Top 12 Things People Wish They Knew About Franchising: A Talk With Franchising Expert and Consultant, Ricardo Matos of SRS Franchising Solutions
What do you really know about franchising? How many different industries do you think are represented by business owners who either want to expand their footprint or by companies who are willing to give others the opportunity to grow their own net worth? Answer: more than you think.
These days, it’s almost impossible to drive around your local neighborhood without seeing a business that is a franchise! From the eyelash bar across the street to the blow dry bar around the corner, or even the home cleaning service that you rely so heavily on. You may be surprised that a lot, if not most, of the businesses available for investment and you, go to daily are franchises.
To be honest, many local friends of yours might even be the hard-working owners of their own franchises, and you might not know.Franchises, of course, that we are most familiar with are in the food and beverage industry, many are restaurants, but there also are so many more!
So, let’s talk about the nitty gritty. What really does it mean to own a franchise? The first thing that our franchise expert, Ricardo Matos of SRS Franchise tells us is that, “a franchise is awarded, not bought.”
Ricardo spends much of his time as CEO and owner of SRS Business Consulting / Franchise solutions matching the perfect franchisor with the perfect franchisee to ensure success. In our consultation with Ricardo, he mentions various things that will ensure your success when looking to purchase a franchise:
PICK YOUR BEST FIT: Finding the right franchise for your skill set and interests will set you up for success. Make sure you choose an industry that makes you excited to get up and go to work every day. SRS Franchise solutions takes the time to make sure that you and your skills are perfectly tailored to the opportunity that you are choosing and helps walk you through the funding options, personality markers, and additional qualifiers that will insure your success.
FUNDING OPTIONS: What do you need to know about being financially ready before owning a franchise? You may be surprised at what you have available to finance your franchise such as 401K rollovers, unsecured loans, SBA loans, and home equity lines of credit.
401K ROLLOVERS: What are they? Do I qualify? 401k rollovers allow you to invest up to 100% of your retirement funds into your own business without paying any early withdrawal penalties or taxes and are an extremely popular method for franchise funding. This can also help you meet cash injection qualifications for other funding sources such as SBA and unsecured loans. 401k rollovers can offer several advantages, including less debt which accelerates profitability, immediate salary for owners, employee benefits, and more. They can be achieved in as little as a few weeks. There are several reasons why it is better to use your 401k vs. savings or taking out a loan. First, the money in the 401k is pre-tax dollars. The money coming out of savings is after-tax dollars. And, if you opt for a loan, you will repay the loan with interest. Not so with a 401 rollover. Another good point is that using a 401k is great for an exit strategy: when the business is sold, all the proceeds roll back into a retirement plan and is not taxed until distribution.
FRANCHISING FEES: There are many different Franchise fees outside of the obvious charge for buying into the franchise, which is payable upon signing the contract. Some franchisees will be responsible for royalties that may be as high as 12 percent of revenues, and do not forget other costs such as build-out, lawyer fees, employees, and business regulations.
VISAS: Did you know that many of your relatives can work with you and on work visas when you own a franchise? E-2 Visas are a unique methodology of being from another country and being awarded the opportunity to work in the US. They are easy to renew and come with a 2-5-year option to work and live in the US. Options to own a business and E-2 visas can begin at around $150,000 investment. You are required to fill out an application and work with an attorney; however, it can be a viable option for many families to have their loved ones work in the US with them.
DIFFERENT INDUSTRIES THAT OFFER FRANCHISES: You would be surprised at some of the industries and types of franchises that are out there. Some of the major categories are automotive services, beauty services, healthcare, finance services, child services, cleaning services, financial Services, pet care services, digital services, and IT Services… to name a few. Some others that you might be interested in but never know were franchises might be swimming schools, college nannies, sitters, and tutors, learning academies, and in-home or out of home senior service providers.
RECESSION PROOF: Because many of these companies have been streamlined by the franchisor, you are buying in to a true and tested and business model. Once you own a franchise, you are privy to equity in the logo, name, and essential framework of the business. If you work hard and keep the marketing of your company at the forefront, you are bound to see a recession proof business.
GOVERNMENT ASSISTANCE: While the SBA (Small Business Administration) does not actually provide loans, they will offer a loan guarantee on up to 90% of the loan to qualified borrowers making the loan more attractive and less risky to the actual lender. SBA loans can be a great method for funding your franchise. Most SBA loans can be secured within 60 - 90 days.
FTC RULES: There are also some federal regulations for franchisors that need to be followed, and a franchise attorney will know what they are. Right now, 23 unique disclosures must get included in any franchise agreement. It's quite in-depth, so don't try to form or join a franchise without an attorney's help. Your Franchise Consultant will be able to guide you through this process with minimal aggravations.
BUY-INS / TERMINATION: Many people do not realize that most franchising buy-ins are for 5 or 10 years. It's up to the franchisee to resign from the franchisee, which may require fees. Plus, you will not be allowed to use your business judgment when operating a franchise selling negotiation. You must follow the standard operating procedures given to you by your organization. You may even be limited about when you can sell the Franchise to others and whom you can sell it to if you decide to retire or venture into other Franchise.
PROVEN RESULTS / WORKING FOR YOURSELF: One advantage of franchising is that failure is less likely if you do the right research and choose your fit well. Some studies show that a legitimate franchise has a 95 percent success rate. If you choose wisely and are dedicated to growing the business, the framework has already been established for you.
WORK WITH A CONSULTANT: Because there are so many legalities, fees, and potential areas of ambiguity, it is an excellent idea to take into consideration working with a franchise consultant such as Ricardo with SRS Franchise Solutions. This partnership will undoubtedly provide you with the resources and direction to ensure success.
You can reference these categories for various franchises represented by SRS: Automotive, Business Services, Child Services, Cleaning Services, Financial Services, Food Services, Food & Beverage, Health Services, Home Improvement Services, Personal Care Services, Pet Services, Repair & Restoration, Retail, Senior Services, Sports/Fitness, Technology Services, Unique Services, and Vending Services.
