Ken Wither has dealt with thousands of prospective food-franchise owners. We have asked him to share his experience by providing inside information on what makes a successful franchisee, some common misconceptions, and why some franchisees simply don’t succeed.
WI: What makes a successful food-franchise owner?
KW: The most successful franchisees become full-time owner/operators. Fully committed to all aspects of the business, these owners are the ones who are most likely to be offered to build their portfolio with several locations.
One individual in Alberta contacted me several years ago, he was new to Canada and was interested in becoming a franchise owner. He started with one location, committed to the business, gained the trust of the franchisor and now he’s growing considerably and is operating multiple locations.
Many of the most successful franchises are family-run businesses. Spouses or other family members are involved in various roles, allowing the family to achieve success together.
WI: What is the biggest misconception about buying a franchise?
KW: Two come to mind. Many applicants aren’t aware that there is a strict pre-screening process. The franchisor is looking for an owner who will represent their brand while being a good leader and communicator with staff and customers. Having the money to purchase the franchise is not enough. There is a process in place to find out whether an applicant meets specific criteria prior to providing them with confidential information about the business.
The second is a misconception that they will have influence on the lease rate. Typically, but not always, a franchisor will negotiate the lease and act as the head tenant. This is a benefit for the franchisee as a respected franchisor can negotiate the best lease and reduce or eliminate lease deposits. A franchisee does not have this financial strength.
WI: What ownership aspect are many buyers unprepared for?
KW: While owning a franchise is an excellent opportunity to manage and operate your own business, franchisees must be prepared to meet the expectations of the franchisor. There are processes and rules in place that must be adhered to – these rules are in place to ensure success. It must be expected that the franchisor will follow up regularly with meetings, inspections and silent shoppers to ensure standards are being maintained.
A couple of years ago, I was working with a businessman coming from South America where he was a high-level executive with a major international corporation. When he arrived in Canada, he purchased his first franchise. He was very likely overqualified for this role but committed to following the processes laid out for him. He has since been offered a second location, due to the success he has experienced.
The reality is, owning a franchise is a step between being an employee and being a true entrepreneur. This, however, comes with its benefits as well.
WI: How about support from the franchisor?
KW: A good franchise company will offer supports to a franchisee. This will come in the form of training, marketing and management. It is crucial that a prospective franchisee complete their due diligence to ensure head office support is available to franchise owners. A prospective buyer can check on the franchises’ standing with the Canadian Franchise Association, review performance across various locations, and ask questions regarding head office support, training and business development plans.
One franchise company that we work with regularly mandates six to eight weeks of training before owners can work on their own. They are determined to ensure that franchise owners have the best opportunity for success.
WI: What if a franchise owner runs into trouble?
KW: This comes down to due diligence when looking into a franchise company. Several things can happen to cause a downturn in business – staffing issues, competition, and trouble with processes – but a good franchise will offer an owner assistance to rectify the problem. This may be in the form of increased marketing, help with hiring, or direct assistance from head office personnel. A franchise that offers an area manager as a regular direct liaison is key to a successful operation. And owners should never be afraid to ask for help; it is one of the benefits of being part of a successful chain.
WI: Do you have any insight into why some fail?
KW: The most common cause is a franchisee turning into an absentee owner. For many reasons, an owner may take a step back from the business and leave a manager in charge. A manager simply doesn’t have the same stake that an owner does, and most franchisors have an expectation that the owner will be involved in the daily operation of the business.
Canadian franchising is experiencing considerable growth with 520 new franchises opened in 2018. This momentum creates nothing but possibilities for those who are ready to seize the opportunities.
Ken Wither is a full-time business broker, a certified broker intermediary with the International Business Brokers Association. He works with business sellers in Alberta and B.C. and has a long-standing partnership with several growing franchise brands operating out of Western Canada. Visit acuitybusinessgroup.com