Is Franchising Right for You?
|By Igin Staff|
In 1940, two siblings opened a restaurant in San Bernardino, California. It was based on two factors: good food and speedy service. The people liked it and the trend caught on. In 1955, they agreed to sell their idea, their sign, restaurant design, menu, and food to a man in Illinois. He would follow their business plan to the letter. He offered good food with speedy service in a store that was identical to that in California. This was the first successful franchise in the history of the United States.
Those two siblings were Dick and Mac McDonald. Their restaurant was -- you guessed it -- McDonald's, arguably the most successful franchise ever. Today there are more than 31,000 McDonald's in over 120 countries serving over 54 million people a day. Had they not sold their idea to a businessman from Illinois, who took the restaurant the franchise route, would anyone but a few people in San Bernardino ever have heard of McDonald's?
Maybe your business isn't growing as quickly as you would like. You have the skills and the love for working in the green industry. Perhaps you need the business abilities and help with the customer base to really make your business blossom. Perhaps you have the business savvy but lack the know how in a specialized segment in landscaping. Sometimes franchising is the answer for expansion. It combines both the business know how and the art of the work, and gives you the missing dimension to make your company complete.
Whether you're creative or technical, analytical or hands-on, buying a franchise can give you the opportunity to buy into success. By introducing a proven business model and trusted name, a franchise may give you the much needed business skills and room for growth that you're looking for. With a proven model having been established by the franchisor, you as a franchisee are less at risk. Their concepts are time-tested and proven; they work.
"If they have green industry knowledge, it's a good combo for us to work with," says Paul Wolbert, vice president of U.S. Lawns. "We can work with them on developing business guidelines and a plan, and make them successful."
Often when starting a business from scratch, you have to figure that it will take a few years to establish your company as reliable and even longer as a trusted name. With franchising, you're buying a name that is recognized, a model that works, and a business that is all set up for you. After their brand and formula are carefully designed and properly executed, franchisors are able to expand rapidly across counties, states and countries and sometimes continents. The customers sometimes already recognize the company brand, you just have to have the skills and operate in the way that has already been proven effective.
One of the major problems in franchising is that although the franchisor has developed a proven method for success, oftentimes the franchisee, now that he is an entrepreneur, will tend to 'fine tune' the proven model. Before you know it, the business is a different one than what he purchased, and in many instances, not as successful as had he followed the road map laid out by the franchisor.
"It's mutually beneficial -- the more you sell, the more you get, the more I get, the better we get, the better you get. The more you give them the more they will get out of it. That is what franchising is all about," says Wolbert. "Often you'll see your figures grow in just a few short years. Someone who started a business five years ago and paid a relatively small price for it, built it up to where he may be grossing a million dollars a year. That business might sell for $750,000. If he wants to wait another few years, he could sell it for well over a million."
"The key to any franchise," says Ken Hutcheson, president of U.S. Lawns, "is training. The whole concept of franchising is that if you follow our guidelines, you will be successful." Franchisors offer training to their franchisees, significant training that is not available to individuals starting their own business.
Franchising offers the potential business owners the advantage of starting up a new business quickly based on a proven track record and formula of doing business, as opposed to starting from scratch.
A well-run franchise would offer a turnkey business: from training, to operations, to human resources, to mentoring and ongoing support as well as statutory requirements and troubleshooting. Not to mention the added benefit of the franchisor's marketing campaigns.
Take for example Valley Green Companies, Sartell, Minnesota. Owner Michael Hornung operates a landscape company. He has 18 employees that service 1,200 customers in lawn care and 700 in irrigation. Five years ago he felt that he needed to find something to utilize his personnel during the winter months, rather than lay them off. As a result he bought a Christmas Decor franchise. He added hanging holiday lights along with snow removal. He serves more than 110 clients with holiday lighting and keeps his business running year round.
"There is a huge learning curve, as with anything, and if we flatten it we get through that process much quicker," said Hornung. "They had a way of training our employees so we could all learn and be more effective. I honestly don't think that I could have learned what I did in those five years on my own."
The beauty of it is that you don't have to make the mistakes one normally makes. They've been made for you. When the concept for the business was being developed, all the trials and errors were worked out. Then the first couple of franchisees will find new problems, so that by the time you're buying in, all of the bugs have been ironed out. The franchisor knows what works and what doesn't and they pass that invaluable information on to you, the franchisee. There is no time wasted through trial and error. A road map is laid out for you, all the way down the line. All you have to do is follow it. Simply put, follow the plan.
A franchise agreement will usually specify the given territory. In turn, the franchisee retains exclusive control over that area, which means you don't have to compete against other businesses of the same name. It creates a cooperative network.
Franchisees work together year round; they network with each other, consult with one another and help out when needed. With protected areas and territories, it's a non-competitive environment, sharing ideas, and ensuring business growth.
You get the knowledge, expertise and advice of the other franchisees who were once in your position. They know what you're going through.
"We weren't ready to grow the business much more because it was just me and my husband," said Karralea List, a franchise owner in Hebron, Kentucky. "We could do it on our own, but there are so many trials and tribulations. The franchisor has already gone through the difficult part. You can pick somebody else's brain. It's all right there in front of you. Why reinvent the wheel?"
Up-front fees can range anywhere from $9,000 to $29,000 and more, with ongoing fees and royalties paid annually to the franchisor.
In the green industry, you can purchase other franchises: irrigation, landscape lighting, lawn care, lawn maintenance, snow removal for the states where they receive snow fall, as well as holiday lighting. This allows you to remain in business year-round, and more importantly, makes you and your business more dynamic. It also enables you to keep your customers and your employees through all the seasons.
The only way to know if franchising is right for you is to do the research. Take a good look at the company. Take a good look at your market, and most importantly, take a good look at yourself -- you just might find that you're in a perfect position to watch your business bring in the revenues that you never thought were possible.