Jane Applegate—Buying a Franchise Takes Careful Study, Commitment

0

Todd Blanchard, 35, of Shreveport, La., was earning more than $100,000 a year as vice president of operations for a trucking academy, but he thought he could do better.

“I had all the headache and not enough reward,” he said.

So he looked at his options. His wife Mary wanted to return to work since their children were in school. He’d been an entrepreneur in his 20s, running his own T-shirt silk-screening business, but he could never outsmart all the competitors who undercut him on price. “I was young,” he said. “I realized, you need help. There’s too much to learn.”

The Blanchards decided to buy a franchise. He figured they could earn more together than he’d done on his own, and with a franchise, he said, you “don’t have to reinvent the wheel.”

The Blanchards eventually chose a biotech franchise that charged them $30,000 up-front and required them to pay 5 percent of gross sales. They plan to invest a total of $300,000 and break even in three years.

With stock markets heading south and rampant talk of recession, now may be a good time to consider a franchise.

“Every time the economy moves toward a recession, franchising picks up,” said Jim Amos, chairman of the International Franchise Association, citing studies by IFA and other trade groups. “We’re seeing an uptick in recruitment inquiries right now, and have for the last six months or so. It might just be one of the leading market indicators.”

Amos is also president and CEO of Mailboxes Etc., one of America’s most successful franchises. From his own experience, Amos concluded, “all franchises that become successful begin the same way. As an idea moves from fad to trend framework, it multiplies. Over time, you end up with two or three dominant players.”

Amos also believes that the most successful franchise concepts are simple above all else.

“It can’t be complex,” he said. “You need concepts that are easily duplicated to be successful.”


Thorough research

Careful and thorough research will go a long way toward success in buying a franchise, said Amos. “The key question to ask is: Are these the kind of folks I want to work with for the next 10 years or more?” said Amos. “You should talk to other franchisees in that system, and ask them: Would you buy it again? If yes, why? And if you wouldn’t, why not?”

Finally, Amos said, “You must look within, and ask yourself: Am I willing to make the effort?”

Todd Blanchard had no idea of what type of franchise to buy. He looked at fast food and other industries before choosing 10-year-old Environmental Biotech Inc., based in Sarasota, Fla. EBI engineers sell specialized combinations of bacteria that digest waste materials in pipes. The company has 40 domestic franchises and 50 international.

The owner and founder, Bill Hadley, calls the process “bioremediation.” EBI’s bacteria “cocktails” digest wastes like grease, oil, sugar, starch and gelatin (a byproduct of photo processing) in pipes, saving businesses the trouble and expense of snaking out backed up drains, a chronic problem for many, especially in the fast-food industry. The byproducts of the bacterial digestion are carbon dioxide and water.

“For a thousand-pound grease trap, the bacteria exhale the carbon dioxide equivalent of one human,” said Hadley. Because the bacteria are specially bred and combined, and require a carefully controlled environment in which to flourish, EBI’s products require close management, which is why Hadley has opened a franchise network rather than selling bottles of bacteria cocktails.

“You don’t just drop the bugs off and forget it,” he said.

Some prospective franchisees like EBI’s pro-environment image, but Blanchard said he had a good feeling about the support system that every new franchise owner needs. “They had great knowledge, experience, communication and support,” said Blanchard. “That’s why you buy a franchise.”

EBI requires that all owners attend “Bug U,” where they complete three weeks of classroom training and six weeks of field training on bacteria management, as well as the fundamentals of customer service, cash flow and marketing.


Psychological test

To qualify as owners, the Blanchards had to take a 75-page psychological-profile test. They then spoke at length to Bill Hadley, who used the results of the psychological profile to suggest the best division of management responsibilities.

While Blanchard left a secure job with a very good salary with the dream of one day earning more, for the time being he’s not making any salary at all, and doesn’t plan to in the near future. “We’re reinvesting everything back into the business right now because it’s all about volume. We’ve planned to take the first year in business to totally reinvest,” said Blanchard.

The Blanchards plan to work for three years before becoming profitable. Until then, “we’re living as lean as possible,” said Blanchard. “But, we’re not missing anything important. Our girls are still in dance class. We just cut back on the other stuff don’t go out to eat as often, things like that.”

While franchise ownership is a lot less risky than starting your own business from scratch, you must be prepared to handle the burden.

“It’s a great error to think it’s not going to be hard,” said Amos. “You are going to bust your rear end.”


Tips for choosing a franchise:

-Give yourself plenty of time to do careful research most franchise agreements are for 10 years or more.

-Talk to as many franchise owners as possible, and learn from their experience.

-Compare different franchises within a given industry, and aim to identify the competitive advantage of each.

-Call your potential customers, and make sure there is a market for the prospective business.

-Consult professionals at the least you should talk in detail to your own lawyer and accountant before making any commitment.

-Don’t get financially strapped. Plan for more expenses than you think you’ll have for longer than you think it’ll take.

-Make sure you are ready for the commitment; owning a business is always hard work.

Reporting by Sarah Prior. Jane Applegate is the author of “201 Great Ideas for Your Small Business” and is the CEO of SBTV.com, a multimedia site providing small-businesses resources. Contact Jane by e-mail to [email protected], or by mail to P.O. Box 768, Pelham, NY 10803.

No posts to display