Perhaps one of the best, and certainly most successful ways for someone to launch into an entrepreneurial endeavor is through a franchise. Many of the pitfalls that someone would encounter when starting a business are identified and the processes that may take years to develop, not to mention marketing strategies, are already in place with a franchise. 2019 was a great year for franchised businesses, by many indications. It was so good, in fact, that many are reconsidering franchise ownership.
With franchise profitability up year over year, most franchise owners are happy with their decision to buy one or more franchise locations. Guidant Financials’ Small Business Trends study shows that franchise owners rate their happiness at an average of eight on a scale of one to 10 (10 being happiest). Franchise owners are even 28% less likely to consider cash a major operational challenge than independent business owners.
Right now, with fewer people entering into franchise ownership, because of the strong job market, popular franchises are primed for opportunities, in a way they aren’t when unemployment is higher. Believe it or not there are opportunities during a recession or a post-recession period that directly benefit franchises. For instance, as prime real estate locations become available, landlords also become more eager for renters – which means they’re likely to cut better deals and put more money into tenant improvements.
As the Small Business Administration (SBA) says, “A recession-proof business is one that provides a need.” For example, even though California was one of the states that suffered the most during the Great Recession, it was Subway’s top expansion market in 2008-2010. Why? Consumers needed more affordable dining options.
Programs with already attractive rates, such as an SBA 7(a) loan, now have lower interest rates than have been seen earlier. And with recent adjustments to the SBA’s size standards, it’s estimated that almost 90,000 more businesses can gain small business status – which means more small business loans – to the tune of nearly $65 million. Guidant Financial, a company that assists existing and potential franchisees for everything from franchise fees, to equipment costs, to real estate, said, 98% of their qualified candidates get funded and they have funded nearly 800 franchises over the past two years.
Finding the Fit
Both for those looking for a business opportunity and those who wish to expand an existing successful business, franchising may be the answer for a number of reasons.
First, franchising can be used as a creative form of capital acquisition. The primary reason growth-oriented business owners turn to franchising is that it allows them to expand without the risk of debt or the cost of equity. Mark Siebert, a franchise consultant, said in an Entrepreneur magazine post, “Since the franchisee provides all the capital required to open and operate a unit, it allows companies to grow using the resources of others. By using other people’s money, the franchisor can grow largely unfettered by debt.”
In addition, franchising usually connects entrepreneurs with highly motivated business partners, who are as interested in their business’ success, as the franchisor. This coupled with the potential to accelerate the rapidity of growth, makes franchising attractive for certain business models and those with the skills sets to develop and maintain them.
Glenn Sandler, who built both a successful car dealership and one of the largest motorcycle retail and repair businesses in the southeast, went back to his CPA roots when he launched GI Tax and US Bookkeeping here in Brevard. Sandler’s vision is to compete with H&R Block, Jackson Hewitt and Liberty Tax, while providing franchise opportunities to men and women who have served in the military.
He was looking in to purchasing a franchise, then decided to start one. “I considered buying a Liberty Tax franchise,” Sandler said. “Then I walked into a room with 100 others who were going to do the same thing, who had never done taxes before. Then, I walked out and decided to build a tax preparation franchise instead.”
Recently, another rising star in the franchise market, Pirtek USA, opened its corporate headquarters in Rockledge. The company is the only franchise in the U.S. for hydraulic and industrial hose replacement and fluid transfer solutions, covering both sales and service. Pirtek boasts 500 employees in the States and 3,000 worldwide.
Moving up 95 places in Entrepreneur magazine’s Franchise 500 list, ranking No. 75, Pirtek has added 18 new franchise locations since January 2017. Its Franchise Development Manager, Nick Ridgeway, invites interested parties to explore the opportunity, in company video’s and their web site assures potential franchisees, “You start off with comprehensive, world-class training and enjoy support every step of the way. Our model works and provides you with the opportunity to grow your team so that you can enjoy all the lifestyle benefits that come from owning a successful business.”
Of course, like any business venture, complete due diligence is required to make sure both the franchise model, business sector and philosophical fit is right for the potential franchisee. “For individuals seeking to purchase a franchise, it is important to always do the appropriate research to make sure that the company’s leadership is in line with your own,” Rick Grossman the CEO of Franchise Hub/Vet Starter said. “You will be in business with the brand for a long time and it is imperative that you are willing to work with the leadership team as you grow your business.”
Originally produced by Guidant Financial and updated by Space Coast Magazines