Truths and Myths about Management Franchises for Investors Montrose CO

There is a saying among investors that buying a franchise is buying a job. Many franchisees—those who own franchises—work long hours at unglamorous jobs for what equates to less than minimum wage while running their franchises.

Still, many investors are intrigued by the success rates in franchising.

"Franchises are typically in business five years after they start—I think the success rate is like 95 percent—whereas startup businesses don't have anything close to that success rate. So you're buying a track record," Phil Brown, an area developer for Sport Clips, said. "The support mechanism...for franchisees is fabulous."

Franchises have a high rate of success in comparison to startup businesses Franchises are popular among investors for a variety of reasons, but are more often regarded as businesses than pure investments. One of the main draws for investors is the sheer amount of information potential franchisees have available to them—including contact information for current franchisees with the company they are researching—which allows them to conduct careful, detailed due diligence.

"Franchising is the only form of business startup where you can speak with other owners, and even visit other owners, who own the same business as you are considering buying before you invest," Scott Cronk, principal of Murphy Business and Financial Corporation, said.

Further, franchised businesses have proven to be successful, which significantly decreases the risk associated with the investment. "Franchise investors are typically not people who are investing in venture capital or high risk or bio-tech...they kind of have a lower risk tolerance," Jeff Levy, a franchisee of The Entrepreneur's Source, said.

Managing Managers

Many people who are interested in franchising aren't interested in giving up their full-time job in order to operate a franchise.

Thus, investors who want to buy a franchise as a source of cash flow rather than employment ought to consider franchising industries that tend to allow their owners more flexibility by requiring them to "manage managers" rather than each detail of the daily operations of the business, Tom Miller, executive vice president and co-owner of Murphy Business and Financial Corporation, said.

Management franchises appeal to investors with day jobs Management franchises "allow you to protect your family by keeping your job, but also building a business on the side," Miller said.

"The real hurdle that [management franchises] have is that [people] think they can just stop in for an hour here, or an hour there, and they think that their business is truly going to run on its own," Miller said.

Miller said he recommends that new franchisees spend "as much time as humanly possible, at least for the first year," at their franchise and working with the managers. "That can be a pretty hectic time in your life, because you're working full-time...and managing managers in all your extra hours."

Manag...

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