Potential franchisees should take a lesson from cautious pedestrians who look both ways before crossing the street. Before paying a substantial franchisee fee, you must be aware and understand that the franchisor may not, or simply won't, be able to handle every related detail for you.
Please don't get me wrong! I am a firm supporter of the franchising concept. There are many existing franchises which are very successful as they have a strong product/service as well as the right people in place. I have found, however, that many franchisors can often fall short in the area of real estate help (specifically in regards to site selecting and lease negotiating). Finding the right location is vital to a franchisee's success or failure. However, this crucial step is not always given due consideration. I simply want to stress that, when it comes to finding space for a franchisee, franchisors may only offer limited assistance due to lack of time, money, and resources. Furthermore, a franchisor may or may not have an in-house real estate department dedicated to assisting franchisees in these matters.
When it comes to offering real estate help, there are, essentially, three main ways that a franchisor can support a new franchisee.
Therefore, before signing on the dotted line, franchisees need to understand exactly how much help the franchisor will provide. You can learn what you need to know by asking the following questions:
To further illustrate these points, allow me to share several real-life stories with you. As The Lease Coach, I was recently invited to conduct a leasing webinar for a recognized franchisor. When communicating with the webinar participants, I found that nine out of 10 of the franchisees listening in to the session were disgruntled with the level of help they initially received from the franchisor. While I am unsure as to what the exact issues were, it seems apparent to me that there was a lack of communication, leaving expectations unfulfilled.
In another instance, I was speaking to a franchisor about several matters and took the opportunity to ask, "How do you find locations for your franchisees? Do you have an in-house real estate department dedicated to this task? Do you phone brokers to work with your franchisees? Can you help a franchisee wishing to open in a distant city, where you are not located?" This franchisor answered, "No, we don't have the time, manpower, or money to travel to each city that we sell a franchise in."
Finally, a franchisor with 300 locations contacted me. In our ensuing discussion, I learned that this franchisor did not have a dedicated real estate department. While the franchise sales reps tried to help new franchisees, they simply did not have the experience necessary to do so. The franchisor had recognized this void and was advertising for a real estate person. But the chosen applicant had only residential real estate experience and not commercial property and/or franchise-related experience.
As you can see, when it comes to buying into a franchise system, it's a case of "buyer beware." While your selected franchisor can - and will - provide name recognition, a proven track record, full-scale training, and so on, you may receive only limited assistance with your real estate needs. By looking both ways before crossing the street and asking the right questions, you can better protect your own financial investment.
Dale Willerton is The Lease Coach - a Senior Commercial and Retail Lease Consultant who works with franchisors and individual franchisees across North America. Willerton is author of "Negotiate Your Franchise Lease or Renewal";he speaks frequently at franchise shows and provides real estate training to franchisors and chains. Visit www.TheLeaseCoach..com / www.DaleWillerton.com/www.HelpULeaseFranchise.com or call 800- 738-9202.
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