment.

What About? Questions To Ask In Considering That Professional Services Franchise?

Whether you are considering investing a few thousand or a small fortune into a professional services franchise, you need to be well informed. You may never have all the information you want, but you can have the information you need if you get clarity on the following list of questions:

  • How much do I need to invest in the professional services franchise to get ramped up (considering initial franchise fees, training costs (including travel, lodging and meals), royalties owing for three to six months, equipment and supplies, licensure, as well as office rent and overhead)?
  • Realistically, how much can I make operating the professional services franchise business (net of ongoing royalties and ordinary and necessary expenses)?
  • Does my current skill set, education and experience translate well to the professional services franchise I am considering?
  • To what extent do I feel as if I have a reasonable understanding of professional services franchise I am considering?
  • In the short run, how many hours will I need to commit to effectively run the professional services franchise? In the long run, can I take advantage of economies of scale to grow the financial potential?
  • How long is the initial franchise term and what will it cost to renew the franchise rights?
  • How long has the franchisor been in business and to what extent do the leaders of the franchised business have experience working in this particular business?
  • How will owning this particular professional service franchise affect my stature in the business community in which I operate?
  • Are there any products or services I must buy from the franchisor? If yes, then how are they supplied and how much do they cost?
  • What are the terms and conditions under which the franchise relationship can be terminated (or renewed), and how many franchisees (and why) have left the system during the past few years?
  • What is the financial condition of the franchisor and any associated business operations?
  • What are the potential long-term prospects of the professional services franchise? Is there the potential that the entire system could be purchased by a larger entity? Is there the potential that the death or disability of the leaders of the professional services franchise could impair the potential?

It is important to note, this is not an exhaustive list of questions you should consider asking. Answers to these questions will uncover other lines of questions you should pursue. Nevertheless, this provides a good start.

Networking: The Key Ingredient To Professional Services Franchises

In business there is much that goes into being successful. No matter what franchise you own, it is more than just one thing that puts you on the map and keeps you there.

  • You need to not only be well capitalized, but also carefully manage cash flow.
  • You need to harness technology to the extent possible, integrating hardware, software, Internet, social media, and mobile telecommunication.
  • You need to not only find good people, but then also put them in the right position.
  • You need to have a good product or service which is competitively priced, with consistent quality, and delivered it in an effective manner.

And this list could go on. For professional services franchises there is an added key ingredient for success: Networking.  Most other businesses (franchised or otherwise) can rely on marketing and advertising to drive sales.  With white collar type franchises, however, business comes from cultivating relationships.

If you are considering a professional services franchise (or if you own one), you need to get yourself out amongst people, even if the opportunity is just a part time one. This networking encompasses many things, including (in no way limited to):

  • Attending business after hours, open houses, conferences and other networking events.
  • Volunteering with local charities, school activities or civic organizations (such as Toastmasters, Rotary, Kiwanis, etc.).
  • Joining (and becoming involved with) business organizations (such as Chambers, industry or trade associations and structured referral organizations).
  • Actively engaging in social media of all types (such as electronic newsletters, blogging, LinkedIn, Twitter and (even) Facebook).

All this networking may seem time consuming and pointless, at times. It isn’t. The people you meet and relationships you develop will score big dividends in the end.

Networking. It will create buzz about you and your franchise. It will develop word-of-mouth. It will generate quality business referrals. In summary, all that networking (even the seemingly time consuming and pointless stuff) will serve as a key ingredient for you professional services franchise success.

Personal Brand Value: The Extra Ingredient For Professional Services Franchise Success

 

In most franchise situations, the franchisor supplies a system and its well-established brand. For their part, the franchisee then plugs into that system and brand with financing and a heavy dose of blood, sweat and (quite possibly) tears.

With most franchises, the franchisee does not necessarily need to have prior experience with the franchise or its line of business. For example, a former business executive can do quite well sliding into a yogurt concept, a sign business or hair salon, even if she was never more than a customer to any of these businesses. More or less, it is the system and brand (coupled with the financing and effort) that ensures success.

Professional services franchises, however, are a unique situation. Again, the franchisor supplies a system plus a brand and the franchisee provides financing and effort. Generally, however, it takes more than that to ensure that the franchise goes. The franchisee also needs to bring a brand to the equation.

Returning to the example, the former business banker decides to purchase a franchise related to being a contract CFO, she needs to tap into her prior life to achieve success.

First, someone purchasing a professional service franchise generally needs to draw on their relevant experience. Following the example, the former banker purchasing a contract CFO franchise will needs to tap into her understanding of finance, business transactions as well as debits and credits.

In addition to relevant experience to draw upon,  those who embark on a professional services franchise ought to have a personal brand as well. In short, not only does it help for them to be good at the underlying required skill set, but the franchisee should also be known for that.

Revisiting the example once again, if the former business banker is well known in the community for having a financial acumen, she will be even further ahead. First, she will be able to capitalize on the franchisors system and brand. Next, she will have the intellectual ability to fit into the system well. On top of that, she will have the reputation within the community that will enable others to trust her in this new venture.

To make the most of the professional services franchise, however, prospective franchisees need to not only buy into the right system and brand, but they also must have certain technical abilities and a quality personal brand of their own.