Tag Archives: Franchising

November 20, 2019 · 4:26 pm

Am I Hot Or Not?

One question that often comes up as I’m discussing franchise opportunities with people is that of what businesses are “hot.” It’s interesting that “hot” comes up at least as often as “profitable”. I can answer the questions for them (and usually do), but I also add a couple of other thoughts. That’s our topic for today.

For those of you that are curious, what’s currently “hot” in the world of franchises falls into a few broad categories. Within the food sector, breakfast places, juice bars, Mexican food, and healthy bowls are doing well. Restoration services – businesses that clean up after accidents or disasters are hot as well. Some of the other categories that are in demand are childcare, pet services, fitness businesses, and some “alternative” health businesses (cryotherapy, etc.), and beauty/grooming. As an aside, I represent businesses in every one of these categories – let me know if you want to learn more!

I’ll review those categories with interested candidates but then I caution them and I’d like to do the same here. Many of the businesses in those categories are “sexy” but several are not particularly profitable.  When you’re thinking about making a huge life change, which is what many of the folks I speak with are doing, you need to take a step back and look at the big picture. It’s not about what’s hot because what’s hot today may be gone tomorrow. Think about businesses that were all the rage a couple of years ago. Yogurt stores (yes, I have some of those too) seem to be fading away. Most of the “daily deal” sites have consolidated or gone away. Same with many of the subscription box services. The tanning bed business has transitioned into a spray-tan business.

My point to them, and to you, is that focusing on what’s hot isn’t a great criterion as you’re looking at new opportunities. Instead, ask yourself what makes you happy. What can you see yourself doing every day that will have you excited about getting out of bed? The odds are that there is a franchise that will allow you to do that. Some folks are equally concerned (or more concerned) with making money. Many of the businesses that do that aren’t “sexy.” They’re things like home repair or remodeling businesses or they’re businesses that might require a higher level of capital like a senior care business where you might need to “float” a payroll until cash flow grows.

Businesses ebb and flow. Categories run hot and cold, but what makes you happy probably doesn’t. Add profitability to the mix and you’re on the right track, whether it’s hot or not.

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November 13, 2019 · 9:50 am

Why This Brand?

When you have over 500 different brands that you represent, the reality is that you can’t know each and every one of them to the same degree. As I’ve been speaking to people interested in changing their lives for the better, I’ve come to have a list of “go-to” brands in each of the major categories. How these brands got on this list is, I think, instructive for every business.

I was actually speaking about this topic to a development director at one of the brands who reached out. Her first question was about the commission structure. We consultants get paid by the franchisors based on people signing franchise agreements and not by the candidates. I gather that for some consultants that how much of a commission they can make influences their choice of which brands to put forward. Point number one: while it’s obvious that the brands are my customers since they pay me, it’s impossible to work in a situation where the candidate’s interests diverge from the brand’s. In my mind, therefore, the commission is a non-factor. I can’t expect to earn anything in a situation where I hand off an unqualified candidate to a brand. My point is that in any sales situation, every stakeholder’s interests must be considered and subordinating what’s right for one party to a potential higher commission isn’t going to work.

One thing that influences my choice of brands a lot is the amount and quality of information the brand provides. You would not believe how little information I have about some of these franchises, several of which are businesses I don’t quite understand. In some cases, all I have is bare-bones information about costs and royalties and a link to the consumer website – not even a “want a franchise?” page which I have to find on my own. Where some brands give us presentations, folders, one-sheets, and research, others give us nothing. You can guess which brands get pitched. Point number two: don’t send your troops into battle without arming them properly.

The next thing I consider is responsiveness. In many cases, getting the candidate engaged enough to want to speak to a franchisor is a time-consuming effort. Once they are ready to go, I want someone at the franchisor who will be as proactive as I have been to get the candidate this far.  Once I’ve made an introduction, I expect the brand to reach out within a day, hopefully within an hour or two. Point number three: if you’re not going to work as hard on making a sale as others engaged in the process, you need to know that there are other businesses out there who will. Be responsive. Return phone calls and emails in a timely manner.

Finally, I also consider communication. Some brands tell me every time they have an interaction with my candidate. Others have been radio-silent. You can guess which type I prefer. It’s very hard to over-communicate in any business.

Those are things I consider when choosing partners. Anything I’ve missed that you think is critical?

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October 30, 2019 · 12:42 pm

Something For Nothing

I went to one of the warehouse club stores yesterday to make some bulk purchases. If you’ve ever been in one of them – Costco, BJ’s, Sam’s Club, etc. – you know that one feature of walking around the place is that there are usually free samples. You can taste the latest and greatest in meats, cheeses, and frozen things to cook while you’re too busy to make something yourself. That got me thinking about the fact that you really don’t see a lot of sampling elsewhere.

I’m a fan of the free trial. It gets customers walking through your door and using your product. What I don’t particularly like are those “free” trials that require you to fork over your credit card. Free means without strings, right? In particular, if you’re a business that is built around what I think is the gold standard – recurring revenues – you ought to be spending a good chunk of your marketing dollars on free trials.

It’s relatively simple math, right? What’s the lifetime value of a customer? What does it cost you to offer up a free trial – a visit, a free month, whatever? What is the conversion rate of those freebies – how many of the trials become regular customers? Recurring revenues are predictable and generally pretty stable. I bet you’ve signed up for subscriptions of some sort and forgotten you’ve done so or don’t use them as often as you thought you would. For a business, that’s a customer without costs, and that’s a nice margin!

When I talk to people who are looking at franchise opportunities and who don’t have a particular brand or industry in mind, I usually talk to them about the businesses with recurring revenue models. Things like cleaning services. Not a sexy business, but very profitable and that, in part, is because of the recurring revenues. Same thing with spa businesses or some hair salons that feature memberships. Are those businesses that can offer a free trial? Maybe if you’re an out-of-the-box thinker. Giving a converted customer the ability to give away a free trial to a friend is another great way to expand your base at very little cost.

Here is the thing about free trials leading to recurring revenues. As with any business, you have to maintain a high level of customer service. After all, when someone’s credit card is getting dinged each month and your business appears on their statement, it’s an opportunity for them to reconsider.  If they walk away, no amount of free sampling will get them back most of the time. Everyone loves something for nothing. The opposite – nothing for something – is very much NOT true!

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