Franchise Opportunity - Questions To Ask The Franchisor - #37

 


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Finding The Right Franchise

Whether it’s hamburgers, pizza, telecom, coffee, Internet, muffler parts, or seniors’ services, there are Franchise opportunities available to evaluate. There are great Franchise systems, good Franchise systems, and bad Franchise systems. The challenge is to ask the right questions to find the right system that will fit your goals and dreams. The key is to ask the questions – and listen closely to the responses. Only then can you determine if the Franchise opportunity is the right fit for you. So whether it’s food services like burgers or coffee, professional services like telecom or IT, or manual services like cleaning or oil changes, ask the questions and record the answers.

What Exit Strategies Are Available?

There are many factors that should come into your analysis before becoming a Franchisee. The folly often lies in not considering this part of the equation at the very time that you are considering entry into the Franchise in the first place. That’s exactly the time when you need to give significant consideration to the value of the asset that can be created. Ongoing profitability, cashflow, and emotional fulfillment, are all important criteria in the process of making an informed business decision about becoming a Franchisee. But then so is the growth of the asset value you create, along with the ease of realizing that value at the time you intend to exit.

You need to discuss these issues with the Franchisor as you consider the Franchise opportunity. If the Franchisor isn’t willing to discuss these issues, then it may mean that there isn’t a solid basis for asset growth, and current profitability is the only consideration. You have to determine how important this particular part of the equation is for you. The important part is to ask the question so you can assess the response in terms of your own goals and dreams.

Snagglepuss always knew it was ‘exit, stage left’, but that is not always so clear in the operation of a Franchised business. What is clear is that some dedicated thought needs to be applied at the time of entry so that appropriate strategic planning is put in play. Let’s consider a simple example to illustrate the importance of this consideration where you can increase the value of the business by $200,000 in five years, and there is a ready and willing market for the business at the end of that time. A straight-line application of the value increase, without considering the time value of money, would indicate that the real average annual earnings would be $40,000 over and above the net income of the business.

That should tell you that a business that earns $80,000 per year in profit might actually be a better investment than a business that makes $100,000 per year, if the latter has significantly less realizable value at the time of exit. If the plan is succession to family members, then again, the value of the asset to be transferred is of paramount importance, and not just the annual income.

Of course the timing of exit or liquidation will carry significant weight, and it’s not always in our control. Gilligan’s partnership share of Skipper’s Cruise Lines would have been much more valuable before he met Thurston and Lovey. That would indicate that we shouldn’t put the hen’s product all in one wicker carry case. The consideration should include both ongoing profitability, as well as ultimate asset value at the planned time of exit.

To receive a free copy of an E-Book titled ‘Franchise Opportunity – Making The Right Decision’ by Dennis Schooley, email that request to corp@schooleymitchell.com.

Dennis Schooley is the Founder of Schooley Mitchell Telecom Consultants, a Professional Services Franchise Company. He writes for publication, as well as for schooleymitchell. blogging.com and franchises. blogging.com, in the subject areas of Franchising, and Technology for the Layman. http://www.schooleymitchell.com , 888-311-6477, dschooley@schooleymitchell.com .

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