A lot of people ask LAR Enterprise about purchasing a franchise. While we are not franchise brokers nor franchise “consultants” (the term used to describe a person whom sells franchises), we are franchise experts and we work with a lot of franchisors and franchisees in many formats to help their businesses succeed.
Our opinions about purchasing a franchise are purely based on circumstances.
Here are some very brief considerations for four (maybe five, when applicable) circumstances we often discuss:
(1) Entrepreneur (2) C-Level Executive (3) Full-time Employee (4) Unemployed, but previously successfully employed and––when applicable––(5) A person who has the ability to hire and afford a full-time manager.
Buying a franchise means buying (technically leasing) someone else's processes, branding, strategy, and business model. This is great for some, but not great for others. We have a few categories of people we have encountered that this generally does not work for: Entrepreneurs and C-Level Executives.
By entrepreneur we mean a person who is constantly starting new businesses or redeveloping existing businesses. Entrepreneurs see strategies that no one else sees, and are prepared to put in hard work when other people turn away, and generally speaking, operate with a little more risk than most are comfortable with.
C-Level Executives are accustomed to making a lot of decisions that they take responsibility for–failure or success. They are not accustomed to be being the rule followers, so much as they are accustomed to being the rule makers.
Both of those people, generally, will not be the ideal franchisee because they will constantly see the problems with the franchise as a whole. (Every franchise has it’s “problems”).
Here’s when those people should buy a franchise: They want an almost turn-key investment and they have a manager who they fully trust and that follows instructions. This would be considered absentee franchise ownership. The right franchise can be a great source of income, and if the personality factor is removed, the investment can flourish with very little stress.
What we do not recommend, is anyone from the two groups above deciding to be a franchisee who is actively involved. Unless of course that person is going to make a significant investment into the Franchise System, and would have a say in the Operations Manual of the system.
The other end of the spectrum would be full-time employees or unemployed people who were previously good employees. In many ways a franchisee is going to be an employee (technically not an employee, but in many ways they will function as an employee of the Franchise System, though they will also own their own business).
A full-time employee who has the drive to work extra on their own business in addition to their day job is a great person to own a franchisee. Likewise, if that person has a trusted person who can be the manager, that would also be a good option.
NOTE: When we talk about a manager, make sure to review the FDD closely to ensure having a full-time manager in place makes financial sense.
If you are unemployed and have the means to buy into a franchise, this is a great opportunity to get up and running with your own business and your own income quickly.
Franchise ownership is skipping all the leg work of creating a business model. Instead, as a franchisee, the focus is on making the purchased model succeed in a respective location.
So, while there are a lot more considerations, this is a great start for four (or five) different scenarios.