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What to consider before starting a franchised business with family

Amongst our standard questions for potential franchisee entrepreneurs is, who’s going to be involved in the business with you? Very often the answer is a spouse, sometimes children, or a brother or sister. Is this a good idea, and what do you need to consider if you are looking at this very proposition.

For some people this would sound like a great idea, but others may shudder the thought.

Is it a good idea? The statistics are mixed. There are many very successful family businesses including both franchisees and franchisors. Unfortunately, there are also a great number that result in failure of the business, and or marriage or family breakdowns.

I have seen from experience several common traits amongst family franchised business that do well. So some of the questions you need to answer are:

Why are you choosing to go into business with the family?

To start with, let’s look at the contradiction of data. Research suggests that it’s not necessarily the family business that drives success or failure, but the motivation. If the key driver is to work with family, or provide employment for your kids, the success rates can be dubious.

If the reason is to build an asset or legacy for the family, do something you love or create work-life balance than the success rates tend to go up.

Have you worked together before?

From both my professional and personal life I can tell you, this is a biggie. Have you worked together, who’s going to be the boss, who’s going to do what? How is that going to work?

You really need to answer these questions before you go any further.

In your own business there is no “at the end of the day” – issues at work become issues at home, so you really need to be aligned and be able to work together.

What are your skills sets, who’s going to do what?

The most successful family business units I have seen define the roles that each member will take, hopefully complementing and supporting each other in the process.

Using a retail business example, if one family member has great customer service skills and experience and the other perhaps administration, the two fit together very nicely, one sells, the other looks after the administration.

How are you going to fund it?

This is a not so small question, and again one that you need total alignment on. This is the case particularly if there is a decision involving selling an asset like a family home or both parties leaving paid employment – especially if one of them is doing so with any hesitation.

We will often suggest that even if the long-term plan is for partners, or multiple family members to be in the franchise, that they start with just one. This can provide some continuity of both lifestyle and income and can reduce quite a bit of stress.

How are you going to manage the other parts of your lives?

Is having multiple family members in the franchised business going to improve your work-life balance or make it worse? How are you going to manage the other things in your life you need or want to do?

The key thing here I would suggest is assessing the type of business or industry and its compatibility with your lifestyle.

If you have young children then an all day-night hospitality business may not suit, but a 7am to 5pm café or retail business may.

In the latter, a small family unit could provide good coverage for opening hours and the ability to drop off and pick up kids everyday.

Is it for you?

There are so many reasons why family franchises make sense including; building a family asset, having multiple people in the business that have a stake, or “skin in the game” and some more altruistic ones like family businesses tend to have higher levels of community and social engagement.

They often also deliver higher levels of personal satisfaction and provide the family the ability to manage their own work life balance.

I cannot answer the question of whether it’s good for you.

But if you can positively answer my questions above then you’re well on the way of making the correct decision for you.

Related: Should I purchase a greenfield or an existing franchise?

Nathan Bonney
Nathan Bonney
Director of Iridium Partners. He can be reached at nathan@iridium.net.nz or 0275-393-022

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