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The Advantages Of Franchising

Transcription:

Lorraine Sheak
So the next question: what are the advantages of buying into a franchise system versus going into business independently?

Mike Magid
I’m going to let the franchise expert here field that question first.

Mike Powers
Well there’s a number of reasons that I can think of, and I’m sure Mike will be able to elaborate on on these as well. You know, as someone who’s interested in going into business, they’ve got to be thinking about all the aspects that go into cultivating and building your business, such as marketing and advertising promotions, right, research and development, training and education, staffing, all those key aspects.

And someone who’s a sole proprietor that’s not been in the business before may have some business background but never really been a business owner needs support and needs someone to be able to give them the latest cutting-edge tools and resources they need. Because no matter what business you’re in today, it’s in a highly highly competitive marketplace, and you as a business owner know that the landscape out there right being so filled with competitors.

And how are you going to get a key point of differentiation—a franchise will help you, franchisor will help you: A. Have a business plan. They don’t have a business plan what direction you’re going it would be like today driving without having your smart phone. It will navigate you from point A to point B, so you really need to have a plan that will help you know the direction and the things you need to put in place to be successful, give you a solid foundation. You need guidance; you need coaching. Everybody needs coaching and some you know some direction are that there’s a couple things. Mike, what are your thoughts? I mean.

Magid
Yeah so I love this question Loraine because I love talking to people about whether they should do this in the pennant leader through a franchise system, and I’m gonna argue against franchising for one minute. And that is the home care industry especially on the non-medical side, it’s a very low barrier to entry business. It doesn’t take a lot to get started. You could typically start it out of your home or have at least some kind of address that allows you to appear to have a business even though it may be out of your home.

And so it doesn’t cost a lot of money, and I think when you’re thinking about it independently, when you’re doing it from that perspective is pretty much health care professionals that decide they don’t want to be in the health care space anymore, and they’ve decided it’s time to do something on their own. And they do it independently, but that world is very small when it talks about opportunities. So I think what the franchising model does is it opens up the business opportunity to a much broader audience.

You can be an engineer; you can be a sales professional; you can be a marketing professional; an IT professional; you can be a healthcare professional as well; but franchising opens it up to a much broader arena of people that have the purpose or mission to get into an industry like this that have the money to get into an industry like this but don’t want to take all the risk on their own. And I think when you’re an independent operator, you take all the risks, and anything that you need done so thinking about it from maybe an operational standpoint as Mike said you know. Who’s your business coach? Who is helping you with your business plan? Who’s keeping you on course to that business plan? What happens if you have compliance or legal questions or issues? What if you want to get the latest and greatest marketing techniques and you want to you know investigate various and marketing opportunities? You could do that independently much more difficult though to do it that way than doing it through a proven franchise system with the support pieces around it.

And the statistics out there underscore the fact that small businesses, when they open up independently within the first two years, ninety percent of them fail. It’s just very very hard to get a business off the ground on your own when it all falls on you versus franchising, which has an about a ten percent failure rate after the first two years almost exactly opposite of one another from a success standpoint, so if I was going to do something and I was going to invest my hard-earned money whether it’s through my retirement, through my investments, through my cash that I have on hand, through the risk of going and getting a business loan, and I’m gonna put my money somewhere, I’m going to do it more from the franchising side.

And there’s one other thing I might add and that is: we talk about equity building. When people buy a business, they buy a business to build equity. And I can tell you that in a resale environment, when you write are you ready to retire? Loraine, it is much easier to sell the business to get more money out of that business as a franchise than if it was your own business or a what we call a mom-and-pop operation. So because franchises are more attractive. They’re safer to the buying public. And so for those reasons I would say you I would go franchising.

Sheak
What about support from fellow franchise owners in the company?

Magid
Mike?

Powers
Well that’s a great question and you know that’s one is often overlooked. Having the ability to be part of a business fraternal organization where you can pick up the phone—here we are in Pennsylvania. I might be able to pick up the phone and talk to Charlie in Arizona and say, “Charlie, how are you doing business and what things are you doing that differentiates you in the market, and share what you know with me?”

I know in our organization we have what we call the Griswold pathway to success, which is best practices, and it’s a living, breathing, interactive, system that’s updated on a regular basis with good best practices from our our franchisees out there. So I think that’s a that’s a great question, and I think having that ability just adds to the systems and the
resources that you would have and the willingness of a fellow franchisee to share that information is astronomical.

Magid
It’s interesting because it feeds back into the success rate of franchising versus independent businesses. One of the reasons that the franchisees that open up and are still in business after two years is because they have a network; not just on the franchisor side with this support that they get, but with the franchise system. Many good franchisors or strong franchisors have what they call franchisee mentorship programs. So they’ll pair up an experienced franchise owner with somebody that’s coming into the business, and that person will be their liaison to questions, that have struggles with anything, if they want to understand something. They have the ability to tap into a system that you don’t have independently.

If you’re independently you better start hiring some really good consultants in various nuances area. If consultants aren’t broad consultants around operations, compliance, legal, marketing, IT, training, right, then you have to hire consultants to get that kind of level of expertise. So when you’re in a franchise system you don’t have to pay for that. If your corporate office can’t give you the answer, call your mentor and ask that individual what you can do or how to handle certain situations. I think that’s a powerful powerful thing that franchise systems provide franchise owners, and that’s why I think they succeed at such a high rate.

Powers
Yeah and there’s you know just to add if I can throw a little commercial out there for Griswold. Okay, there’s a organizations that are franchisees advocates, American Association of Franchise Dealers. It was really rewarding for us to receive their Franchisor of the Year Award 2017 for having the most fairest franchise agreement, equitable franchise agreement, with our franchisees. And you know the good part about that to accentuate that, we were nominated by our franchisees for that award. So I think that’s when you know that you have everything working together and other franchisees communicating with other folks and really have a good solid alignment of all the key resources and people.

Magid
Yeah, and you talk about that trade association but also within a franchise system, there’s things like the Franchise Advisory Council, which are a group of franchise owners that work collaboratively with their franchisor on every issue or every initiative that the company wants to move forward with. And they get really good feedback and advice from those franchisees about the direction of the company. There is also franchise associations, which is what Mike was talking about. So the Association is the American Association of Franchisees and Dealers, but then within that within a franchise system for instance there might be another trade association affiliated with that. So when they have issues they can go to that trade association, come back, that trade association will direct them on what is right, what isn’t right, what they need to be aware of in a franchisor/franchisee relationship. It works really well when it balances out the scales from the franchisor to franchisee. And again I think those things lead to franchisee success.

Powers
Yeah access to information is powerful. And what it is and you have a relationship with these fellow franchise owners that as I said I started out with its internal kinda organization.