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Why Should You Buy A Franchise?

I am often asked why anyone should buy a franchise. You have to pay fees for a license, attend training courses, sign an agreement the length of a small novel and then start a business that doesn't even have your own name on it. For many people, this seems all too complicated for what are essentially ephemeral advantages. Sure, you could be getting the "secret recipe" or the inside look at a new and exciting product line, but on the whole franchising lives in the day-to-day world of business. Franchises change oil, serve food, do accounting and sell retail products. In fact, I have never seen a franchise engage in any activity that wasn't already being done by independents. To add to this, some companies, like ours, actually require that you have a background in the business before you can join us. Seems strange, if you know how to do accounting, why would you join an accounting franchise? If you know how to cook hamburgers, why buy a burger franchise? If you know how to change the oil on a car, then why buy a franchise that essentially does only that?

The answer to these dilemmas is that franchising offers more than just help performing the technical aspects of the business. While you know how to cook a hamburger, a hamburger franchise should show you how to make money cooking hamburgers.

When I first became involved in franchising in 1986, I attended some sessions with the well-known franchise consultant Bob Gappa of Management 2000. He taught me that there are only three things a franchise company can offer. They are systems, support and brand name. To even suggest that we have anything else to offer to a potential franchise purchaser borders on the ridiculous. Franchising does not have magic dust we can sprinkle on every new inductee to ensure success. Running a business, any business, is hard work. A good franchise company can help you through the issues that are important, teach you the core business principles and assist you along the way. Can you do it yourself? The answer is obviously yes. Millions have and this continent was built on their efforts. The point that has to be made, however, is that for every person, who succeeded on his/her own, many have not.

Why do you need systems, support and brand name? First, while you may know the product or service of the franchise, you probably do not know the business of that product or service. It is an entirely different matter to know how to do accounting than it is to run a business that does accounting. Systems show you how to organize the process in the most efficient manner possible. Business ultimately revolves around allocating resources. A good system will show you how to make good use of scarce resources. A good system has stood the test of time and has been developed with only efficiency and client service in mind.

A good franchise company will also continually develop the system to reflect advancements in technology and a changing marketplace. These ideas often come from the franchisees themselves who are closest to the action. The importance of this study and development is that everyone benefits from advances. There is no doubt that individuals working on their own could duplicate these systems. But how long will it take?

The next aspect is support. Someone once said that you go into business to do the one thing you love and to learn the hundred things you do not know how to do. Even with the simplest of products or services, there comes a time when you will face something you have never seen before. This is when support is needed. Good support groups have usually seen the problem before and they can shortcut your time resolving the issue. Even if the problem is new to the support group, they have the time and the resources to fully solve the problem for you, if for no other reason than to have the answer the next time the issue arises.

Support should go further than just answering questions. Good support ensures that your education is up-to-date and relevant to your business. Good support looks at issues before they become problems. This proactive stance allows the individual franchisees to avoid problems entirely. A good support group will help you measure yourself and guide you along in the logical steps of your business development. After thirty years in this business, our company has a fairly good understanding of the issues facing new offices, mid-aged offices and older offices. We know this not because we are smarter, but simply because we have done it before. The founder of our company, Walt Padgett, once said that Padgett is thirty years of mistakes that have been fixed.

The franchise company should offer you brand-name recognition in the marketplace. This is done through the continual promotion of the company and its products through various media opportunities. By developing a brand name in every area, a major asset is created. When people think of your company when they are thinking of a product or service, you have a huge advantage in the marketplace. This responsibility is jointly shared between the franchisee and the franchiser. The franchisee is needed to promote the name locally, while the franchiser promotes the name nationally.

These concepts, systems, support and brand name are the cornerstones of good franchise companies. These are the reasons why you should consider franchising as an alternative to doing it yourself. I would not take this as a universal endorsement of all franchise companies. Some are very poorly equipped to offer these three ideals, but this is how all franchise companies should be measured. When it comes time for you to make a decision about franchising, consider these ideas and be prepared to do your homework.

Dan Sautner, C.A., is chairman of Padgett Business Services. Padgett Business Services, with 425 offices system-wide, provides accounting and tax services to independent companies throughout North America.
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Author:Sautner, Dan
Publication:The National Public Accountant
Geographic Code:1USA
Date:Feb 1, 2000
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