Buying a Franchise vs. Buying a Stock Portfolio – Why Not Choose You?

If your day is consumed with thoughts about wanting a better retirement but you don’t know where to turn, you’re not alone. Historically, Americans have opted to buy a stock portfolio and hoped for spot-on investment advice and growth to sustain you and your family in retirement.

Buying A Franchise

Buying a Franchise can Outpace Stock Growth

Have you ever thought about buying a franchise with your best friend or in an Investment Club?

Buying a franchise with a pattern of financial growth over time not only gives you a hard asset that builds equity but also puts you in control. Choose yourself to control your destiny as opposed to taking the investment advice of a stock firm or commissioned salesperson with a gross commission quota to meet.

Are you that guy stuck in Corporate America, not necessarily enjoying your commute to work every day, that knows your time is slipping by? Your salary just can’t keep up with inflation or healthcare costs, housing, food, you name it.You know your salary and even that of your spouse is not paying the bills. You also know, the idea of retiring well at age 65, only to live another 20 years or so, is just a pipe dream.

Find a Partner, Form an Investment Club and Buy A Franchise Business

Top franchises vary in price from as low as $60,000 to as high as $1,000,000 and more. There’s no reason why your investment team can’t buy multiple franchise units and diversify your franchise portfolio. You might want to own three Fantastic Sams franchises or multiple units of a fast food franchise or buy a franchise in the fitness sector or even a senior care franchise. You choose how to diversify your franchise portfolio.

The Federal Trade Commission is Your Friend

The Federal Trade Commission regulates the franchise industry. They protect the American Consumer. The FTC’s Franchise Rule states that a franchise business can display authentic information relating to the financial performance of either franchised units or company-owned outlets.There must be a legitimate basis for the information and the information must be included in the Franchise Disclosure Document under Item 19. The financials must be actual records of franchised units or company owned units.

Typically, the financial records span a period of at least three years and include a fixed number of either franchised or franchisor-owned units.

Your investment team can acquire the most current Franchise Disclosure Documents (FDD’s) of virtually any franchise system. If that franchisor has an Item 19, you can compare franchises in the same sector or analyze which franchise industries are performing better than others.

In addition, FDD’s include the names, telephone numbers and email addresses of all current and former franchisees. You will have an opportunity to contact current and former franchisees as a part of your franchise validation.

Do What You Love

We all know the world is changing very fast. Decisions are difficult and making smart choices every day is critical to your well-being. Whether you’re looking for a new job or a career change or you’ve decided to be your own boss, pursue that dream doing something you love.

People of wealth own valuable assets. Buying a franchise with a track record of stellar financial performance is a valuable asset.

Food Franchises Trending In 2017

Food Franchises and Restaurant Franchises are designated as either Quick Service, Casual Dining, Upscale Casual, Fine Dining or Fast Casual formats. Which restaurant format is trending in 2017?

If you’ve been researching food franchises, you may not have heard of the fast casual format. Essentially, fast casual is a blend of fast food and casual dining with a menu that features healthier, fresher, high-quality ingredients.

Food Franchise Blog

First quarter 2017 Restaurant Performance

Restaurant sales continued to struggle in March. Same-store sales dropped 1.1 percent while traffic dropped 3.4 percent. That’s a slight improvement over February 2017, but same-store traffic in the first quarter dropped 3.6%.

The average restaurant check in the first quarter was up 1.9 percent which is trending lower than the average 2.3 percent growth for all of 2016.

Upscale Casual Restaurant Trending Up in the First Quarter

Upscale casual restaurants typically have tablecloths, trained waitstaff and a full bar. They differ from fine dining restaurants which offer a good bar, signature cocktails, and fine wine. If you’re looking to be pampered, you’ll want to reserve a table at a fine dining establishment.

Upscale restaurants showed the strongest performance in the first quarter 2017. Fine dining and quick service restaurants were second and third respectively.

Family dining and fast casual restaurants were the weakest segments in quarter one.

The Restaurant Formats

Fast Food or Quick Service Restaurants (QSR)

Fast Food or Quick Service (QSR) are most often described as food concepts like McDonald’s, Taco Bell, Burger King, Jimmy John’s franchise, Subway franchise, and sandwich shop franchises that serve somewhat healthier food and get you on your way in less than 5-minutes.

The fast food restaurant franchise serves food for less than $5 per meal, have somewhat mediocre food quality, and has limited menus with no table service.

Casual Dining Food Franchises

Casual Dining restaurants typically serve food under $15 per meal with a fairly diverse menu and healthier choices than fast food restaurants.

Casual dining restaurants include TGI Fridays, Applebees, Red Robin Gourmet Burgers, P.F. Chang’s and Russo’s New York Pizzeria. Russo’s New York Pizzeria was voted the Best Fast-Casual Brand 2017!

Fast Casual Restaurants

Fast-casual restaurants are a combination of fast food and casual dining. The food is more upscale and offers a diverse menu than say Chipotle Mexican Grill. A good example of a fast casual restaurant is Panera Bread. Panera has no table service to speak of. You place your order at the front counter and then food is placed in an assembly area for you to pick-up.

Paisano’s franchise and Great Steak, Cheesesteak franchise also can fall into a fast casual franchise category.

Staffing Food Franchises in 2017

Finding qualified employees to staff your restaurant franchise is a concern. Managers and cooks and waiters can be hard to find and keep. Turnover in the restaurant industry is high. In fact, turnover for hourly restaurant employees as well as managers is higher than they have been in over ten years and is trending higher.

You may have to offer additional financial incentives to your staff to get them hired and keep them from leaving. Turnover is costly and can affect customer service.

Which Restaurant Format Should You Choose

As with any investment consider the trend but don’t make your decision solely on what is trending now. Times change, especially if you’re talking about food franchise opportunities or the restaurant industry.

Find food franchises that are emerging year to year. Sometimes the fastest growing food franchises are the first ones to fail. Look for consistency and a low failure rate.

Place a high value on the food experience of the management team. Do they have a successful background with food franchise opportunities or in the restaurant industry as a whole? What is their business plan to achieve consistent growth? Are they choosing winning locations?

As always, do your diligence and then ask questions of current franchisees. Find the best food franchise opportunity for you.

Top 10 Regrets Franchisees Have, AFTER Starting a Franchise

If there’s one thing we hear a lot at America’s Best Franchises, it’s “I wish I’d known THAT before I bought my franchise.”

Top Ten Regrets

“THAT” can be critical to success in franchising. There are so many things you need to know to start and run a franchise. Following are the Top 10 mistakes franchisees will make when starting a franchise.

1. Rushing the decision to buy a franchise.

Compare competing brands and don’t get caught up in trendy businesses or brands. Don’t be pressured by a salesperson to make a decision for some arbitrary reason that isn’t important to the BIG picture.

2. Not getting the necessary support from your family.

Owning a franchise is a family decision. Your entire household needs to be on board from day one.

3. Having unrealistic expectations.

Yes, franchise owners benefit from buying a proven model but that doesn’t mean you can’t fail. Validate your decision with RESEARCH. Pay close attention to failure rates. Some franchise systems have failure rates of less than 2% while others might be higher than 50%.

4. Being under capitalized.

Make sure you research Item 5, 6 & 7 of the FDD. Get clear on start-up capital, total investment, royalty fees and advertising fees. Is there an escalator to the royalty fees? Don’t stop there. Ask current franchisees if the numbers were accurate. If not, where did they go wrong?

5. Not having the best source of funding.

There are many options for funding, so make sure you explore them all before landing on one. If you have retirement funds consider using them to finance your franchise, tax free. And take inspiration from TRUMP: The Art of the Deal, which says, “Aim high and then keep pushing and pushing and pushing again until you get what you want.” Ask your franchisor about in-house financing and always push to negotiate your best rate or deal.

If you’re thinking about an SBA loan, understand the risks. SBA loans come with personal guarantees. Default and you could lose your home. Further, once you get an SBA loan, you can’t borrow your way out of being under capitalized. The likelihood of you getting any additional capital is not good. Ask your bank, if need be, if you can get additional bank financing on top of an SBA loan. If not, consider getting 30% to 50% more funding than you think you might need. If it turns out that you don’t need it, you can always pay down your loan early.

6. Not knowing your territory.

Recent history shows the term “exclusive territory” can have many meanings depending on which side you’re on. Find a franchise that has protected territories – exclusive rights to operate in a geographic area. If territories are not protected and even if they are, ask current franchisees about the impact of new units opening up adjacent to their franchise territory.

7. Not understanding your market area.

You own the secrets to your market because you live your life there. You are part of the community on a daily basis and can observe where people shop, traffic patterns, and what retail centers are busy and at what time of day. You also understand the needs of the community and know what services aren’t being provided.

8. Under-budgeting for personal living expenses.

Talk with current franchisees about the point of positive cash flow. Realistically, it could be 6 months to a year before you will be able to take a salary from your franchise. You’ll need to have a financial cushion of 6 months to a year for personal living expenses. Don’t forget unforeseen expenses, i.e. medical, education, and auto expenses.

9. Not putting enough thought into the hiring process.

Turnover is costly. Interview several candidates, do background checks, check references and look for a pattern of consistency. Hire who you want and DO NOT SETTLE.

10. Not accepting that franchising might not be right for you.

Owning a franchise is a risky proposition. If you are not a risk taker, franchising may not be for you. The nature of a true entrepreneur is a person that is willing to risk capital and resources to create personal wealth. If you don’t react to pressure well, you may want to reconsider. Entrepreneurs are survivors. They accept the challenges ahead of them and thrive by learning from their mistakes. If that’s you, we wish you great success!

Should Groupon Be a Part of Your Franchise Marketing Strategy?

Understandably, increasing your sales and number of customers is a top priority when marketing your franchise. And while there are many strategies to do that, daily deal sites like Groupon might be one worth considering.

Should Groupon Be a Part of Your Franchise Marketing Strategy?

How They Work

You might be familiar with Groupon from the customer’s perspective: you have the opportunity to pay for an experience or product at a serious discount, which gives you the chance to try out that brand to see if you like it without investing too much.

From the company’s perspective, you offer a product or service at a steep discount. You also give Groupon (or whatever deal site you work with) a percent of that to cover the “marketing fee.” The actual fee may vary, depending on the type of deal you’re offering and your industry, but 50% of the end price of the deal is standard.

So let’s say you run a home cleaning franchise, and you offer a first-time cleaning, normally $200, for $100. That’s what the customer will pay for your service. You then would give Groupon $50. So a service you’d normally charge $200 for, you get $50 for.

Why Losing Money is Great Marketing

It seems counterintuitive to take so little for something that you normally charge a lot more for, so why do it?

Let me introduce you to the concept of the loss leader: by offering a steep discount (one where you might even lose money) up front, you can attract new customers who wouldn’t otherwise have considered your business. The idea is that if they like what you offer, they’ll buy from you again and again … at the regular price.

So while you might lose money on that initial cleaning that you just got $50 for, if you market your business right in that first engagement with a new customer, you could get her to sign up for a $150 monthly cleaning for a year. Suddenly that loss of initial revenue isn’t such a big deal!

Consider the money you lose with a Groupon deal to be the money you invest in marketing. You could spend that money on advertising or other strategies, but in this situation, you’re spending it to get a highly targeted lead, one you already know is interested in what you sell.

How to Convert Those Groupon Customers

There are complaints from businesses that Groupon users are just out for a cheap deal, and that few ever come back and buy again. That may be true for a small portion, but overall, I’d say it is up to your franchise to ensure they become repeat customers.

How can you do that? Ensure that their first visit is stellar, then hook them. Maybe you ask for their email so that you can send them promotions. Or you give them a coupon to save 25% on their next visit. Or, like in the house cleaning example, give them a special offer if they sign up today. Whatever enticement you can offer to get them back, do!

Image: Photospin