What is first thing to know when becoming a franchisee? When you become a franchisee, you are obtaining the right to use someone else’s trademark and operating system.
In exchange for that, you are going to have to agree contractually to use the trademark as the franchisor designates and follow that operating system.
You are going to pay a fee for the privilege of getting into the franchise network and then an ongoing fee.
So the first step is to really look introspectively and ask yourself, ‘Am I the kind of person that can follow someone else’s system? Or do I want to go off and do things on my own?’
How restrictive are the franchise rules? The stronger franchise concepts tend to be the ones with the most restrictions.
And that’s how they build their brand.
In order to build a strong brand, you have to have those controls in place.
And you have to be willing to enforce them.
The franchisor that would scare me the most as a franchisee is somebody who is willing to change their standards. If I am doing what I am supposed to be doing to build a big strong brand, I want every other franchisee to live by those same rules.
How do you know if the fee is worth paying? You’d have to weigh the cost of what would it cost me to go start everything. The person who is only interested in the fee and not interested in promoting the standards of the brand again is a red flag.
Most franchisors don’t make a lot of money on the initial fee because they are giving you opening support.
They aren’t going to show you a balance sheet of what the opening support costs. But ... whatever their marketing scheme is, as long as they have that in place, that’s worth something to someone starting a business.
Legally, how hard is it to become a franchisee? The franchisor has done all the ground work for you. Legally, the franchisor has to prepare a franchise disclosure document or FDD.
All of the facts that you need to create your own business plan are created for you in that FDD.
You are going to want to read it thoroughly and have it reviewed by a franchise attorney. Someone who understands franchising because a franchise attorney can say, ‘This is pretty standard in franchising,’ or ‘Oh, wait a minute, they shouldn’t be asking you do this.’
You still are going to have to set up your own business and it would be a DBA under the franchisor’s trademark.
What should an LCO or landscaper know about franchising? One issue that we always have in franchising is territory. And one thing about a service business, particularly one where the franchisee is mobile, is you want to avoid what I would call interbrand competitions.
Where you and I are both franchisees of a lawn care company … and the only thing we have to compete on is price, and when we go out and call on the same homeowner or same business to provide that service and we are undercutting each other’s price, everybody loses. In those types of service businesses, I think having a protected territory becomes important.