To Start or to Franchise?

Happy Friday!

Do you remember my newsletter on the build vs buy argument? I want to do something similar today, except call it

To buy a franchise? Or to start from scratch?

Let’s say you’ve identified an industry that you love, how do you know if you should start one fresh or buy into a franchise?

The reason I ask this question is because I want to start interviewing more owners of franchising brands in an unbiased way, and I want to ask them all the same question:

What is the persona of a guy that would be better off just starting one of these by themselves? In other words, what type of person really doesn’t need a franchise, and might even have a negative experience if they bought a franchise?

I like this question because it’s asking a sales guy to anti-sell his product. That’s when we get the real truth…

Aaron and I touched on this topic in our interview, and he was unbiased enough to agree that there’s a whole category of entrepreneur out there that would butt heads with his company too much. Here’s how to know if that entrepreneur is you:

You Should Probably NOT Buy a Franchise If…

1. You’re a true outside of the box thinker

2. You’ve ONLY BEEN a lifelong entrepreneur

3. You hop from project to project

4. You have zero experience managing people

5. You don’t work well with authority

6. You have to dip into more than 1/3 of your net worth to buy a franchise

7. You have a very specific skillset

You Probably SHOULD Buy a Franchise If…

1. You’ve owned a business for a period of years and did well with it.

2. You have experience working a normal W2 and had a mostly positive experience and received mostly positive performance reviews.

3. You have experience managing people and are good at it

4. You have a broad skillset.

5. You won’t need to tap into more than 1/3 of your net worth for all of your franchise startup costs.

6. You’re systems oriented and want to step into something that is already proven to work.

7. You find a franchise in your preferred niche that has some sort of propriety method that you wouldn’t be able to replicate on your own.

You’ll Have The Most Success as a Franchisee If…

1. You have B2B experience. Watch this clip for context.

2. You like getting out there and shaking babies and kissing hands. Wait, reverse that…

3. You have experience stomaching some risk and volatility.

You don’t HAVE to have those three qualifiers to succeed, but it really helps. At least when referring to home service franchises, that is.

Buying a franchise is quite literally buying a business, except you don’t have any customers yet. So much of the framework in my build vs buy newsletter apply to buying a franchise, as well.

Here’s an exchange that Aaron and I had regarding how former business owners do as franchisees:

Me: Do you see a correlation between former business owners versus lifelong W2 owners and how successful they are?

Aaron: It's funny because you would think that it would need to be business owners and that that would have the higher success rate. True entrepreneurs, people who are like me or you, we're just gonna start something from scratch and it's gonna turn into this big thing. People like us might struggle more in a franchise system than someone. We’ve been rewarded for doing completely operating outside the box and they have X number of dollars in the bank or X number of net worth because of their ability to do that, right? And while we have operators like that, we try to remind them like, listen, this is why you brought us in. This is why you bought it.

So someone who's really good at like, here's the manual, follow the manual and like figures out the manual or whatever it is, that person will do really well in a franchise system because it's just like, give me the playbook, I'll just go do it.

Me: I’m friends with a Crumbl franchisee and he went to their training and someone made a comment like, yeah, we should try X Y or Z. And Crumbl was just like, we don't want you to be creative. Don't be creative. Like, please, you're, you're going to be a robot and you will have the most success. Just trust the process. That would be really hard for me.

Scoring System

Rate yourself 1-5 on the below. 5 = highly agree, 1 = highly disagree:

1. I work well with authority.

2. I am great at managing others

3. I have significant experience managing others

4. I am very comfortable “putting myself out there” in the community.

5. I have sufficient capital to afford X franchise.

6. I’ve been at a W2 OR have owned a business for years and was successful at it.

7. I’m not prone to thinking outside of the box.

8. My business skillset is very broad.

What did you score? A 40 = go buy a franchise TODAY! An 8 = stick to whatever it is you’re already doing, or go start a business inead.

I got a 23 😂. I think I could do ok in a franchise if I got a right operator. Having a great operator could turn this whole email on its head…

Conclusion

This was fun to pontificate. I hope you learned something. Rolling Suds’ franchisees are crushing it BTW. Each truck averages $422k in gross revenue and $139k in profit, and almost all franchises are getting multiple trucks in their first 6 months. And those numbers keep climbing, as they’ve only been at this for 18 months or so. Give them a shout if you’re interested in franchising, or you can email Aaron here: [email protected].

Top Tweets of the Past Week - lots of bangers this week!

1. Sprinter Van Biz

2. Rocker B Ranch

3. Make Millions in Real Estate

4. Generous Millionaire

5. Pressure Washing Biz Economics

As always, thanks for reading! Please share with a friend.

Chris Koerner
chrisjkoerner.com