Veterans: Avoid These Five Pitfalls When Buying a Franchise
Investing in a franchise can be one of the most exciting times in a veteran’s life. After proudly honoring our country by serving in the military, a veteran can get a new lease on life via franchise ownership – and can utilize his or her military-honed skills to attain success.
Once a veteran begins the mission that leads to franchise ownership, the process can move very rapidly. From securing financing to ultimately signing a franchise agreement, the process of acquiring and opening a franchise location can happen in what seems like the blink of an eye. For this reason, it is imperative for the veteran to do his or her due diligence, and to avoid five pitfalls that can spell failure.
Pitfall #1 | BAD FIT
First and foremost, if you are not a good fit for a particular franchise, it is highly unlikely that owning this franchise would enable you to achieve your maximum potential. So no matter how a new franchise – or even one with a well-established brand – jumps out at you, you need to step back, evaluate the business, and visualize yourself owning it.
Ask yourself, “Am I going to enjoy this? Will my military skills and experience be put to best use while owning this business?” In the end, no matter how exciting an opportunity may be, you have to find the optimal fit for yourself – one that truly mirrors who you are.
Pitfall #2 | TOO GOOD TO BE TRUE
And even when you seem to find the right fit, a franchise may not be all it seems. In cases like this, you may even have a franchisor offering “guaranteed profits” in the first months of operation. Seems great, but – just as in the military – it is crucial to stay vigilant.
Regardless of whatever success a franchise has had in a particular location, that success may not translate well into the market you would serve. So examine the franchise you would be acquiring in great detail, and do some market research on the competition in your area.
Like anything else in life, business success is almost always the result of calculated planning, relentless work, and perseverance. You have seen how well that approach works in the military. Be sure to apply it when assessing franchise options.
Pitfall #3 | WEAK MODEL
Even if a franchise has what seems to be a fantastic product or service, if the franchise does not have a tried-and-true business model there are bound to be problems. What is a business model? There are many definitions – but you can think of the model as the design of the business, involving such essential elements as products and/or services, goals and objectives, people (employees, customers), processes and strategies (business, financial), and investments (money, equipment). As you might suspect, based on what you have just read, the model of even a very small business can be rather complex. But you do not have to navigate your way through all the complexity by yourself. As I pointed out in my article “How Franchise Consultants Help Veterans Buy Franchises” in January-February 2015 Search & Employ®, a franchise consultant can help you.
But regardless of whether you do the job by yourself or with the aid of a consultant, you should consider the following:
- No matter how great a product or service may be, without customers to buy it, there is no business.
- If there a market for what the franchise sells, how lucrative is it?
- If there is a lucrative market, what types of systems and processes does the franchisor have in place to optimize profitability? Without the right system in place, revenue can become wasted through inefficiencies – leading to less profit for you, the franchise owner.
If the franchisor did not get the business model right the first time, you should think twice about the investment.
Pitfall #4 | NO DIRECT INSIGHT
Even if the fit, the market, and the model seem right, there could still be a problem. So far, you would have investigated a particular franchise from the outside. Now would be the time to go inside. And one of the best ways to gain insight into the actual success of a business is to talk directly with current or former franchisees. Speak with people who can attest to the picture of the business as it has been presented to you.
Thousands of veterans have transitioned from the military to franchising over the past few years. So it would be an excellent idea to reach out to one who owns a franchise that you are considering. Ask him or her what the first few months were like, what the profits have been, and how much support the franchisor has provided. Chances are the owner will be more than willing to help you, and may even volunteer additional information you can use.
Pitfall #5 | NOT BUTTONED DOWN
Even after you have done your due diligence and found the right franchise, you should not sign on the dotted line unless everything the franchisor is promising is written into the document – which is called a franchise agreement. Whether the franchisor is offering reduced royalties on another franchise down the road, or a special training seminar that could help you better operate your business, make sure you have the offer written into your franchise agreement.
It is also very important to have your lawyer sit down with you to go over the agreement. You need to be fully aware of your liabilities and responsibilities before you sign onto a binding agreement with the franchisor. If you are not comfortable with something – or not sure about something – this is the time to get it resolved. Make a list of questions to pose to your lawyer. After your consultation, you can send the questions to the franchisor for further clarification or an amendment of the agreement.
As a veteran serviceman or servicewoman, you deserve the best opportunities as you embark on your next mission in life. Avoiding the five pitfalls I have discussed will get you there faster – and on down the path to success.
David E. Omholt is a franchise advisor with Veteran Franchise Centers (VFC) – a RecruitMilitary strategic partner. His company offers a free service to veterans looking to learn more about the franchise buying process and options in the market. Omholt is a Certified Franchise Executive (CFE) and a frequent speaker on the subject of franchising on talk shows, at industry conferences, and on college campuses. He has been both a franchise licensor and a franchise licensee. Omholt is available at 866-246-2884 or email@example.com.
By David E. Omholt on Friday November 13, 2015