7 Important Questions to Ask Before Starting a Bay Area Franchise
Buying into a franchise can be a great way for Silicon Valley entrepreneurs to go into business for themselves and not by themselves. Franchises offer the ability to leverage an established business model and draw on the training and support of a home office that has a vested interest in your success. Though franchising can offer several advantages over starting a business from scratch, not all franchise opportunities are created equal, and there is no guarantee of success.
Before committing time and capital into a Bay Area franchise, it is important to do your due diligence. Your goal is to learn as much as possible about the companies you are interested in partnering with so you can make an informed decision. Toward that end, there are several questions you want to ask your franchise recruiter, here are seven of the most important:
- How much preparation and training do you provide new franchisees?
This is perhaps the most important question, because when you buy into a franchise, you are supposed to be receiving a proven business model with predictable results. However, all other factors being equal, the predictability of your results is dependent primarily on how closely you follow the proven model. What you’re looking for is a comprehensive training program that covers all essential aspects of the business, and that there are proper systems in place to help you learn how to successfully operate the franchise.
2. What types of people tend to be the most successful with your company?
We all have strengths and weaknesses. In general, entrepreneurs understand that all businesses require hard work to succeed, and this is particularly true during the startup phase. That said, not all entrepreneurs are a good fit for every franchise model. For example, you may not want to start an in-home senior care franchise in Silicon Valley if you do not have a health care background and/or a passion for working with the elderly. By the same token, a day care center in Palo Alto might not be a good match for someone who did not enjoy working with children.
3. What type of ongoing training and support do you offer?
Getting trained and opened is a major undertaking to be sure, but the company should also have a strong support staff to help you continue to grow and prosper. One thing to look at here is if there are royalty fees beyond the initial franchise fee. You may not be too excited about the idea of paying a percentage of profits or annual franchise renewal fees, but there needs to be a financial incentive (beyond just the reputation of the brand) for you to continue to succeed.
4. How strong is your advertising and marketing program in the Bay Area?
You need to have a solid plan to grow your business, and this will depend heavily on your marketing plan. Many companies have coop advertising you can buy into. Others have strong lead generation programs with cutting edge systems that can generate leads in a more cost-effective way. Pay close attention to what kind of marketing and advertising they do; this will be the lifeblood of your business.
5. How much money can I realistically expect to make with this business model?
This question is where the rubber meets the road in regards to your earning potential. Many companies boast about the earnings of their top franchisees, but what you want to know is what the average franchisee makes. Sure, everyone hopes to be in the top tier of franchise owners someday, but you should not realistically expect that at least in your first couple of years.
6. What are some examples of challenges your franchisees have faced, and how have they successfully overcome these challenges?
Even the most successful companies have had to deal with numerous challenges. In particular, there are likely issues that have come up multiple times among franchisees. Here, you are looking for some success stories about what the home office has done to help deal with the challenges franchisees have had to confront. This should give you a “real life” expectation of what kind of support you might be able to expect when the going gets tough.
7. Can I have the names and contact information of at least five current franchisees I can speak with?
Any good franchise company should have at least five present franchisees willing to speak with those considering getting into this business. Talking to those who are out there working every day to make their business thrive provides an important perspective you will not receive from the corporate recruiter. The recruiter is a company representative who is there to “sell” you on the benefits of starting a franchise. And while there is nothing inherently wrong with that, they cannot give you the detailed, day-to-day operational information you will receive from an actual franchise owner.
After speaking with the home office and at least five franchise owners out in the field, you will have a much better idea whether or not this is the right business for you. If you decide you have found the new business you want to be in, you will need to speak with an experienced Bay Area business lawyer about entity planning and formation, location, commercial leasing and several other legal issues. This will help ensure you start your new business on the right foot.
Jeffrey Miller is a Palo Alto business attorney and member of the Palo Alto Area Bar Association (PAABA). He provides skilled guidance on all legal matters related to California businesses. If you need any kind of legal assistance with your Bay Area business, call attorney Jeff Miller today at (650) 321-0410 or email him at firstname.lastname@example.org.