Is a Franchise Your Best Route to Entrepreneurial Success?
Is a Franchise Your Best Route to Entrepreneurial Success?
by Richard Parker, and Barry Lenson
Should you buy a franchise? Will owning one give you entrepreneurial riches and independence?
Trump University Professor Richard Parker can answer those questions better than anyone else. He has been buying and selling businesses - and starting them too - since he was in his teens. In this recent conversation with Trump University’s Executive Editor Barry Lenson, Professor Parker shares insights from The Art of Buying a Business, the life-changing course he developed for Trump University.
Barry Lenson: Many people believe that owning a franchise minimizes the risks of owning a business - that there are systems, policies, and procedures in place that will minimize the hazards. So is it really smarter to buy a franchise than a non-franchised business?
Richard Parker: When you buy a franchise, you may have some better data to predict your profits and the overall success versus a brand-new startup business. That is because franchises, unlike other startups, follow a mass recipe that has proven successful in other locales. And yes, those systems, policies, and procedures are already in place.
However, any good non-franchise business has those same ingredients too. The difference is that franchises might have more credibility with consumers than other businesses do, thanks to a recognizable brand name, advertising and familiar products. But the bottom line is, any good business needs a recipe to succeed. Most franchises really only give you the ingredients.
BL: Many people buy franchises to avoid the cost of marketing, advertising, image-building and the rest. That seems like sound thinking, right?
RP: Those are major benefits, but they come at substantial cost. And you are never going to avoid those costs altogether. You will be paying a franchise fee right off the top line for them. Some of the strategies about how to handle advertising and marketing are laid out for you when you acquire a franchise. The question is, can you do a more effective job of reaching those same goals on your own? You may be able to do it for less money than the cost of a franchise.
BL: Are there any individuals who should avoid franchises altogether?
RP: Franchise ownership is not for everyone. It is best for people who don’t mind following orders, who are comfortable embarking on a middle-of-the-road venture with no major upside and (hopefully) no major downside.
Many people buy franchises because they lack confidence in their ability to run their first business. That makes you wonder whether those people couldn’t learn the skills they need at an institution like Trump University and quickly know how to run a business and make more money.
So to summarize, a franchise is not for you if you have an ultra-strong entrepreneurial drive, a burning desire to break new ground or challenge the status quo. Nor is it for you if you are unwilling to put the needs of the parent company before your own.
BL: So what do you tell the person who really wants to own a business and is leaning towards a franchise?
RP: Let me list the considerations.
First, take an honest inventory of yourself. What are your goals? Your strengths? Your weaknesses?
Second, decide if you can live with, and thrive within, the confines of a franchise.
Third, make certain to educate yourself about the specific franchise you are considering. Franchise companies employ the slickest sales people you’ve ever seen - people who could sell you just about anything. So please be wary.
Fourth, if you’re absolutely convinced that a franchise is for you, buy a resale. One that’s already proven successful with customers in its current location.
Fifth, if you have an ounce of doubt about buying a franchise, then it’s probably not for you. Take the time to research and investigate non-franchised businesses for sale. You really are better off, in my opinion, getting into a non-franchised business.
Sixth, and most importantly, whether you buy a franchise or not, education is the key to your entrepreneurial success. Take the time to learn what’s involved and know what you need to do in each stage of the buying process. Ultimately, your knowledge will determine whether you succeed or fail.
Trump University Professor Richard Parker developed Trump University’s self-paced multimedia home-study course, The Art of Buying a Business. Barry Lenson is Trump University’s Executive Editor.