Before even approaching a franchisor, Elgin suggests some key
things. Prepare a personal financial statement listing all your
assets and liabilities. This includes cash, stocks and similar
investments, your home, personal property, credit card bills and
car loans. Calculate your net worth and liquid assets. Many
franchises zero in on net worth and liquidity. Having those
numbers, along with your financial statements, at your fingertips
is impressive and shows you mean business.
How important are net worth and cash liquidity? According to
Sanders, cash liquidity is more important in the beginning to Merry
Maids than net worth, due to the high amount of debt net worth
sometimes includes. Campbell says, "Financing debt on debt is
not a great formula for success. Depending on the strength of the
net worth, financing can be a valuable option [in some]
circumstances."
It's equally important to think about what you want in a
business. Elgin suggests two things to consider:
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1. Your long-term goals: What do you want to gain from
owning this franchise? Do you want a business that absorbs you or
not?
2. Your compatibility with the franchise: When Elgin got
into a video-rental business many years ago, he was used to working
the 9-to-5 weekday routine. Suddenly, he had to be at the business
every evening, weekend and holiday. If you want to work only at
particular times, find a franchise that operates on a similar
schedule. Determine the number of hours per week you want to be
there, and if you have a family, factor in time for them. But
remember, as the owner, you're on call for emergencies or to
fill in for absentee employees.
Got Skills?
What skills do
franchisors look for in future franchisees?Marketing Skills
39%
Industry Experience 29%
General Business Experience 31%
Source: Entrepreneur's Franchise
500®, 2004
In finding a franchise you can be happy with, Elgin urges,
"Think about what you like to do and what you're good
at." But be aware that even corporate-world experience can
still not be enough when it comes to managing employees. The
environment is often very different from the corporate sector, and
you'll be recruiting and hiring employees who bring a host of
new issues for you to deal with, such as language barriers,
turnover and absenteeism. If personnel issues are not your forte,
consider hiring a general manager, but find out first if the
franchise allows that.
Being prepared for the evaluation is advantageous to both you
and the franchisor, because it allows both parties to see if
there's a good fit. Preparing thoroughly to prove why
you're worth investing in puts you in a much better position
than hastily popping the question and facing rejection.
Originally published in the September 2004 issue of Entrepreneur Magazine
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