What to know before you buy a franchise

Making the decision to join a franchise can mean a huge increase in resources, but how do you know which would be a good fit for you? While it can be great for brand recognition, marketing and other resources that come from partnering with a national company, it also comes with requirements, expectations and challenges.

“You’re buying into that but in doing so, part of buying into a franchise is now you are protecting the brand with which you just bought in,” says Lou Schager, COO of Mosquito Joe.

“Some franchises offer detailed organizational systems, training and day-to-day support, and others are more product focused. Each has its own strengths and its own personality,” says Phil Fogarty.

Fogarty says his experience with two different franchises was dramatically different and served very different markets. The Ohio Weed Man franchise owner has also owned a holiday lighting franchise in the past and while Weed Man is very system-oriented, the holiday lighting franchise was much more focused on products.

The Christmas Décor franchise gave him the buying power for the variety and quantity of products he needed at the right time of year.

Brad Saunders has owned a franchise before and is now the director of business development at Spring-Green Lawn Care. He says most people are looking for an organizational system for the weed and fertilization side of their business when they choose to partner with his company.

“Because these green industry guys want to do everything, it can be beneficial to partner with the franchise to get the technology, the experience, the technique out of the way by purchasing a franchise,” he says.

Take a good look at your books before you make any decisions, Saunders says. In his experience, franchisees are usually using cash flow or profits from other businesses to help them invest and grow their business.

“Our suggestion always is not to put cash down,” he says. “Try to use minimal cash but then try to have a business that’s strong enough to make those payments for you ... You’ve got to have a systematic way to help support and finance that first couple years so that you’re able to grow the business fast enough to get that personal return on it.”

Smart budgeting, especially in the first few years is a requirement as profits take some time to come. “Sometimes we have people who like to start a business and start making money right away and that’s not a good approach,” Schager says.

Do your homework.

If you’ve ever considered a franchise before, you know there’s a lot of paperwork involved. The franchise disclosure document, or FDD, can be daunting to look through and you may want to consider enlisting the help of a lawyer or accountant before you sign.

“It’s a pretty overwhelming decision in a lot of ways because once you sign, there’s always post term and in term non-competition things,” Fogarty says. “You really have to be all in and to be successful in anything you have to be all in. You can’t do things half-baked and expect great results.”

And if you’re looking at a turf care franchise, you’ll want to have an agronomist on staff as well, Saunders says. “Specifically the turf care of the green industry there’s so much licensing and technology and equipment and materials and everybody’s got a new brand of weed killer coming out every year,” he says.

Marketing is another area where you might need some assistance. While many franchises have marketing experts and consultants who can make a great plan, the execution is the tough part, Saunders says.

Marketing locally is what’s most important, Schager says – getting around to local chambers of commerce, establishing connections with different associations and building a referral network.

A business consultant is another thing to look for in a franchise operation. Franchises may require a certain amount of growth and set goals for your business, and a business consultant can hold you accountable and help you make a plan to achieve that growth.

“Internal support is very important,” Saunders says. “(Business owners) are already busy. They’re already trying to do too many things. If you don’t have somebody to tell you how to reinvest that money into growing the business, you’re not going to do it. You’re too busy.”

Looking beyond the brand, consider what type of support you’re going to get once you’ve signed the papers. “I’m surprised always at how a lot of franchise systems are more about selling the franchise and how little support there can be at the back end of it,” Fogarty says. “They’re prepared to sell and get the brand out there but they’re not prepared to handle the variety of needs that people have when they join up with the franchise system.”

Making up your mind.

The decision-making process can take months, or even years, but it is crucial to fully understand the ins and outs of a franchise agreement before making a commitment. Moving from owning your own business to owning a franchise means you can’t dabble in both, Schager says. You must follow the systems in place per the franchise agreement, so it’s key to understand all of the requirements.

Besides the initial investment you’ll have to make, look at business expenses for the first year. Consider equipment purchases, new uniforms or supplies, software and training.

“I think that anytime you’re required to buy materials or required to buy proprietary equipment from a franchise, you should be cautious,” Saunders says. “It may be a great deal and it may be the best way to go but you should be aware.”

Mosquito Joe requires franchisees to use Ford trucks and STIHL blowers because they’ve found them to be the most effective, both in cost and production. They have relationships with both companies, which helps on cost.

While Spring-Green does require franchisees to purchase a custom-made tank for efficiency, Saunders warns that when it comes to buying chemicals and fertilizers, franchisees should do it on their own. “Absolutely do not buy that from the franchise. Even if they think they’re getting a better deal, there could be hidden markups,” he says.

They key decision-maker, besides the owner, is often the spouse in Saunders’ experience. He says about 50 percent of Spring-Green franchisees are husband-wife teams. And at Mosquito Joe, Schager says the most successful franchises are family-run.

He recommends that the point person in the organization, whether that’s a spouse or not, be involved in the decision-making process. But it’s important not to involve too many people who are already dealing with the day-to-day operations.

“I’ve had that happen in our operation,” Saunders says. “Those people are sitting in that conversation going ‘What else am I going to have to do?’”

Once you meet with a franchise representative, you’ll get the franchise disclosure document, or FDD, which is the Bible when it comes to learning about the terms and conditions of a franchise agreement. Regulated by the FTC, it includes everything from the benefits and training to the default procedure.

Validation through references is one of the most important steps in the process, and making one or two phone calls isn’t going to cut it, Saunders says. “All organizations are going to have a third of the people that are cheerleaders, a third of the people that are just getting by and a third that hate what they’re doing, so you’re going to have to take that into consideration,” he says.

“You really have to be all in and to be successful in anything you have to be all in. You can’t do things half-baked and expect great results.” Phil Fogarty, Weed Man

Making it happen.

Once you do take the plunge, you need to get your employees and your customers on board. Depending on the size of your company, you may want to inform your customers yourself, or you may want to delegate that communication to account managers. “Ultimately what the customer needs to know is that the owner of this business is taking on a franchise in order to give you professional, top-of-the-line service,” Saunders says.

Selling the employees on the idea can be simple since it shows the company is growing, giving them opportunities to move up.

“There’s no more powerful way to do business because you have the personal service and the vested interest of a local owner with these great resources and experts that leverage all their experience, time and skill into this brand and this service, so I think it’s an extremely easy sell to tell someone I’m going into a franchise,” Fogarty says. “I’ve done it a couple of times now and every time it’s always been a positive because people just inherently understand this. Hey, if you’re going to join up with somebody that’s going to give you better resources, but you’re still delivering it? That’s great, I’m all in.”