October 31, 2014

5 Possible Outcomes in Franchise Ownership

franchise ownership

It always helps to have a goal or two in mind when pursuing something big, like becoming the owner of a franchise business – any business. Do you have a specific goal in mind? Do you have your “end game” visualized? Have you thought about some of the possible outcomes? Or, are you thinking about becoming the owner of a franchise business just to escape a lousy career-related situation?

I hope not. That’s because buying a franchise, owning a franchise, is a long-term play. You need to think long-term.

Below are some possible long-term outcomes that can happen as the result of becoming the owner of a franchise business.

Possible Outcomes in Franchise Ownership

1. You Could End Up Building a Lot of Wealth

Most of the wealth in franchising comes by way of multi-unit ownership.

Fact: Multi-unit franchisees control 55% of all franchised units in the U.S.

Multi-unit franchise ownership involves choosing a franchise concept, and a franchisor, that encourages multi-unit ownership.

As a matter of fact some concepts, especially ones in the food sector, require new franchisees to sign multi-unit franchise agreements. These agreements may be for 3, 5, even 10 franchise units.  There’s usually a development schedule set up that franchisees must adhere to. For example, franchisees may have to commit to opening one new unit every 18 months.

Multi-unit franchise ownership can be quite a wealth creator. It’s simple math. If you own 10 franchise units each doing $1 million in annual sales, and you’re able to keep even 5% for yourself after royalties and expenses, you’re making $500k a year. That’s a lot of money. There are lots of franchises in the food sector that do quite a bit more than $1 million in annual sales.

Can you imagine owning 10 or 20 Dunkin’ Donuts franchises?

2. You’ll Never Have to Work for Anyone Else Again

Doesn’t that sentence have a nice ring to it?

For some, that outcome would suffice. Especially those who have had to become expert job interviewees because of the number of times they’ve been downsized. If you’re someone who has experienced multiple job losses, you know what I mean.

On the other hand, there are those of us who have had to work for real jerks and keep our jobs. Before I became my own boss, I had several bosses who were verbally abusive and felt that if enough people feared them, maybe their job production would increase to an acceptable level. Well, it never worked for me, and if you had a boss-or bosses like that – I doubt it worked for you either.

If you do decide to become your own boss, know that there’s a certain feeling of power that comes with it. If that power ends up looking good on you, you may never have to work for anyone again.  It’s a great outcome.

3. A Sense of Accomplishment

I’ve worked with dozens of people who have told me that their main reason for wanting to buy a franchise was to have a sense of accomplishment.

A lot of the people I work with have been downsized from their mid to high-level corporate jobs and usually more than once.  Some of them are so depressed, it’s heartbreaking.

Some of them have worked 14 hour days for months at a time, trying to accomplish the goals their higher-ups set for them, only to have their divisions shut down and their jobs eliminated through absolutely no fault of their own. These goal-oriented people missed out on reaching their goals because their jobs were eliminated.  No wonder they’re depressed. They don’t feel they accomplished anything.

Buying a franchise and then actually becoming a successful franchise owner can go a long way in the “feeling a sense of accomplishment” department.

You should try it sometime.

4.  Building a Legacy

I’ve talked to dozens of would-be franchise owners who have told me that they didn’t want their children to experience some of the things they’ve had to endure over the years. (Like getting downsized over and over again.)

I’ve had people tell me the only reason they wanted to buy a franchise was to make sure their kids were set. They wanted their kids to have an opportunity to learn the business and eventually take it over if they chose.

That’s pretty powerful stuff. It says a lot about what’s been happening over the years in corporate America.

Today’s corporate employees, the ones that are living in reality, know where they stand. They know that their jobs can be eliminated at any time, and always have an updated resume at the ready. In addition, they’ve cultivated a powerful network of like-minded people on LinkedIn, and know how to use it.

Would you like to help your children avoid the career pain that so many are experiencing these days by buying a franchise that they could get involved in? Would that be a good outcome for you?

5.  Retire in Style

Maybe you’d like to walk away from your business; the business you’ve built up for the last 10-15 years. Maybe you’re thinking of building it and cashing out.

A lot of people I talk to start with the end in mind. They plan on selling their franchise after their franchise contract is over.

Selling your franchise isn’t that complicated. Usually, the franchisor gets involved, and may even help you find a buyer. Most franchisors already have people in their sales pipeline looking to buy franchises, and if there are any candidates in your geographical area that are fairly serious, they could be introduced to you.

If there’s no luck on that front, you can hire a business broker. Business brokers list your franchise and present it to people that they’re working with who are looking for existing businesses. They receive a fee, usually a percentage of your selling price, if they sell it for you.

You can find business brokers in your area by going to IBBA.org, the official website of the International Business Brokers Association.

Owning a franchise business is a major commitment. You’ll work really hard. There will be times of stress. There will be bad days and good days. But, they’re your days because it’s your business.

You have a lot more control over your own destiny. And the outcome – who knows? Maybe you can control that, too.

Franchise Photo via Shutterstock

21 Comments ▼

Joel Libava - Franchise Expert


Joel Libava Joel Libava is the Franchise Expert for Small Business Trends. Joel, The Franchise King®, equips today’s prospective franchise owners with time-tested, proven techniques designed to increase odds of success. He does this through one-on-one coaching, and gobs of useful content that can be found on places like Small Business Trends, SBA.Gov, and his award-winning franchise blog, The Franchise King Blog . He’s been featured in Entrepreneur® magazine, and is frequently called upon by national media outlets and publications for his no-spin insights into the world of franchising.

21 Reactions

  1. But how about the other side? While I definitely see the potential of franchising, there is still a question on whether it will always succeed. Although I know that the chances of success is higher in franchising because you get someone to guide you in your business, there is still a chance for failure, right?

    • Thanks for commenting.

      You’re right; one could always fail.

      Of course that can happen in a franchise or a non-franchise.

      And, the risk isn’t really any lower in a franchise-it’s a myth.

      One must work with experts-including an accountant and a franchise attorney to mitigate their risk.

      The Franchise King®

  2. I have dream of creating my own franchise someday in the future, but we will see… ;) Maybe the whole “streamlined” operation according to a script, is going against my thinking of a personalized style and individualism. I have to chew on this topic.

    Joel: Thanks for bringing up the possible outcomes! You are the Franchise King! Who is the President? ;)

    • Thanks, Martin.

      I’m still not sure if a franchise is right for you-and I’ve known you a while!

      One more thing: When there’s a King, there’s no room for a President.

      The Franchise King®

      • Joel,

        You are probably right about this. I like to play with the idea in my head. I would like to do something (on a bigger scale) with my favorite beverage, tea…

        I am a republican, so I am voting for a President! ;) You better visit the Kingdom of Sweden! ;)

        But who is really ruling the Franchise Kingdom? The queen or the princess? ;)

        All the Best,

        Martin
        Americanized.org (under construction)

  3. Just to add to this on the other side:

    The franchisor can coupon you out of business. What do they care they still get their franchise fee and you even pay for those coupons with your marketing fee (ask a cold stone franchisor).
    The franchisor can sell new franchises that encroaches on your territory adding to much competition.
    The franchisor can provide little to no support but fine you for minor infractions.
    The franchisor (depending on the state you live in) can not renew your franchise after you spent all that time building the business.
    The franchisor can require you to sell any property or equipment back to them at below market prices if you decide to exit the franchise.
    And given the fees and star up costs for multi-franchise agreements, you are already a millionaire if you are signing a multi-franchise agreement..

    Let’s face it, franchises can be a great way towards wealth but there are just a ton of junk franchises out there with a few top notch ones (McDonalds anyone?). I think you need to do more due diligence for a franchise then you do opening up your own business and creating your own brand. I have seen to many millionaire become hundred thousand airs when they entered the franchise business.

    • Chris,

      Thanks for commenting.

      The thing is-it’s a lot harder to scam people these days. The internet has made things a lot more transparent, for one.

      Other things you mentioned, like selling franchises inside of an existing territory don’t really happen too much. If franchisors did that, they’d be breaking their own contracts.

      A lot of the stuff you wrote is just plain not true. It’s hearsay.

      Anyone looking into becoming a franchise owner needs to ignore a lot of the stuff they read or “hear” from well-meaning, but misinformed people, and commit to getting the facts themselves.

      FYI: Some people are only misinformed because they too have heard stuff. I’m not suggesting Chris here is putting stuff out there that isn’t true on purpose.

      Find people who you like and believe. Get some franchise books. Read some franchise blogs. Go the US Goverment sites like FTC.gov and SBA.gov and read about franchising.

      And, talk to the franchisees-the ones that have already taken the risk and are “Living the dream” every day.

      Franchising…like any business, has pros and cons.

      Due diligence is the key.

      The Franchise King®

      • Thanks Franchise King. I will go back to all my franchise owning clients and tell them everything they have experienced, is just not true, only hearsay. They can ignore the fines because they had the wrong sign posted and they “failed” their inspection, sell the equipment to who ever they want when they close down a location, because its just hearsay that it is in the franchise agreement and you know what I am so glad they don’t have to take all those coupons the franchisor has flooded into the market because, hey they must have heard about it on the internet, not experienced it themselves. And boy am I glad we can shut down the FTC because everyone can read about scams on the internet.

        And boy, did you just take a page from the MLM book with “living the dream”? The fact is the things I mention do happen, and if you were honest you would know that and own up to the fact that working under a franchise can be like working for a boss that is unforgiving and yet you have paid them for the honor to live under a very strict set of rules. Can those rules be good sometimes? Yes, but you are not free to do what you want. Heck, even the Big Mac was created despite the franchise system and doubt it would be created today under current franchise agreements.

        So instead of attacking me (which is what you did), instead giving people more than just a fluff piece about franchising. I know you are concerned about losing your brokerage fees but you know that the best franchises are hard to get into. Ask anyone that wants to buy a McDonalds franchise or an Audi franchise if they can just call the Franchisor and get started. So for those interested, here is my advice:

        Get a good Attorney that specializes in Franchise law. Franchise laws are all handled at the state level and knowing your rights is key. No matter what the franchise agreement says, they can’t circumvent state laws.

        Tons of due diligence and before you sign, including type of franchise, what they do with your marketing fee, real case studies of support and how the franchise helps you.

        Talk to other franchisees and find out what they like and what they don’t like. Best to do this with someone way out of your territory so you can get a good non-biased opinion.

        Figure out if you can do it yourself without having to pay franchise fees. Some franchises are so dead simple that you don’t need to pay them the honor for using their name, you can do it yourself.

        If you have already built or grown a successful business, ask yourself if a Franchise is really for you. Most successful business owners hate living under a a Franchisors thumb when they already know how to grow a business.

        And finally, ignore the advice of anyone that talks about the lifestyle or “living the dream”, you can get that from your local MLM salesperson. Any business including Franchises require a ton of investment in time, money, late nights, sweat, tears, laughter and an eye to the future. it can mean great wealth or bankruptcy. The business owners I know and work with can not imagine doing anything else but also spent nights sleeping at the shop because it was what they needed to do to be successful. Go into the business with an open mind and open eyes.

  4. Well, Martin.

    I’d have to say it’s The Franchise Princess.

    She has a rather strong personality.

    The college she’ll be attending this fall really has no way of prepararing for her onslaught.

    The Franchise King®

  5. If I may suggest a bonus outcome:

    6. You could end up failing or in a bad franchise
    Ending up trapped in a bad franchise system and/or having the franchised business fail is a very real possible outcome of franchise ownership, especially for those who do not do deep due diligence and do not seek the counsel of a REAL franchise advisor (not one of the franchise “coaches” or “consultants” from the big broker/matchmaker systems). See UnhappyFranchisee.Com for many many stories of these outcomes.

    This is why prospective franchisees need straight-shooting advisors like Joel to help them cut through the hype and base their decisions on reality. This is not an industry to be trusting or to go it alone without an insider’s help (especially a Franchise King).

    • Thanks for adding a #6.

      I figured someone eventually would point out what you wrote:

      “You could end up failing or in a bad franchise.”

      That is a definite outcome.

      There’s no guarantee that you will succeed as the owner of a franchise.

      Research is key, as well as working with people that will look out for your best interests.

      There are enough horror stories concerning franchisees that have found themselves in lousy situations.

      Your website-Unhappy Franchisee points those out.

      Again, thanks!

      The Franchise King®

  6. I am glad to hear that! Is she a tea drinker? Will she attend a college in your home-state? I studied Business Administration (specialization, Organizational Leadership) at Southern New Hampshire University in Manchester, NH.

  7. I think you might find some very different answers if you asked the owners of a krispy kreme or a blockbuster franchise owner you might find some different opinions

    • Mike,

      Blockbuster doesn’t count.

      The failure had to do with a massive change in the way people purchased and used a product.

      Even the most powerful franchise crystal ball couldn’t have seen Netflix coming 10 years before it did.

      Krispy Creme. That one was kind of ugly. Management issues, and a lot of franchisees-ex-franchisees that lost money.

      The Franchise King®

  8. Blockbuster counts from the standpoint that they did not adapt or evolve. It’s a consideration when buying a franchise.

    Curves was in the same boat. Management didn’t listen to the ideas or complaints of the owners who saddled with a 1990s concept with no innovation or willingness to adapt. The Curves franchisees on UnhappyFranchisee.Com were clamoring to be allowed to add Zumba or 24 hour access or elliptical machines but were shot down. They closed in droves. Years too late, Curves introduced Zumba as if it were a new idea.

    It’s very important to listen to what the franchisees of the chain are saying about management and the receptiveness to new ideas because your fate is in their hands. That’s another reason to consult an insider like Joel.

  9. Chris,

    I wasn’t attacking you.

    And, if you did a Google search on me, you would have learned that I’m NOT a franchise broker-and that I don’t get paid brokerage commissions. I’m also very realistic about franchise risk.

    A good number of people that are actually in the franchise industry don’t always agree with my take on things. That’s because I’m honest. I’m certainly not known for publishing fluff pieces. (Trust me)

    Look- http://www.thefranchiseking.com/should-i-visit-franchise-headquarters

    Many franchisees have lost their businesses. Many have been able to live the dream.

    And, you are right about one of the things you wrote:

    “Any business including Franchises require a ton of investment in time, money, late nights, sweat, tears, laughter and an eye to the future.”

    Get to know me a little, Chris. You’ll find that I walk the walk when it comes to making sure my readers…my readers on any of the websites I write at-including my own are knowledgeable and know the score.

    The Franchise King®

  10. Darryl Shurgin

    I like the post, as it is provocative and one-sided. I like the comments here even more because the discussion fleshed out the other side of Franchising a bit.

    No matter if it’s a conventional business or a franchise, one must be prepared to learn or lose their shirt. A franchise is no shortcut. It’s a system to follow. But you still have to know everything that a successful business owner knows, or learn it very very fast.

    Some franchises have very tough contracts to get out of if all does not go as rosy as planned. It’s not just quit and walk away from your investment. You might even have tied up and collateralized assets.

    So get comfortable with the business section at the book store (and the library) and read. While you’re there, don’t just read the franchise stuff. Read books like Think and Grow Rich, How to win friends and influence people (you’ll need a big dream and tenacity to stick to your plans, people skills to deal with staff and customers) and other such books.

    If a Doctor attends medical school and then does residency and internship, so should you do the equivalent for your business plans. Nobody says you can’t do this along the way.

    But please don’t allow a franchise system and good sales pitch to replace your personal obligation for self education.

    Also like Kiyosaki says: build your professional team. your legal advisor, your accountant, your franchise advisor…they add input, and handle specific specialty areas of your business…so find good ones that you can trust.

  11. “No matter if it’s a conventional business or a franchise, one must be prepared to learn or lose their shirt.”

    Good point. But I would add something no one in the franchise industry will ever ask a franchise prospect: What will happen to you if you fail?

    Will you lose everything? Will your marriage fall apart? Will you be so distraught you might be driven to a more permanent solution?

    Every day franchisees on UnhappyFranchisee.Com post their sad stories and it seems they never considered the worst case scenario. Franchise promoters encourage this tunnel vision, acting like they’ll kill the success fairy if they entertain negative thoughts.

    That’s BS. If you and your family couldn’t survive the loss of your business, for the love of god don’t do it. The truth is that franchises succeed at about the same rate generally as non-franchises, and even the best franchises fail on occasion. If you’re going to go ahead, find all the negatives you can and weigh them in your decision.

    Go in with eyes wide open, ready for best and worst case scenarios.

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