Interview: So You Want to Own a Franchise?

Posted by 23 December, 2008

1822348080_5837ab38ec_b

A lot of Americans wish to work for themselves. One way to do that is through franchising. Franchising allows a person to set up a turn-key business in many instances with established systems in place. Having taken a look at Franchising.org, it was fascinating to see the sort of economic impact franchising has on the U.S.

HOW WIDESPREAD IS FRANCHISING?

The answer may surprise you.  By 2001, there were 767,483 business establishments in all domestic franchise systems (either owned by franchisors and franchisees), which employed almost 10 million people, with direct output close to $625 billion, and a payroll of $230 billion.  These establishments account for significant percentage of all establishments in many important lines of business: 56.3% in quick service restaurants, 18.2% in lodging, 14.2% in retail food, and 13.1% in table/full service restaurants.

I was fortunate enough to have two franchising experts who allowed me to ask them a few questions. This is a two part post, the first of which is an interview with franchising expert Leslie Kuban.

1. Can you tell me a little about yourself?

Leslie:

I have lived in Atlanta most of my life but feel more like a Midwestern girl; my folks are both from Ohio.   Vanderbilt University is my Alma Mater; I have a BA in Communications and also attended Leeds University in Leeds, England for one term.   When I am not assisting corporate professionals leverage their corporate success and experience into franchise businesses that they own, I am enjoying many personal interests; tennis, latin dancing, crafts, writing, yoga, cooking and entertaining to name just a few.
Feburary 2009 will mark my ten year anniversary as a franchise advisor and franchise owner with FranNet.    It has been a wonderful experience and I still have as much passion for doing this work as when I first started.   I am among the first to see up and coming growth franchise opportunities entering the Atlanta market place, which is exciting.   Franchise ownership has been very good to me in terms of personal satisfaction, lifestyle balance, and financial reward; helping others enjoy the pride, independence, and success that franchise business ownership can provide is work in which I feel a lot of pride.

2. I see that you have owned a Mail Boxes Etc. (currently a UPS store). Can you tell us about your experiences with that (good and not so favorable)?

Leslie:

Being a part of the Mail Boxes Etc. family was a super experience for me.   I learned a lot about managing financials of a small business, managing employees, customer service, and working within a franchise team.   It prepared me for the work that I now do.

3. You are currently a franchise owner at FranNet which is a franchise consulting business. What have you most enjoyed most/least about FranNet as compared with Mail Boxes Etc?

Leslie:

MBE was a great business and group of people; I learned however, that retail is not the best fit for me.    My personality is much better suited to a marketing and consulting oriented business with much greater daily flexibility and variety.    The day to day experience of running MBE stores became mundane because it was routine.   In my FranNet business, I work from home, every day is different and I meet new people all the time; this is a much more suitable “business lifestyle” for me.

4. If someone was interested in owning a franchise, what questions should they be asking themselves?

Leslie:

The search for the right franchise does not begin with looking at lists of franchise opportunities in magazines or on web sites.  It begins by looking in the mirror and asking:

~What is motivating me to own my own business?
~What specific results would I need from a business in terms of financial return (income and future equity value) and personal lifestyle for this franchise business to be a justifiable investment of my time and money?  In what time frame?
~What are my best skills?  Sales? Marketing? Customer Service? People Management?
~What do I NOT want to have to do in a business?
~How will I support my personal expenses for the first 6-12 months of launching the business when I am not likely to be able to pull a pay check from the business?
~How much of my liquid capital can I realistically and comfortably part with to start a business that is a good fit for me and that will allow me to fulfill my goals?

There are many more questions that must be asked; these are the starters.   From here, we reverse-engineer forward to what the business is that matches these criteria.  Too often people choose a franchise because they love the product or service as a customer and then realize that they are not suited to own and run that type of business from a skill, lifestyle, and/or financial position.

5. When I imagine a franchise, McDonald’s and Quizno’s pop into my mind. A large upfront investment also comes to mind. Do most successful franchises require large up front investments?

Leslie:

This is the best news!   There is no correlation between the upfront cost of a business and how successful or profitable it can be.   Large fast food franchises have a high start up investment need because of the real estate, the playground, all the equipment and inventory, a large payroll, tremendous expenditure in marketing, not because they are “better” franchises.   There are countless lower cost service opportunities that yield an equal or higher return than franchises with higher start up costs.   Find the lowest cost franchise that fits your motivations, needs, skills, and wallet.  Why risk any more than you have to meet your needs and goals; that is the FranNet mantra.   When coaching my clients, I advise them that they need to have 6-12 months of personal living expenses set aside to pay the bills at home during the ramp period.   On top of that, a minimum investment of $40,000 is likely required to capitalize a franchise business.    Home equity lines of credit, self directed IRA rollovers are the most popular sources of funds people are using to fund franchise businesses.   SBA lenders are still making small business loans but their requirements are even tighter than they were prior to Sept. 08; I have found this to be the least favorable way to fund a business due to the length of time it takes to secure the financing, and the fees and closing costs associated with SBA lending.

6. One of the topics I stress on my blog is passive income. Is there such an avenue in the franchising world (or at least close to it)?

Leslie:

Franchise business ownership is not like real estate investing where you can hire a good property manager and not have to do much and collect your rent money.   Overall returns can be higher but there is more work involved.   After growing a business over 4-5 years, it is possible for franchise owners to employ staff and systems to handle some or much of the day to day operations so that s/he does not have to be there all the time doing everything; Kiyosaki’s “B Quadrant” business in other words.  There are even some franchise businesses that can be started as a semi-absentee investment allowing people to keep their primary job or business.   In either case, a minimum of 10-15 hours a week of involvement is realistic to expect.

_____________________________________________________

Are there any other questions you have for Leslie? Have you thought about opening a franchise? If so, what sort of franchise and what is your motivation?

If you would like to contact Leslie Kuban with any questions you might have, here is her contact information:

Leslie Kuban

FranNet of Atlanta

770-579-3726

lkuban@frannet.com

http://www.frannet.com/lkuban

Other Posts:

The 3 Myths of Happiness
17 Ways to Save the Planet
The Biggest Bailout Ever
Is Happiness Viral?
What Determines Happiness?

Photo by El Gran Dee


------

Don't miss the next article, add our RSS feed
If you enjoyed this article, please Stumble it!
Follow me on twitter

Categories : Entrepreneur Tags : ,

Trackbacks & Pingbacks
Comments
December 25, 2008

Great interview on exactly what it takes to run a successful franchise. I learned a lot.

Posted by Mark
December 29, 2008

Yes, I know Leslie is someone I would turn to if I was looking at getting into franchising.

Thanks for the comment Mark!

Posted by admin
January 28, 2009

Interesting post – I was very interested in franchises. I’m not sure what kind I’d like to be a part of – Retail is not my cup of tea anymore honestly.

PennySeeds.com’s last blog post..A little birdie told me to day trade with Twitter.

Posted by PennySeeds.com
January 29, 2009

I have opted for the smaller scale Franchise http://www.cityareaguides.com
it is only one guide per city
I own three now!

Posted by JamesterDude
Leave a comment

(required)

(required)