Tom Aranow warns Beware of franchises

Author: Tom Aranow, Harrington Daniels Advisors

There are hundreds if not thousands of franchise “opportunities” out there for entrepreneurs who want a fresh start at a new business. I question whether many of them are really opportunities at all and I urge all potential franchise owners to beware when considering purchasing one. 

The franchises that most of us are aware of are generally offered by restaurant chains like McDonalds and Burger King. They are the epitome of what a franchise should be; they have wonderful name and brand recognition. Every-one knows what they are and what they sell. Even if some have questions about the health benefits of eating fast food, everyone who has eaten at one and has been happy with his meal can be assured he will receive the same meal, of the same quality, even the same catsup, pickles and lettuce on the West Coast as they will in Milwaukee. That’s the key to any franchise’s success; a public that doesn’t like to take chances knows what to expect.

There are so many franchise offerings out there that it is hard to find a catchy name that does not belong to one. I tried “CarpetClean.” Yep, there is one out there. Then I entered “PaintingPros.” Yep, once again they offer a franchise. The point is that while they are great names and they tell us clearly the type of service they offer, we don’t know anything about the real quality of those services. The end result is that I would not feel safe buying from them without some good references or the recommendation of a friend.

If you do buy a franchise from an unproven company you will also find that your success is tied directly to the company’s and those of other franchisees. In effect, you may have dozens or hundreds of partners all of whom have different work ethics and skill levels. You depend on them to offer great service and to develop a positive image and build a name for the franchise. If a customer’s experience with the franchise in Los Angeles is below par they’re not going to buy from you when they move to Milwaukee.

So, if you are considering buying a franchise, consider the following:

1. Does the company’s brand and name recognition rise to the level where you’ll own a piece of a good and well recognized name?
2. Is the home office of the franchisor strong enough to actively monitor and enforce standards so that your fellow franchise owners will always offer the same high quality service that you will?
3. Is the business model (particularly the marketing strategies) that the franchisor uses a proven success? Has it been tested and proven successful in a variety of settings and markets?
4. Can you carry on and succeed if the franchisor fails or goes out of business?

If the answer to any of these questions is “no,” then think again. Be aware that what you’re really buying might be some expensive training and success that the franchisor may not be able to deliver.

Tom Aranow has over 30 years of executive management and entrepreneurial experience in a variety of industries and is the author of over 35 published articles and essays on best practices in business and not for profit management. He is the Senior Advisor for Business Strategies at Harrington Daniels Advisors, in Grafton, and Kohls Group Consulting in Pewaukee, he can be reached at 262-376-9507 or by email at tom@hdadvisors.com

Originally published in the Daily Reporter l© Daily Reporter Publishing Co., All Rights Reserved.