SLF: Life of a Serial Entrepreneur

Just a few quick thoughts for anyone out there who is thinking of buying into a franchise. First, unless it’s a really big name like McDonald’s or Burger King, don’t do it. I’ve done the franchise thing, I’ve started many businesses from scratch, and I’ve bought existing businesses. Each route has pros and cons, but I’ve learned that the franchise has more cons than pros.

Here’s why. The whole franchise concept is a business-in-a-box, the turn-key opportunity. Of course they sell you on the support and hand-holding they’ll do, the marketing, the business plan, etc., but what they gloss over is how the franchisor ALWAYS gets a cut of your business - even when you’re not making a dime.

Everyone wants a piece of the small businessman. Uncle Sam wants his cut (for doing nothing more than allowing you to exist), local government want their cut (for imposing many rules and regulations and tons of paperwork on you), the landlord wants his share and then, if you franchise, the franchisor wants their cut. All these pieces of YOUR pie get handed out before you even start to pay the real bills, suppliers, utilities, advertsing, payroll, etc. Then, if you’re lucky, you have a few pennies left over for yourself. Well, my advice is to cut out as much overhead as possible and start with the franchisor. You don’t need them.

Unless their one of the big boys with a rep. That’s what you really want to buy, when you buy a franchise, the rep. I once worked for Burger King Corporation and I helped open many franchise outlets. In every case, the day we opened the door, with little or no advertising (it’s called a quiet opening to break in the staff) the place was packed. Some quiet opening.

If you opened Joe’s Burger Shack, even with the best location, you would really have a quiet opening. It takes advertising and marketing along with the location to get those first customers in the door and to build the momentum. But a brand name will bring them in like gangbusters.

So, you say, why not buy a franchise then? If it’s McDonald’s, okay. Chevron Gas Station? Fine. But almost any other franchise, with little name recognition, is just a drag on your business bottom line.

Want to open a tax business? It’s a good business (that’s the franchise I tried). You don’t need a franchise. Do a search on Google and you will find a dozen books available on how to do it. Same for a coffee shop, a sporting goods store and just about any business. You can find business plans, trade magazines, trade groups, conventions, seminars, etc. and most of this information will cost you very little.

Want to open a book store? The Independent Online Booksellers Association, is a trade association dedicated to promoting bookselling. They have a book and training courses on how to do it.

Coffee shop? There are companies that will do everything a franchise will do, from store layout planning to products, for a one-time fee. Although, I don’t think you need them either.

If you study the competition, including the franchise operations, do your homework, and make your own plan you can do quite well without paying out 10% to 15% of your gross sales every month for the rest of your life.

Franchises are expensive schools and you don’t need them. Do-it-yourselfers go to Home Depot. There should be a Business Depot for entrepreneurs starting up small businesses. Now there’s an idea. Let’s see someone run with it.