By Gary Prenevost
So you’re thinking about buying a franchise? Congratulations, you are now part of one of the strongest emerging trends in Canada today. The market is seeing record or near-record business volumes and franchise sales and no wonder, given going into business for oneself is arguably less risky than corporate employment these days.
Over the past several years, with few exceptions, we have seen the long-term permanent job with a guaranteed paycheque all but disappear. The vast majority of today’s prospective franchisees over the age of 45 have experienced employment cycles of just two to three years and, in between those jobs, unemployment cycles of six to 18 months.
For someone who is now 45 and wants to work until age 65, this cycle creates at least three employment gaps that employment insurance (EI) will come nowhere close to covering. Further, when they do get their next job, it is usually at a lower level of responsibility and compensation than their previous position.
As such, it is understandable why many Canadians are looking to buy a franchise instead—but it is also absolutely important not to go into business for yourself simply as a strategy to escape the negative situation.
When your primary reason for becoming a franchisee is to move away from a serious career problem, all you’re likely to find is a ‘Band-Aid’ solution. This simply moves you from one ‘diminishing returns’ scenario to another, with the additional risk of investing a lot of your own money into the new business. Instead, you have to know precisely what you want your business to do for you.
A franchised business is also a vehicle, nothing more, nothing less. It is designed to get you from point A to point B in terms of time and money; the goal is to get you where you want to be financially by a certain point in the future, typically at least five to seven years from now. Similar to figuring out which car to buy based on your personal criteria, buying a business also requires a very clear idea of what you will want that business to do for you along your journey to your financial and lifestyle destination.
There are other points of comparison, too. As much as you might love a sports car and it looks beautiful sitting in your driveway, if no one is driving it or you did not know how to drive it, then it could only be considered an expensive pile of metal, plastic and rubber.
The same holds true for a franchised business. As powerful as the brand and as solid as the business model may be, evidenced by the great success of many previous franchisees, the franchise requires someone to drive the business on a regular basis.
When trying to find the right franchise, too many people go about their search with the attitude that “I’ll know it when I see it.” This type of feeling is akin to expecting to buy a car just because you like how it looks, without wanting to understand its capabilities or functionality.
For one thing, even if a franchised business has worked well for other franchisees, that does not mean it will be a good business for you. Similarly, a business you might not identify as a good opportunity for you could actually be the ideal fit. Making decisions based on initial perceptions can be very dangerous, because those perceptions are very limited in their range and depth.
Most people only look for businesses through a limited number of channels, for example, such as the Internet or franchise expos. While there are certainly plenty of franchise options that show up in these searches, it is important to recognize that those that show up the most frequently are not necessarily the best opportunities; they are simply the companies spending the most money to achieve greater visibility than others.
Often, the “I’ll know it when I see it” search is simply a default pattern for people who do not bother analyzing their own needs and wants before they look for a business. This is a serious mistake and, as a result, they can be easily swayed by limited information and persuasive arguments. It is not uncommon for these people to buy businesses that are not the right fit for them. You will hear them say, “It’s not what I expected,” or, “I wouldn’t do it again,” or, “The franchisor doesn’t fix things.” They become unhappy and frustrated and may not meet their financial or lifestyle goals. This is the number one reason franchised and non-franchised businesses alike fail—a mismatch of the owner’s skills and the core requirements of the business.