There has been a significant rise in the number of people interested in purchasing their own franchised business in the current Covid-19 economic and social environment.
I have previously stressed the critical importance of potential franchisee entrepreneurs undertaking thorough due diligence of the opportunity, including engaging specialist advice from accountants, solicitors and bankers.
We are now seeing a large proportion of first-time business owners, and as such there is an additional level of due diligence required.
However, I’m not talking about the due diligence that can be undertaken or outsourced to the specialist advisors. It’s not an in-depth evaluation of the market or the brand. It is far more personal and closer to home – a self-examination of one’s motivations for embarking on a journey of franchise ownership.
At the heart of this is a need for what I call a motivational analysis. A good place to start is with Simon Sinek’s “Start With Why”. Reading the book or just watching the 18-minute TedTalk will provide you with a general overview of why some are extremely successful when others are not.
The same philosophy and approach can be applied to make better decisions when buying into a franchise system and create better outcomes for entrepreneurs. In essence you need to look deeply at why you are wanting to acquire a franchise business.
Map out motivations
By looking at the profiles of franchisee entrepreneurs, we can map out their likely motivations and create a matrix of the type of franchises or business that will speak to their “why” and help you examine your own motives.
There are two most common profiles, so let’s look at the kinds of franchise formats that tend to suit each of these. The first group can be called “Plan B-ers”.
This group can typically include the recently made redundant, and those returning to work post children. Now, it can also include those who have had a taste of self-determination during lockdown and want to go it on their own.
By looking at the profiles of franchisee entrepreneurs, we can map out their likely motivations and create a matrix of the type of franchises or business that will speak to their “why” and help you examine your own motives.
Their backgrounds will be varied as their skillsets. What is common with a majority of Plan B-ers is inherent in the title – this isn’t their first choice, so many will be looking to buy a job and/or some security.
For some of this group they will use the opportunity to make that career diversion into something they always wanted to do. However most will be looking at playing it safe. The safest and most comfortable path for Plan B-ers is to look at their core skill and experience sets and apply these to a franchise structure.
They are usually risk adverse, so well-structured, established systems will suit them best. This could be systems designed around a professional service such as HR, accounting or perhaps property management, if from a professional background.
Home services and or trade-related options may be sought by those from the trades, and perhaps retail franchises if they are from hospitality or retail backgrounds. Other options or systems that have earning guarantees or income protection will be very desirable to this group.
The second group can be described as Twilighters – people looking towards, but not quite ready to retire. Three factors come into consideration with this group.
Preservation of capital is usually paramount, so key issues include how much the system is to buy into, and how safe it is as a business. Their general objective is likely to be protecting an asset base that has been created over a lifetime of employment.
The second consideration is around earnings expectations. Quite often, the motivation for Twilighters is not solely income, but more a desire to stay involved and have a business interest.
The third consideration is much more practical – what’s involved with running the franchise, how hard is the work, and how much time is involved to run it successfully.
Combining these three objectives at various volumes produces a match with systems that are generally at the lower investment level, and often those that can have hours and attention varied to suit.
Alternatively, for the well capitalized franchisee entrepreneur, secure high performing capital systems are also a consideration, key factors being their ability to be operated under management and or the ability to on-sell.
We have touched on just two of the why profiles for potential franchisee entrepreneurs, but the commonality with these – or any of the other profiles – and the key to their success is to understand the motivation for purchasing a franchise and seek out systems that are able to speak to your “why”.
