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How choose the right Franchise , for starting a Business and keep your money safe?

by Ronaldo Derric
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parallax: difference in apparent displacement or apparent direction of an object viewed from two different points that are not in line with the object.

paradox: Something of a seemingly contradictory nature (such as a person, situation, or action).

— Merriam-Webster Dictionary

RELATED: 5 Questions You Need to Answer Before Choosing a Franchise

Franchise Parallax Paradox

As per Latest news , One of the most interesting things about franchises is a strange phenomenon I call the “franchise parallax paradox.” The same franchise is often viewed as a great business opportunity by some observers at the same time, while others hold a completely opposite opinion.

Assuming neither party has a personal interest in the answer (such as a sales commission) and setting aside the question of personal suitability, it is often the case that these two dissimilar opinion holders What separates them are their relative franchise experience. Their different perspectives lead to very different perceptions of the concept’s attractiveness as a business. They may also have very different views on the long-term prospects of that franchise.

Top 3 best, Information asymmetry creates potential winners and losers. This economic truism also exists in franchises. For example, experienced franchise operators, franchise development professionals, and consultants deeply involved in franchises know which brands are heading in the right direction and which ones to avoid. This spills over into brands that don’t want to appear on resumes they receive for corporate franchise jobs. They are in a much better position to avoid bad concepts (or at least lower their offer prices) compared to customers. You need to do a better job of explaining what a quality concept looks like using.

High-quality franchises have common attributes and metrics that correctly identify them as high-quality — more metrics than marketing spin. and new expansion agreements signed by existing franchisees are verifiable data that tend to indicate high-quality franchises. This data can be measured and tracked over time. Examples include unit-level profitability, high customer satisfaction, and his 100% opening of sales units.

The true indicator of a quality franchise is data-driven. But the franchise department sometimes gets amnesiac about this. The relative merits of a particular franchise are based on “fit” or just disagreement, not evidence. Sales exaggeration and overly aggressive marketing go unnoticed. Buyer’s responsibility The industry is shrugging. This means that the “haves”, armed with information about what a quality franchise actually looks like, make one decision about a brand, while the “have nots” are influencers, crafty It leads to a situation driven by marketing, paid recommendations, and unvetted listings. So, depending on who you ask, and their understanding of the quality of the franchise, the very same brand could be viewed as an opportunity or a dog.

RELATED: How to Choose the Best Franchises to Own in 2022

Investigating Franchise Concepts

As a prospective franchisee, systematically explore the concept of franchising and involve as many people with franchise experience as possible. Network with reputable broker networks, franchise attorneys, franchise experts, and franchisees themselves. Talk to your competitors and hear their impressions of the franchise concept you are considering. We need to know what all these people who are obsessed with franchises know and get as much data as possible about the franchise concept itself.

Also, pay attention to the types of franchisees the concept attracts. Are all franchisees first-time business owners? Do they have a franchise background or do they tend to be more experienced operators? Groucho Marx However, in franchising, a peer group of potential franchisees sends an important signal. “Why would a franchise endorse this particular type of candidate? Why would this type of candidate be attracted to this business in the first place? Do you think they will succeed? What if they fail? Could that be the likely reason? What did these franchisees know about franchises before they chose this concept?

Finally, has the brand attracted interest from private equity? It’s not easy, but research where the franchise you’re considering falls on the spectrum of PE interest. Are Private Equity Aggressively Rolling Up Multi-Unit Operators or Brands? Have They Acquired Nearby Competitors? Franchises Continue to Consolidate Around Platforms. If the brand you’re considering isn’t already part of a platform and scaling itself up, try to find out what’s behind the decision to fly solo on websites to post free ads and stay small. If private equity has already been considered and passed, you may want to do the same.

A short case study illustrates the franchise parallax paradox perfectly (but very much): Burgerim. Burgerim sold quickly after entering the flashy US market and having a little real track record of operating in its home country of Israel. it was done. 1,500+ franchise licenses Between 2016 and 2019, it opened just 200 locations before imploding and causing a rare Federal Trade Commission lawsuit against the company.

Seasoned restaurateurs, some franchise analysts, industry reporters, and private equity investors were watching the story and were puzzled by the pace of Burgerim’s franchise sales. First, the menu and operating model were complex, and the franchise pitch was aimed especially at inexperienced buyers. Consumer demand was largely unproven. Given that the model is completely different and that Five Guys had a real operational track record, a homebrew comparison to other highly successful burgers such as Five Guys and his concept denounces blatant appropriation. did. Five Guys also attracted a strong base of experienced multi-unit restaurant operators that Burgerim did not have on, free classified ads sites.

According to FRANdata, there are approximately 775,000 franchised properties in the United States alone. About 50% are restaurants and food-related retailers. Restaurant operators also tend to be multi-unit operators. As such, there were enough proven operators to be potential customers for the Burgerim franchise. But according to the Restaurant business Burgerim’s ad instead clearly emphasized the low cost of entry and lack of necessary experience. no experience required In all caps, people said they needed only $50,000 to open a restaurant.” This should be a big red flag. Same brand. Two completely different perspectives based on experience in both the franchise and the restaurant sector.

Also, there was no private equity interest in the brand. A legitimately valuable and fast-growing franchise brand usually attracts the interest of his private equity. But private equity was eerily quiet as Burgerim continued to make headlines with its swift license sales. Future franchisees themselves probably didn’t understand this, but lenders, analysts, and the industry press did.

RELATED: What You Really Need to Look for When Considering a free classified ads sites.

How to avoid the bad side of the franchise parallax paradox

Berger Rim is, of course, an extreme example. However, currently aggressively marketed franchises that veteran franchise observers may deem sleepy, dangerous, overpriced, unappealing, or simply need more time to prove themselves. If you are a prospective franchisee, how do you avoid getting caught up on the wrong side of the parallax paradox of franchising? Utilize the knowledge of as many insiders as possible to fill knowledge gaps.

First, create your own decision criteria based on provable data, not marketing hype. Be clear about your goals and how the franchise can help you reach those goals. Align your data against these specific goals. For example, “In order to make this business venture worthwhile for me, I need to own these two units and make at least $125,000 a year after paying off my initial investment.” How many of our franchisees have actually made it? Engage reputable and experienced guides, including franchise attorneys, in the process.

Second, ask for help — but be sure to ask anyone recommending a franchise about their experience, training, and rewards. Experienced and well-trained advisors are available with years of experience guiding happy franchisees to good concepts. Wait until you find a good advisor with a proven track record.

Third, networks, networks, networks within the franchise. Participate in franchise conferences. Join the International Franchise Association to learn about franchising best practices. Meet different people with franchise experience. Talk to competitors about the concept you are considering. Talk to your franchisee. do they do that again? why?

You can and should fill in the gaps in your franchise knowledge, but you must be willing to put a lot of time and effort into your due diligence. Help is there if you ask for it on, websites to post free ads. Experienced franchise operators and subject matter experts pressure test your assumptions and encourage you to ask the right questions. A vetted list helps clarify important selection criteria and questions to ask, but they are only a starting point.

The franchise is a proven model. But not all franchises are equally attractive businesses. Perhaps the most dangerous factor in the franchise buying process is your own belief that you know more than you actually do. Take advantage of the franchise’s vast knowledge base.

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