Can You Buy a Big Franchise?
Once you realize the appeal of joining a big franchise, the next logical question is: "Is it possible for me?" Even if you're extremely interested in buying a McDonald's or Subway or 7-Eleven, will those big-name players want to sell to you, Joe the Franchisee?
Absolutely, says Hardy Grewal, a longtime Subway franchisee and Subway's development agent for Los Angeles County and Orange County, Calif. The chances for a regular guy to buy into a big brand like Subway "are there, if you have the capital and the background we're looking for," says Grewal, who receives about 4,000 applications every quarter. "We are still approving new franchisees now--maybe not to the extent as when the brand was growing originally, but there are always new opportunities. Plus, people in the system may want to retire and sell stores, so we're always looking into our pool of qualified people. "
Contrary to conventional franchising wisdom, Subway does seek the entrepreneurial spirit in new franchisees, Grewal says. Investors? Not so much.
"I sift out doctors or engineers who are looking for a second income," he says. "We want people involved in the day-to-day and who want to expand the brand."
Even in the current financial crisis, "don't expect the larger and more experienced or important brands to panic and take in any candidate that simply has the money to open," says Michael H. Seid, founder and managing director of franchise advisory firm Michael H. Seid & Associates and co-author of Franchising for Dummies.
In fact, single-unit franchisees might find an upside to the economic downturn. "Many franchisors are going to be challenged for the next nine months to a year," Seid says. "A solid single-unit franchisee will be attractive to them to help meet their current growth projections."
What, specifically, will make you attractive to franchisors? "Come to the table with the needed capital and an ability to qualify for a loan--that's what franchisors need right now from a prospective franchisee. For the next year, available liquid capital will play a very important role in candidate acceptance," Seid says. "Franchisors also look for background and experience, but not necessarily in a related industry. How well you've done in your career is an indication of future performance. And show you understand the brand and the culture of the franchise system, and be respectful, even excited, about joining the system."
Also understand that research is all the more important now--even the biggest franchises could be eventually affected by the economy, some for better, some for worse. "This downturn will positively affect those brands with quality offerings at a lower price point," Seid says. "But high-end restaurants and hotels will face some issues in the coming year."
What's Grewal's best advice for franchisees looking to succeed in a big franchise? Go for it in the due diligence phase, as he did when he bought his first Subway location.
"Instead of going to the financials right away, I talked to at least 10 franchisees in the system, asking their honest opinion about any problems," he says.
Also, ask questions about guarantees on leases and visit websites of franchisees--even the unhappy ones. Grewal says discontent franchisees are common in any large system.
"There will always be one or two franchisees [who are disgruntled]. If you visit 10 stores and they all say they want to sell, then that's when you shouldn't touch a franchise."
Once you join a big franchise, Grewal recommends maximizing your opportunity by staying open to growth.
"Some people buy one or two stores because they want to count the cash themselves every day. They don't want to delegate," he says. "I had the ability to do that."
Because of that ability, this Indian immigrant rose from buying one franchise to owning 25 to overseeing 700.
"I couldn't have dreamed of getting to where I am today without franchising," Grewal says. "I'd probably be an accountant making nowhere near what I'm earning now. It was through franchising that I was able to accomplish the American Dream."
Entrepreneur.com readers: How did you finance your franchise? In this tight credit market, franchisees have to be more creative than ever in financing their franchise. What is the most creative approach you took to find franchise funding, or what is the most creative financing story you've heard from another franchisee?
E-mail your stories to firstname.lastname@example.org . Then check back to this column; in an upcoming month, we'll reveal the most creative financing stories of the bunch.