Last week I was talking with someone interested in owning a franchise. The candidate's opening statement was, "I want you to find me the next McDonald's." The conversation went like this:
"Ok, great," I replied. Then I asked, "what does the next McDonald's look like to you?"
Candidate: "Ya, know, a household name brand. A concept that people know and walk in because they know whatcha got."
Me: "I get that. What would the business characteristics look like?"
Candidate: "I don't know."
Me: Would you be interested in a franchise that is open 18 to 24 hours per day, seven days per week? Are you ok with more than 50 staff members who are unskilled, usually young, and maybe not very responsible? Can you get excited about investing 2 million dollars to make a $200,000 per year profit?
Candidate: No, that is not what I'm looking for.
Me: But that is McDonald's.
It reminds me of the day I was at Jones Beach outdoor theater for a sold-out concert. I was running my Maui Wowi smoothie franchise at the show. It was a hot and humid August New York evening. The show was sold out, and we had a continuous line of 30 customers or more at our kiosk. I was running around trying to keep the ice bins full. A gentleman who purchased a smoothie stepped off the line and asked me, "Do you own this concession? You are REALLY raking in the dough!" I replied, "Sir, do you know how much rent I pay to be in this venue? I would blow your mind. Do you see all the staff? Do you know how much all this fresh fruit costs and how much I have to throw out or give to soup kitchens before it spoils?" "In a huff, I said, man, you have no idea what it takes to run a business."
If you are ever in the position to evaluate business investments. It would be best to examine what it takes to run the enterprise. What are the hours (including prep and cleanup)? How many staff are needed? What type of staff? What is your role as the owner? Does it fit in with what you enjoy doing professionally - Not only what you have experience in? For example, you may have been managing a staff for the past ten years, and you may be good at it. However, you may not like it. Why would you choose a business that requires the franchise owner to manage staff all day?
When picking a business, you have to evaluate it from behind the counter, not from the customer's perspective. Just because the food is great or there is always a line does not, by any means, indicate that it's a strong business model. If the units bring in $100,000 in revenue, but the cost is $96,000 in overhead to run the business, is it worth it, even if you love the food?
To me, business success is measured by one standard. After you put in the time, work and money, does it give back to you time and money so you can enjoy what matters to you in life? So, start with what matters to you specifically. What is your end goal? Seeing your kids grow up, five-star vacations, building a church, giving to charities dear to you. Whether it's a job or a business, it's just a vehicle to get you what you want and need in your life. Don't get caught up in choosing a company for consumer and not business reasons.
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