This article are provided for information purposes only, and are not intended as legal advice.


Franchises – I have been looking but can’t find one, what do I do?

July 22nd, 2009

I have been receiving many phone calls that people want a specific franchise but they are not available for sale.  They have assumed that this is the only franchise which will make money therefore they refuse to look at any other options.  Even though you may have what you believe to be the best franchise, you need the best location to make it work.  McDonald’s is an excellent franchise but many locations have closed because of poor sales.  Many franchisors pride themselves on knowing how to pick good locations.  Many years ago, a franchisor, who no longer is around, was owned by three real estate agents.  They sold residential condominiums and then got into owning a medical franchise.  Their expertise was in residential locations.  This  experience did not make them an expert in the location of medical offices. 

 

Businesses, particularly retail stores are all based on location, location, location.  Unless you are a destination, no one will go to you in a poor location.  I am aware of a fast food restaurant which is located on an industrial street .5 miles from a busy street which has many other fast food restaurants.  All the restaurants on the busy street are busy because they have high visibility and high traffic.  The other fast food location cannot be seen, no one knows where it is located and sales are very slow.  In other locations, this fast food chain has been very successful.

 

You have made up your mind that you only want one business. If in the city or town that you live, there is 100 such franchise locations, the market has been saturated and no more new locations are being established, how are you going to get a franchise?  Many franchisees own multiple stores.  Often, a franchise will make $50,000 profit per location therefore some investors have 2 to 20 locations and can make a good living.  If you have multiple stores, you are not active in the day to day business therefore you will be only the manager and over see the operations, you are not putting in the long hours that you once did for your first store.  If you have a manager running your empire, and it is profitable, there is no incentive to sell any location because the economy of scale allows you to bring services in house, one manager, one repair person, accounting for all location, better purchasing power for supplies etc.

 

As a result, if you are so focused on buying on one type of franchise, you may never be able to fulfil your dream of owning one because no franchise will become available for sale.  The more popular franchises have waiting lists of people looking to buy a franchise.  There are lots of other opportunities and other franchises which may meet your criteria, do not be so focused.  When a person wants to buy a business, they often decide what type of business i.e. retail, manufacturing or they pick the industry sector i.e. food industry.  They do not sayI want to buy XYZ company and nothing else.  They look to see what is available and they have flexibility because they do not know what is for sale at any given time.  Potential franchise owners need to keep the same approach, determine the sector that you want to be in ie fast food and then research what options that you have.  Keep in mind, when you buy a franchise, you can buy a brand new franchise or and existing franchise which has been operating for many years.  Master franchisors usually only sell new locations and you will have to look at businesses for sale to find an existing franchise to purchase.


Filed under: Franchises — Gary Landa @ 9:46 am


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