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Posted by Mitchell York under Franchising, Small Business Management
Recently, I was interviewed by Allbusiness.com on the subject of franchising and how people can know whether it’s right for them. If you’re considering going into business for yourself and thinking about the franchise model, take a listen. if you want even more, check out my book on the subject.
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Posted by Mitchell York under Franchising, Small Business Management
Should young people in their Thirties or even Twenties buy franchises?
The Wall Street Journal reported recently that franchisors are targeting young franchisees to replace the old fogeys Baby Boomers who are nearing retirement age. The thinking is that younger franchise buyers, if they can raise the capital, will have have more energy and a fresh vantage point from which to attack a business plan. The naysayers include franchise experts like The Franchise King of Ohio, a franchise broker, who says to the youngsters:
“You just don”t have enough business management experience under your belt, yet. You have not enough stress yet. You have not experienced enough in the business world. It’s nothing personal.”
Wow! What’s that about? My feeling is: bring ‘em on! I think young entrepreneurs are amazing. In my own franchise network, there are “kids” like Claudia and Rodney, a wonderful couple in their Twenties, who are tearing it up selling smoothies and leaving no stone unturned looking for new business. In my coaching practice, I have thirty-and-younger clients who are smarter, more aggressive, and more resilient than you’d think given their years. When I was a bit younger, at 42, I was president of a company whose CEO was around 28. He sold the company for $750 million a few years later. I worked for another 20-something who’s promotional products company is now doing $25 million+ a year in sales. And have you read the Crains NY Business Top Entrepreneurs list? Look at those pictures–some of those guys (and gals) don’t look like they shave yet. And remember Bill Gates and Michael Dell–both started their businesses in their dorm rooms.
Whether a young man or woman starts a franchise business or some other type of business isn’t the point. Younger people (I’m 52 now, so I think I can say this with some authority) have a view of the world that is entirely different from the Boomer generation. They are less patient, more collaborative, less hierarchical, as a rule less materialistic, more environmentally conscious and in many other ways a breed apart. So sorry fellow old timers, you can no longer credibly say that the youngins can’t do it bigger, better, faster and cheaper than wise old you.
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Posted by Mitchell York under Franchising
Having just written a book on how to know if franchising is right for you after your corporate career, I am a collector of the stories of people making good on the franchise dream. How are they doing it? I interview interesting franchisees all the time and was going to wrap it all up in one mega-blogpost, but I think you’ll gain more as a prospective franchisee if you can listen to these folks one at a time.
First up: Matt Slappey of Decatur, Ga., a franchisee of Murphy Business Brokers. Matt was a sales executive at Pfizer for 12 years–a successful one who made his numbers. But the anxiety of being powerless in corporate America took its toll on him. “We had layoffs every 18 months. I was once laid off and rehired on the same day!” He was tired of having “meetings about having meetings.” Finally, he quit–no layoff, no severance, no stock options.
He took a few months to soul-search. He decided he wanted the “potential to make a ton of money without having a lot of employees to manage.” He bought his business brokerage franchise about two years ago and says he has “never been happier.” He has an interesting spin on what he does: “I help people who own small and midsize companies understand the value of their business and help them sell it without competitors knowing it was ever for sale. And I help former corporate people like me buy their own business.”
So how hard was his transition to self-employment? Pay special attention here, potential franchisees: “My transition was pretty easy, other than having to get a real estate license. I have an accounting degree, which is helpful. I have good sales and presentation skills. And a great work ethic. Also, Murphy had great weekly training for a year.” What amazes me is how many people buy a business without these core skills: a working knowledge of accounting, the ability to sell, and to the desire to work like a madman for as long as it takes to be successful.
It can’t be that easy, Matt! There were, and are, many challenges. So Matt offers these suggestions to prospective franchise entrepreneurs:
1. When you buy a business you may have no initial income at all, so you have to have reserves.
2. Do due diligence–and that doesn’t mean calling the three franchisees that the franchisor recommends. “Call 40 people who own the same franchise.
3. If you’re buying an existing business, use a business broker to represent you. (Well, you’d expect Matt to say that!)
4. Ask yourself: “Can I see myself doing this every day?” Meaning, if you have a short attention span, as many people who start a business do, you better have very deep pockets.
5. Make sure you have family commitment before buying a business. “My wife is 110% supportive. It took her a couple of months at first. She wasn’t sure, so we waited. An opportunity might go off the market, but pass it up if you have to.”
So how’s it going for Matt? “I’m just more proud than I have ever been. Proud that I don’t rely on anybody else.” That’s a nice state to be in. It can be an easier transition than you might imagine, if you have all the right skills.
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Posted by Mitchell York under Franchising, Small Business Management
For people thinking of starting a business but hesitating because of the recession, you’re out of excuses: a new study by the Kauffman Foundation finds that about half the Fortune 500 and Inc. fastest-growing companies were founded during recessions.
The study has three main findings:
1. Recessions and bear markets, while they bring pain and often lead to short-term declines in business formation, do not appear to have a significantly negative impact on the formation and survival of new businesses.
2. Well over half of the companies on the 2009 Fortune 500 list and just under half of the 2008 Inc. 500 list began during a recession or bear market.
3. Job creation from startups is much less volatile and sensitive to downturns than job creation in the entire economy.
While the Inc. list is dominated by tech-oriented startups, the study notes there will be service innovations in fields as old-school as retail and food service. I can attest to that: read Dane Carlson’s Business Opportunities blog for a mind-bending look at what entrepreneurs are coming up with every day of the week in industries as traditional as house cleaning and deck-building.
Need more inspiration? Read Leah Grant’s blog (The New Business Mentor) and sign up for her newsletter. Check out Pam Slim’s recent book, Escape from Cubicle Nation. And if you’re considering a franchise, there’s a very good new book on that subject here.
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Posted by Mitchell York under Franchising, Uncategorized
As many of you know, I own a franchised business in addition to being a coach for people who are considering franchises or other business startups. My franchisor refers people to me regularly for what are known as “validation” calls. Prospective franchisees call around to existing franchisees to do research on the franchise and learn what it’s like to be in the system. If they ask good questions, they can come out of the process with a much clearer decision path (pro or con). The trouble is, 90% of the people who call me ask the wrong questions! Read more…
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Posted by Mitchell York under Franchising
Who came up with that phrase? Anybody know? I really like it. I was on the phone yesterday with Michael Haith, CEO of Maui Wowi International. I became a Maui Wowi Hawaiian franchisee seven years ago. Michael and I haven’t talked in over a year. A few days ago he left a comment on my blog and we got back in touch. We got to talking about how my franchise was going (the answer: great), and about the book I have just finished writing, called Franchise: Freedom or Fantasy, which will help people make better decisions about whether to buy a franchise. (The book comes out in June–if you want to be notified when it’s available on Amazon.com, send me an email.)
In early 2002 when I first was investigating Maui Wowi, Michael asked me whether I was running toward something by starting a business or whether I was running away from something. I thought that was a great question. Turns out I was running away from something, namely my being burned out on corporate life and my lack of will to keep at it. I didn’t care what I did, as long as it didn’t involve corporate structure, a boss, and airplanes. And voila, or perhaps a better word would be “Aloha!” I became part of Maui Wowi’s ‘Ohana (Hawaiian for “family”).
In our chat the other day about running away versus running toward, which, by the way, is the subject of a chapter of my book, Michael said, “Well, maybe you didn’t make the right decision, but you made the decision right.” Man, every seven years or so this guy gives me a line I can use for the next seven years! I’ve been thinking about that line since we talked on Friday. It really fits what happened to me in my franchise. I was running away from what wasn’t working for me. I landed in something that was completely different from what I thought it would be: I thought I’d be opening a retail store every six months or so until I had an empire of 10 or more stores generating sales of $500,000+ each. And I’d be directing my minions to do the work while I counted the cash.
Well, it turned out a little differently. There were no good locations at reasonable rents, so I launched the business with a portable kiosk at Yankee Stadium, and then more kiosks at other stadiums and similar facilities. The work was profitable but back-breaking. Despite the heavy lifting, I did enjoy, as one former franchise colleague put it, having my “man license” and driving a trailer around with 900 pounds of stainless steel inside–at least for a while. I realized I could not sustain this unexpected business model for very long (though some in our system do it and love it). I had to, as Michael said, make the decision right. Walking away–as some other franchisees have done–wasn’t an option for me. And do what? Go back to corporate America? Not a chance.
So I changed my business model from retail events to catered events with smaller, portable equipment, and focused on corporations, private parties and colleges. I am solidly on my way to a multimillion-dollar business and have no intention of stopping, and no desire to. I am having too much fun and too much success. All because I didn’t make the right decision, but I made the decision right. If you know who said that first, let me know.
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Posted by Mitchell York under Franchising
I’m just finishing up writing a book for executives who are thinking about becoming entrepreneurs. I was trying to come up with an anecdote about how entrepreneurs need to be flexible thinkers, about to dodge roadblocks without much time to plan. I think I came up with one.
I went to Columbia Business School. One of my good buddies in class was an electrical engineer, whom I’ll call Todd. He designed photovoltaic cells for industrial buildings. I remember vividly when we took our first Corporate Finance midterm. The test consisted of one problem in which we had to use discounted cash-flow and other analysis to create a valuation for a company.
I got to about Step 14 of a 30-step process and then forgot how to calculate the cost of equity. After a minute of trying to remember, I made a little note in the margin: “Professor, I forgot how to do this step, so I am assuming the cost of equity is 12%.” Then I moved on to step 15.
Meanwhile, I could hear Todd in the seat next to me, and it sounded like….whimpering. Sweat was beading on his forehead….in the middle of December! When the test was over I asked him what happened. He said he got stuck after about 10 minutes (of a two hour exam) and couldn’t go on. I asked him, “Why didn’t you just make something up?” He was too dazed to answer.
We had a long conversation about it afterward. We concluded that the reason I was able to keep going and he was not had to do with our core personalities, our DNA. I am a marketing guy. I make stuff up for a living. If I’m wrong, so what? He is an engineer. If he makes stuff up, buildings are gonna fall down! He has to be right.
Once we talked it through, he was able to adjust for his personality type and vowed next time to keep going even if he didn’t know the answer to a piece of a problem. He got an “A” on the final and the course. I got a “B.” But should Todd be in his own business? Maybe not. Last I heard he is happily designing the most advanced solar panels in the industry for bigger and bigger buildings, and having a great life working for someone else.
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Posted by Mitchell York under Franchising
Browsing through my Google Reader this morning I came upon The Franchise King blog, which is written by a franchise broker (someone who is paid by a franchisor when a prospect he brings in buys a franchise). The post starts with a photo of a family (above). The headline:
“Microsoft is getting into the downsizing game, and in a huge way. When Microsoft fires 5,000 of it’s [sic] workers, all of us need to take notice….”
It goes on,
“Do you realize that 5,000 families have been impacted? This is the real story. I remember the 3-4 times when it happened to my dad. I remember the look on his face, each and every time it happened. It was a mixture of anger, sadness, and worry. As kids, (3 of us little munchkins) it was quite scary. Now, there are 5,000 families feeling what our little nuclear family felt. They are feeling it today. The question one needs to ask themselves [sic] is this: “How many more times will I have to feel this way before I get the courage to start owning what I do?”
Can you hear me over the movie soundtrack of the King’s melodrama? I’m hearing a John Williams-y score reminiscent of gathering storms: timpani drums, brooding cellos, a French horn perhaps. I give him credit for going after the laid-off ‘Softies – if anyone has money to spend on a franchise, it’s probably those folks.
The King’s line of reasoning plays on the emotions of potential readers. It is very appealing to say to oneself, “This time I’m gonna stick it to the man and be my own boss!”
The King will probably make some good money this year selling franchises to families on the rebound. I am a franchisee myself, in addition to being a coach to entrepreneurs. I bought my franchise when I was rebounding from a lay-off and a bunch of other things that had me very low. I have been in my franchise for seven years and have been highly successful—I would guess I am the most profitable franchisee in my system—but my decision-making process was all wrong. I was running away from something, not running toward a vision of my future. And I was highly susceptible to the sales pitch of a franchise broker who was a little more subtle than the King, but just as effective.
If you have been laid off, there is a process you can go through to get to a place where you can make good decisions about what to do next, and to evaluate whether getting another job or starting a business is the best solution. The first step is to ignore the pleas of people trying to make money off your hardship. If you want to know other steps in the process, get in touch with me. If you have advice of your own on this issue, please comment here.
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Posted by Mitchell York under Franchising
If you’re wondering who’s going to do well in this economy, look no further than companies that sell franchises. In a very insightful article on MSNBC.com, Mark Siebert notes that the increase in the unemployment rate of 1.4 percentage points over last year adds 2.2 million people to the jobless pool. And “every 0.1 percent increase in the unemployment rate adds another 150,000 prospective franchise buyers to the marketplace.” Add to those who are being pushed overboard the folks who are going to jump before they are pushed–Siebert calls them the “near layoffs”–and the pool grows larger still.
So lots of workless people are sloshing around. Franchisors are salivating! But it gets better. Lots of folks have already sold out of the market and are sitting on cash earning no return. These people are looking for ways to put their money to work. While there may be fewer people willing to plunk down a million bucks for a Dunkin‘ franchise, those same people may fork over $500,000 for something else, and there are plenty of franchises available for that amount or less.
Mr. Siebert has a consulting firm that helps companies franchise their businesses, so he has a particular point of view supporting franchising. I come from the opposite angle. I don’t support franchising. I am neutral. As a franchisee and business coach, I know the pluses and minuses of owning a franchised business and the dangers faced by someone who’s going into a franchise for the wrong reason.
Still, I think Siebert’s article is incredibly valuable for people who want to understand the economics at work that favor franchise sales in the coming year. There was never a time for buyers to beware more than now. If you want to find out more about the risks of franchising and how to cope with them, drop me a line.
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Posted by Mitchell York under Franchising
There’s a provocative post on one of StartupNation.com’s blogs. The title is, “Out of Work? Consider Buying a Franchise.” The writer cites the downfall of Wachovia Bank and addresses the 5,000+ workers in Charlotte, NC, who have already lost their jobs.
The author writes, “When the unemployment rate is high and large corporations are downsizing, buying a franchise is typically a good alternative for someone with the entrepreneurial itch.”
Nooooooooooooooooooooooooooooooooooo!
Buying a franchise isn’t good for an itch. In fact, franchising can make you want to scratch that itch until you have a huge rash. An infection. Gangrene. Amputation! You get the point.
When you get laid off (and I know whereof I speak, I was there once seven years ago courtesy of Ziff Davis Media), you may not be in the best psychological frame of mind. Your confidence is shaken, your routine disrupted. You’re disoriented. To distract yourself, you start Googling and clicking and, before you know it, you’re a franchisee. You’re still hurting from what happened in your job as you embark on something that will test your limits as nothing has before.
You are not running toward something as much as running away from something. And it’s just a matter of time before you can’t run fast enough or far enough to get away from yourself.
If you find yourself laid off from a financial services job or any corporate job amidst the economic chaos that is unfolding, and you are fortunate enough to have enough cash in the bank to even think of buying a franchise, my advice is to wait a while. Consider taking a few months to do some things completely unrelated to work. Travel, spend time with your family, read–whatever pleases you. Even if you’re a “Type A” with a short attention span, resist the urge to jump too fast into something else. You may not be the franchise or entrepreneur type, and if the itch goes away by itself, that’s a lot better than spending your nest egg on a dubious prescription.
Have experience with buying a franchise before you were ready? Or one that totally contradicts my point of view? Let me know.
How to Know if a Franchise is Right for You After Your Corporate Career.
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