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The Educated Franchisee: Find the Right Franchise for You (The Educated Franchisee AND The Franchisee Playbook Book 1)

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The Educated Franchisee: Find the Right Franchise for You (The Educated Franchisee AND The Franchisee Playbook Book 1)

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Highlights & Notes

It should go without saying the only type of franchise you should move forward with is Option #1 – A successful franchise that matches your skills and objectives.

Courage is resistance to fear, Mastery of fear— Not absence of fear. —Mark Twain

I contend a certain amount of fear is a good thing. We have fear because there are things in this world that can hurt us. Fear, by design, helps us avoid those dangers and is exceptionally useful in self-preservation.

Fear is connected to what we think might happen. Your feelings may or may not have any connection to reality. In many ways, fear directly relates to a lack of knowledge. It is connected to the unknown.

I share this example to make a point. The knowledge and preparation we bring to a situation will dramatically affect both the perception of danger and the actual danger. Quite simply, an increase in knowledge decreases fear while increasing our potential success.

What happens if I go out of business? What happens if the franchisor disappears tomorrow? What happens if the market changes and there is no need for this service or product?

Use your fear to motivate you to get more knowledge. The more fear you have, the more questions you’ll ask and the more knowledge you’ll gain. This will allow you to get as close as possible to certainty before you make any decisions about entering the business.

Everyone begins this journey being “Unconsciously Incompetent.” From there you move through the stages of “Consciously Incompetent,” “Consciously Competent,” and finally, “Unconsciously Competent.” The fact is risk and fear are different in each level.

You need to understand that risk is not the same for everyone. Water is not fundamentally risky, just as owning a business is not fundamentally risky. It’s the way that we interact with the environment, the knowledge we gather, and the safety nets that we establish that determine the level of risk.

Many studies have shown that people will react more quickly and with greater commitment when they fear pain or loss than if they desire pleasure or gain.

Fear and the human psyche are a powerful combination. You can use this emotion as a tool to significantly raise your level of play.

The number one motivator of successful business people is the desire not to fail!

Shortly after beginning a journey, Alice reaches a fork in the road and asks the Cheshire Cat: “Would you tell me, please, which way I ought to go from here?” “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where,” said Alice. “Then … it doesn’t matter which way you go …” said the Cat. “… so long as I get SOMEWHERE,” Alice quickly added as an explanation. “Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.” —Lewis Carroll (Alice In Wonderland)

As an example, does this sound like a dream? “I can see us achieving a 12% margin increase next quarter.” Nope. But how about this, “I want to be able to travel the world and visit 25 countries with my spouse.” Now that’s vision! Why? Because now you have a cornerstone to your future. This vision statement leads to action questions such as, “What do I need to achieve my vision?” The answer is time, money, and health. “How much money? Where will I find the time? How late in my life can I wait to begin to make my vision a reality?” These are great questions, but they only get asked if you begin with a vision.

Your vision is up to YOU. It should be you and your vision that determine what business opportunity to select, not the other way around. To say, “it depends on the business,” surrenders the power over your own dream and makes it part of someone else’s business plan.

A vision is simply an attractive, motivating dream backed by a plan to achieve the dream.

A vision statement must clearly outline your projected future. In order to determine your projected future, begin by listing your goals and dreams, regardless of whether they are practical. Questions that can help you in this process include: What kind of person do I want to be in the future? What do I want people to think of when they see me? What do I want to be remembered for? What type of legacy would I like to leave behind? What is truly important to me? What brings me happiness? What am I most proud of? You may also want to list the things you do not want in your future: What do I not want to be remembered for? What do I not want to do during my retirement years? What limitations do I want to avoid?

So, what vehicles are available to you? Consider these: Traditional employment Self-employment Business ownership Investment in real estate and/or equities A combination of approaches

People usually become coaches at the following times: 1)  Between jobs 2)  After their years of employability end 3)  When flexibility is of utmost importance

Many married couples will have one spouse retain a job for the first 12 months, while the other spouse starts a business. As time goes by and the business is producing a solid cash flow, the first spouse may leave the job and join the business on a part-time basis while also focusing on investments.

When there is belief a solution exists, the level of commitment intensifies.

Somehow I can’t believe that there are any heights that can’t be scaled by a man who knows the secrets of making dreams come true. This special secret, it seems to me, can be summarized in four Cs. They are curiosity, confidence, courage, and constancy, and the greatest of all is confidence. When you believe in a thing, believe in it all the way, implicitly and unquestionable. —Walt Disney

seven essential characteristics shared by the majority of successful entrepreneurs: Trait #1: Having a clear vision Trait #2: Confidently communicating the vision Trait #3: Setting a timetable for achievement Trait #4: Viewing setbacks as learning opportunities Trait #5: Standing apart from the crowd Trait #6: Finding good enough, then get going Trait #7: Focusing on continual learning

Entrepreneurs set a timetable and hold themselves and others accountable to the timetable. Their vision is more than wishful thinking; it involves taking concrete steps to actualize the vision.

That’s why it’s important to set timetables. Timetables are just like tossing your hat in the water to see if you’re making good progress.

The entrepreneur sees challenges and even disappointments as points on a continuum and does not allow these to dampen his or her vision.

The entrepreneur knows about calculated risks and that there is a significant difference between risk and risky. Are you willing and able to keep pursuing the vision in the face of adversity, doubts, or ridicule? If so, that is a huge factor in your favor.

“Perfect is the enemy of good enough.”

Business owners don’t look for the perfect idea. They look for “good enough” and then they get started.

If you’re going to become a business owner, it’s time to embrace the fact that everything will not be perfect. There will always be a reason NOT to do something. Your first business will not go exactly the way you expect it to. There will be bumps, and this is normal. Your job as a business owner isn’t to find the perfect business, invest your money, and pray. Your job is to find a business that is good enough, invest your money, and then actively drive the business toward your destination.

As you contemplate business entry, do not think of it as the end game or a solution. It’s really only the beginning of tremendous learning and growth.

In other words, the entrepreneur is a lifelong learner, not just someone who racks up degrees as bullet points on a résumé.

The first step to getting the things you want out of life is this: Decide what you want. —Ben Stein If money is your hope for independence, you will never have it. The only real security that a man can have in this world is a reserve of knowledge, experience, and ability. —Henry Ford

ALTERNATIVE #1: THE PASSION APPROACH “I love the taste of a Subway sandwich! Therefore … I should open a Subway sandwich shop.”

Failing to manage your manager is quite risky. It can easily lead to a slippage in the overall success of the business.

Every franchise, particularly the high-quality ones, should be able to show you a business model proving demand for its product or service. If your community truly has an unmet need, then your prospects for business success are increased.

Just because the community needs a sandwich shop, computer repair service, or executive coaching practice does not mean that you have the skills to successfully operate each one of these businesses. In addition, it does not mean you will be happy in these roles. Each one of these businesses requires completely different skill sets, they have different hours, you will manage different types of employees, and the sales process is different. Structurally, there is no similarity between these businesses. The lesson here is that just because the community needs the product or service, it does not mean the business necessarily meets your skill sets, lifestyle objectives, or financial parameters. Put another way, just because the community needs the product or service, it does not mean that you are the one to fill that void.

Niche options can offer higher return on investment over some big brands. A blue-chip franchise is not the franchise that has the most locations or has 100% brand-name recognition in your community, just as the best stock is not the company with the largest brand name. A blue-chip stock, like a blue-chip franchise, is the one that has the best system of creating success in today’s competitive marketplace; it is able to systematically out-maneuver the competitors that you currently find in your marketplace while delivering the best returns. Whether you have heard of the company or not is irrelevant.

Do you want to find a blue-chip franchise? Yes. Does it make sense to make this the starting place? No.

Being the first in your market to jump on a hot trend can be sexy, but it is not always smart, especially if driven by unbridled enthusiasm. It’s easy to get caught up in the momentum of a hot concept and not want to miss out on a chance-of-a-lifetime opportunity.

Even if the business is hot, in a proven industry, and is literally going to replace sliced bread, it still does not mean that you are the best person to operate the business or that it will meet your income and lifestyle goals.

ALTERNATIVE #6: THE EDUCATED FRANCHISEE APPROACH “I want a business that fits my skills, lifestyle, and financial goals while reducing business risk. Therefore, I should explore investing in a Subway sandwich franchise.”

An educated prospective franchisee always places himself at the center of the equation. You are the engine that has to make any business work. First and foremost, the business must fit you.

Remember, you will never find the “perfect” franchise—the one that “guarantees”success. It does not exist. The goal is simply to stack the deck in your favor by reducing risk as much as possible. You can maximize your chance of success by carefully determining what type of business structure is the best fit for you. Put yourself at the center of the universe and insist upon a great match.

So what is the essence of The Educated Franchisee Approach? Step 1: Determine what skills you bring to the table, either independently or with an advisor. You can do this by making a list of the jobs you have held and your responsibilities. Have you managed people, organized things, sold, marketed, analyzed financial data, or made presentations? Make sure it’s a thorough, honest skill-set assessment that digs deep. Step 2: List all of the functional areas of business and determine where you have strengths and where you do not. Just scratching the surface with an observation like, “I’m a people person,” won’t cut it. You need to carefully examine each area. One functional area would be sales. Do you have sales skills? If yes, what type of sales skills? Do you have experience with internal or external sales? What type of sales environment would give you the highest chance of success and would challenge you? Do this for each functional area of business. Step 3: List this information together on a single piece of paper. Actively use this information to measure whether a business opportunity is a good match to your existing business skills.

Now that you’ve armed yourself with a detailed skills assessment, review your vision statement. The skills assessment assures you have the skills; your vision gives you direction and guidelines. If you desire to have flexibility to spend time with your children on weekends and during the evening, add these criteria to your assessment. Make sure that any business you investigate is a good match at all levels. Let these criteria be your guide as you now identify the type of business that is right for you. At this point you need to target businesses and industries that match both your skills and your vision. You need to conduct this research regardless of industry. Most of us have preconceived ideas regarding industries; it is important to try to eliminate preconceptions. If you want to be “happy,” your business has to connect with your skills and your vision. Volumes of research support the idea that matching skills to work requirements is the key variable of workplace or professional happiness. If you are doing work that matches your skills, you will conduct the work more effectively. If it is done more effectively, people will appreciate your work and ask you to do more. The more work you do, the more positive reinforcement you will receive and the greater the success of your business. It’s a cycle that drives business success—and happiness.

It is critical to build your box carefully and then analyze each business opportunity in regard to whether it is a good match to your skills and your vision. How do you do this? Simply ask yourself, “Would I hire myself to manage this business?” Go through your skills and your vision and see if the argument is strong for you to be the one to successfully drive the business.

Two roads diverged in a wood, and I … I took the one less traveled by, And that has made all the difference. —Robert Frost

What are the advantages of owning your home? The most common responses to that question include: I’m not going to just hand over my money for someone else’s benefit every month. I want something that belongs to me and can be passed along to the next generation. If my home is paid for, I’ll always have a place to live. I want to invest in something that will appreciate in value.

Owners employ a broader vision and understand that sacrifice has to be made in the short run in order to build an asset and achieve greater security in the long run.

That’s the beauty of owner benefit. The owner decides what to do with that benefit—reinvest it in the business, pay down debt with it, or use it for personal expenses.

This is how wealth is created in a free market economy. Someone invests their capital and builds something of value.

Making the leap from employee to owner involves two dramatic shifts in your thinking: 1)  Shift from the “salary mentality” of an employee to the “cash flow and asset creation mentality” of an owner. 2)  Your technical analysis of how much you make must be based on the complete picture of costs and benefits.

Only history can offer perspective on our current place in the universe. —Unknown

Business-format franchising relies on both exclusive control of product/assets and the value of the business operating system.

Strength does not come from physical capacity. It comes from an indomitable will. —Mahatma Gandhi

Franchising is not an industry. Instead, franchising is more properly categorized as a model for doing business. It is comparable to licensing, agency agreements, distribution agreements, joint venture agreements, or company-owned development. People do not typically view those business models as industries, and franchising should not be seen as an industry either.

“Franchising is not a business or an industry, but it is a method used by businesses for the marketing and distribution of their products or services.”

The franchisor has worked hard to perfect a system that can be replicated by others, so what the franchisee is buying is a license to use the system, not the system itself. In the due diligence phase of a franchise investigation, you will discover the system quality. A system may include the right to use trademarks and logos, but you’re not buying them. This is true with all sizes of franchise systems. They are giving you the right to use their system of doing business.

you should be focusing your research on is the overall quality of the system of doing business. Does the existing methodology of doing business improve your chance of success? If the answer is “Yes,” then you are probably on to something. If the answer is “No,” then walk away.

what is the first thing you should do after becoming a franchisee? The correct answer is: Follow the system.

The system is where the value is found. Leverage your investment by following the system and growing your business.

The Franchise Disclosure Document (FDD) protects franchisors and franchisees. The FDD details the history and financial standing of a company, serving as an incredibly useful tool in your evaluation of a franchise.

If you find yourself reading or listening to a pitch and cannot distinguish whether it is a franchise or a business opportunity, just ask to see the Franchise Disclosure Document. No Franchise Disclosure Document? No franchise. It’s that simple.

Every franchise system has a training and support department. The job of this department is to take an individual that has limited experience in the functional aspects of the business model and create experts.

The second key to the franchise value proposition is the infrastructural backbone. The franchisor provides assistance to the franchisee every day, adding value and allowing the franchisee to establish and maintain a competitive advantage in the marketplace.

In many ways, the infrastructural backbone provides the same type of advantages that most chain-based businesses have over typical mom-and-pop businesses. These systems allow you to run your business more effectively, at a lower cost, and with greater control. Most importantly, these advantages remain with the franchisee for the length of the relationship, which takes us to our next topic.

Fellow Franchisees: In franchising, there is a fifth category. Fellow franchisees are located in non-competitive markets and are running the exact type of business as you. Most franchisors encourage the creation of franchisee advisory groups. These franchisees speak to each other on a regular basis.

The reality is that the franchisor’s training program will, over time, become less impactful to you. It is through your fellow franchisees that you will continue to learn. Over time, a fellowship will develop that can last a lifetime. This aspect of franchising is often underappreciated in regard to supporting long-term success, and this success is also a key element of your exit value.

To summarize, franchises simply have a larger pool of potential buyers; therefore, a franchisee is significantly more likely to find a buyer.

But despite many cautions, failure to follow the system is the number one reason for franchise failures.

If you try to change the system and you end up with poor results, you must look in the mirror. The failure is not with the franchisor but with your choice not to use what you purchased – the rights to a proven system.

A franchisee must pay several fees to enter and remain within the system. There is a franchise fee that is paid one time up front. There is also a royalty that is typically paid on a weekly or monthly basis.

You must be comfortable paying these fees and consider it your duty to the system to do so.

In the first case, owning a franchise is not easy. A good franchise system does not reduce the work load, it simply allows you to focus your effort on more productive tasks while making fewer errors. You move through the learning curve faster. It may be more work than you have ever done before (and you may enjoy it more than working for someone else), but it is not easy, and you need to be ready to work hard.

Regardless of what your initial gut-level reaction is to a business opportunity, you must do your due diligence. It is a critical part of your learning process and is required to be sure you really know what it takes to be successful.

“None of us is as smart as all of us” —Japanese proverb on the power of a network.

It isn’t what the book costs; it’s what it will cost if you don’t read it. —Jim Rohn

As I mentioned above, once you receive a Franchise Disclosure Document, there is a mandatory waiting period of two weeks before any contract can be signed. This waiting period is designed to give you time to formulate questions and to make sure there is not a rush to conclude a deal without complete information being exchanged.

Sometimes people think accumulating lots of Franchise Disclosure Documents equates to having more knowledge about franchises, enough knowledge to make a judgment among franchise businesses. That’s simply not the case. The Franchise Disclosure Document does not tell you how the franchise competes against its competitors, who the competitors are, or other qualitative aspects of the business. Instead, the Franchise Disclosure Document exclusively focuses on the factual information about the franchisor and the proposed relationship between the franchisor and franchisee. Perhaps most important, the Franchise Disclosure Document reveals any red flags you should be aware of before making a judgment on the attractiveness of a franchise. The document helps you see past the flashy marketing and sales and allows you to refocus on an analytical view of the franchisor and the related opportunity.

Over the years I have noticed that if the top personnel have business, management, and franchise experience, it generally results in stronger, healthier franchise systems, regardless of the current size of the franchisor.

Many people look at this section on a micro level. They go to their state and ask, “Why was there a transfer in my state two years ago?” Although you may want to ask this type of question, I think the more relevant questions relate to overall systemwide trends. Has the system grown over the past three years? Has more than 10 % of the system changed hands in any given year? Have there been an excessive number of abandonments? This is an important section—don’t overlook the forest for the trees.

You have brains in your head You have feet in your shoes You can steer yourself Any direction you choose —Theodor S. Geisel (Dr. Seuss)

Franchise fees can range from 100,000 for a significant opportunity. The average is around 30,000.

Percent-based royalty is the most common form of royalty in franchising. The percent-based royalties range widely, anywhere from 1% to 30% of gross sales, with an average of about 7.5%. In some systems, this percentage rate is reduced with increased franchisee sales volume.

Some systems do not demand a royalty. Some people consider this to be a strong positive—I would tell you to be careful. The franchisor must make money to survive, and without a royalty, the franchisor must make money through the sale of products and supplies to the franchisees. Generally, the franchisors who make their money from selling products and supplies may not disclose the amount of profit they are making.

Royalty payments will figure into the business as a line-item expense, nothing more. The important factor to focus on is the profit—what you take home at the end of the day. The questions you need to ask yourself are these: What is the difference? What am I getting from one company that I’m not getting from another?

These companies often have superior service to both end-user customers as well as franchisees. In some cases a higher royalty may be well worth it.

Advertising contribution: This is a certain amount of money the franchisee gives to the franchisor on a regular basis; it’s not income to the franchisor. This money goes into a fund for projects that help the franchisor and franchisees market,

Under marketing, not under capitalization, is the biggest barrier to a franchisee’s success, particularly in the early stages of the business.

One disadvantage may be smaller territories and higher franchise fees, meaning you will basically be getting less territory but more system for the dollar than you would pay for a younger system. In essence, you’re paying a surcharge for a more proven system and lower risk.

Because the franchisee was willing to join the system in its early days, they were granted a territory that is substantially larger than current Budget Blinds® territories. The franchisee controls an asset that has grown substantially in value should they wish to sell their business in the future. In essence, it’s like a real estate play.

For example, don’t be fooled by a comparison of, say, three franchises in which one of the franchises emphasizes low royalties, seemingly a very favorable factor. Keep the old maxim “you get what you pay for” in mind in such situations. Look more deeply into the question of what you’re getting for your royalty payment, not just the amount of the royalty payment.

The odds of hitting your TARGET go up dramatically when you aim at it. —Mal Pancoast

Over the course of an investigation, you are likely to spend 30 hours or more in order to fully understand a franchise system. For people managing multiple priorities, your investigation should take a month, assuming a commitment of one hour per day. It’s a lot of hard work, because you want to be careful in your selection. You don’t want to waste your valuable time investigating companies that are not good matches for you.

On the other hand, always keep this in mind: A positive trend does not mean that you should jump into the business. It must match your vision, skills, investment, and overall objectives.

A franchise coach plays a role similar to that of a “headhunter” in the job recruitment process, playing the matchmaker who links two parties with the potential to work well together.

For franchisors, finding the perfect franchisee that will be highly successful in their system takes significant time and effort. Less than 1% of the people that directly contact a franchisor will become a franchisee; however, a franchisor has to staff up to deal with the 99% that are either not qualified, not serious, or not a good fit. At the same time, prospective franchisees often find that franchisors can be unresponsive. Even though the lack of responsiveness may be for a good reason, such as having sold out the area or simply a shortage of staff, this can be very frustrating to a potential franchisee. Determining which franchisor is interested in their area and in their skills can be challenging.

Time is money. Consider what a precious commodity time is today, and you can see why an experienced guide who saves you time and energy is highly valued. Seasoned franchise coaches will only work with pre-screened, solid franchise organizations. A trusted advisor will not waste time looking at franchisors that are sold out, don’t really match your skills or vision, or simply have a poor success record. It’s a service that is completely free of charge to the candidate. That’s a big plus.

great franchise coach is: Experienced in business ownership and in franchising An active listener Someone with your best interests in mind at all times A person who you can trust And finally, someone who will be open and honest in their communication with you

The key questions to ask the target company: Is the franchise available in my area? Do I have the prerequisites required by the franchisor? Is the franchise in a growth mode? Is the industry growing? Does the franchise match my vision, skills, and desires?

I keep six honest servicing-men (They taught me all I knew); Their names are What and Why and When and How and Where and Who. —Rudyard Kipling

Some of the first questions the franchisor will want you to answer are: What are the circumstances for wanting to explore entrepreneurship? Why do you think you will be a good business owner? What attracted you to seek more information about this particular offering? Do you have the financial capability to be successful in this franchise? What is your timeframe for making a decision?

As the saying goes, they want people to work “on” the business, not “in” it. Successful franchise systems work when franchisees are committed to following a proven model.

If they do respond, be aware they may start the process by having you complete a detailed application. Those who are new to the process may find the level of detail a bit disarming, but keep in mind the franchisor is also using this step as a screening method. And they’re using it in two ways: 1)  They want to know if you’re truly qualified, financially and otherwise, to engage in a serious discussion of business ownership. 2)  If you follow their direction and complete the application, it is a signal to the franchisor you may be a serious and system-focused candidate.

With their sales hat on the development person will, of course, want to portray the franchise in a positive light and encourage the prospect to explore further. At the same time, they want to be sure they have a good match in the prospect, as the strength of the overall franchise system depends on attracting and retaining high-performing franchisees.

LEARNING is not attained by chance. It must be sought for with ardor and attended to with diligence. —Abigail Adams

As you look at a franchise system, you need to realize it is like any other group of people. The top 20% of the franchisees should be doing VERY well—they are the stars. The middle 60% should be making a nice living—working the business everyday, putting in the time, and making it work. The bottom 20% of the franchisees are not doing that well—they are the ones who are normally looking to leave the systems or are holding a side job while trying to hold their business together.

The critical question you need answered is “Why?” Is the business for sale because the owner is retiring and selling out at a profit? Is the business for sale because the franchisee does not have the skills to be successful? Is the business for sale because of health issues? Is the business for sale because of change in local or national consumer patterns? Is the business for sale because of a failure of the franchisor’s system? Is the business for sale because the franchisee wants to hike the Appalachian Trail? Keep digging until you feel you really understand the reason for the sale. Generally, you will find the driver for the sale to be one of the following: 1)  Proactive desire to sell due to external circumstances. 2)  Failure of the business due to franchisee’s inability or unwillingness to follow the system.        or 3)  A bad system that cannot drive success at the franchisee level.

You also miss important information. Many times how something is said is more important than what is said. You do not want to miss the finer intonation found in a conversation.

As you ask questions, be very careful to get past “yes/no” answers. For example, “Are you doing well in your business?” is a yes/no question. This question tells you next to nothing. The key is to follow-up the first question with, “Why is that?” By doing this you will gather great information and your due diligence will come to life.

Some systems are serious, some fun, some aggressive. When you talk with owners, you will get a sense of the system’s personality. When you find a system where your personality is a match, you will feel a sense of home and a sense of family.

He who asks a question is a fool for five minutes; he who does not ask a question remains a fool forever. —Chinese Proverb

When examining a franchisee’s financial picture, an over-emphasis on the bottom-line profit number can be misleading, and even dangerous. Here’s why: The bottom line is more of a tax treatment function than profitability! Let me say that again: The bottom line is more of a tax treatment function than profitability!

An example of a bottom-line question is: “What is your salary?” “How much do you make?” “How long did it take to break even?” “What is your profit?”

“Is the business a financially attractive exercise?”Although bottom-line questions feel good when you ask them, in reality they can be exceptionally misleading.

An astute business owner will derive financial benefit from many different areas of the business. As a result, the line between business expense and owner benefit often becomes blurred.

As employees, people readily understand the salary construct. They start with gross salary, then the government takes out taxes, and what’s left is take-home pay. Employee Construct: Salary – Taxes = Pay

A business owner looks at income differently than an employee. Business owners start with total (gross) income, deduct expenses, and then pay taxes based on taxable profit. Owner Construct: Gross Income – Expenses = Profit

Owner benefit is achieved in a number of different ways. A franchisee realizes an owner benefit because: An owner can legally pass a number of personal expenses through the business such as child care, vehicles, health coverage, travel, country club expenses, and many others so long as there is a business purpose associated with the expense. An owner can aggressively contribute to retirement plans. An owner can take money from the company as a distribution, dividend, or draw instead of salary.

As a business owner you decide, in accordance with the rules of the game established by Generally Accepted Accounting Principles (GAAP) and the IRS, how to account for the expenses of operating the business. The government wants more business owners. They want you to succeed and grow and hire more people. As a result they allow for preferable tax treatment. These advantages are valuable and provide business owners with advantages.

For your interviews with existing franchisees, you will focus on two easy questions: What are the expenses and how does each expense category work? What are the income sources and how does each income category work?

Once you have confirmed the categories, ask franchisees to explain how each category works. Questions you might ask are: How much do you spend on marketing each month? Does marketing cost vary depending on the time of year? How much do you spend on labor? Is labor cost the same every day or does it vary?

If you would know the value of money, go try to borrow some. —Benjamin Franklin

Fundamentally, there are two types of money available to potentially finance your business entry: debt and equity. Debt is money you have to pay back. It’s money that has been given to you on a loan, usually secured by some sort of collateral. Over time, it has to be returned to the lender, and returned with interest. It is the same type of relationship as a home loan and your arrangement with the banker.

Equity financing does not have to be repaid in a traditional sense. Equity financing involves someone giving you money in exchange for an ownership stake in the business. On one hand, that is a nice method because you do not have the cash-flow concern that comes with paying back that debt. Of course, you have to keep in mind that you must give a certain portion of your profits to the equity financing partner, so you must be able to come to terms with continuing that division of profits.

HELOC Establishing a HELOC (Home Equity Line of Credit) is one of the most popular ways of financing a franchise startup. Since homes are the most common form of collateralization for most loans, it makes good sense for many people to use the equity in their home for financing, particularly those who have substantial equity in their homes.

Many receive advice, but the wise profit from it. —Publilius Syrus

In my view, retaining the services of a good accountant on an ongoing basis is not an option—it’s a MUST.

DO NOT ABDICATE YOUR DECISION-MAKING RESPONSIBILITY!

Every great leap forward in your life comes after you have made a clear decision of some kind. —Brian Tracy

Do you have an approach you use when it is time to make a decision? The answer is usually “Yes.” Over the years, we have all developed approaches to decision making. These approaches generally fall into one of two categories: 1)  One category could be described as logical or left-brained. You gather the information and your calculator to start grading the alternatives. These are the folks who often say, “It is all about the numbers; nothing else matters to me.” 2)  The other type of decision maker is the intuitive or right-brained person. This type of decision maker has to “feel right” about the business. They trust their gut and figure everything else will work itself out. Most of these folks say to me, “I really need to like the business and be passionate about it.”

suggest you award points based on the following system: + 2 points for being an outstanding match + 1 point for matching your need 0 points for a neutral ranking - 1 point for not matching your need - 2 points for being in conflict with your need

Relax, close your eyes, and envision yourself in five years being an owner in Company A. With your vision of your future in your head, ask yourself these questions: How am I spending my day? Am I enjoying what I am doing? Who is around me? Am I happy? Have I created a life based on what is important to me? How much freedom and control am I experiencing? How successful am I? Have I created wealth? Am I feeling energized and motivated?

Every great athlete uses visualization techniques. Every great leader uses visualization techniques. In this case, you are using it as a tool to tap into your “right brain.” As you envision your future with Company A, how is your body responding? Pay attention to your physiological response. Are you stressed? Are you relaxed? Are you energized?

The numbers look like this: 70% of successful business people report they are primarily motivated by the fear of failure; the other 30% report they are mostly motivated by the need for success. It is clear that fear of failure is a powerful emotion and can be a great asset in the drive toward success—if you are able to harness it. Paralysis can have the opposite effect. If you find you are paralyzed and cannot seem to make a decision either way, please be careful about owning a business. Business is about making timely decisions every day. You need to be able to do this in order to be successful. If you are too scared to make a decision, you will not make the decisions that are required as a business owner and risk failure. Look at yourself in the mirror and ask yourself if you can harness the power of fear to spur you forward and create success. Remember these words: Courage is resistance to fear, mastery of fear—not absence of fear. —Mark Twain

Coming together is a beginning, staying together is progress, and working together is success. —Henry Ford

The second reason is that many people encounter some uncertainty after they sign the franchise agreement and before they open for operations. In marketing courses this is commonly called post-purchase dissonance. Any wrong step you take may have a significantly negative effect on your confidence level.

Life is a succession of lessons which must be lived to be understood. —Ralph Waldo Emerson

I recommend you focus on these factors: Leverage positive thinking Eliminate entitlement thinking Make a two-year commitment Set your top three measurable productivity goals

If you believe something will happen, there is a significantly better chance that it actually will happen. Ask any athletic coach about how they prepare players for victory, and the response will be consistent; you MUST put positive thoughts in the forefront as you head into a competition if you want to have any hope of winning.

“When we execute our game plan and do everything we’ve worked on in practice, we’ll come out on top.”

We all know of three types of situations awaiting us every day: 1)  Good situations, the ones that give us pleasure 2)  Neutral situations, inconsequential occurrences that pass without much notice 3)  Negative situations, the road blocks that impede our success

Another behavior that can make a huge difference for you is to solve negatives quickly and make sure you do not dwell on them. A disruption of positive energy can really throw you off track, as evidenced so often in athletics. The greatest coaches emphasize the important of “being in the present.” Athletes are coached to have very short memories when it comes to making a costly error.

Without exception, we all experience setbacks. Again, the trick is to limit the time we spend in those negative situations and to move on to the next opportunity as quickly as possible.

Want to be a successful business person? Then hang around successful business people! In all walks of life, we choose our surroundings, whether in social or business circles. So as you identify people you want to spend time with, why not make a point of targeting positive, successful people?

Keep in mind, however, that associating with like-minded leaders is a two-way street. You should plan to give positive energy back to the group, not just drain energy from it. Ask yourself, “Why would the leaders want me to be around them? What value can I contribute?”

A successful business owner does not blame others. They look in the mirror and say, “What can I do to fix this situation?” As you’ll recall from the previous chapter on the stages of franchisee development, there can be a tendency at times to blame the franchisor if things aren’t going as planned. A business owner cannot afford to engage in disempowering thinking and behavior. To achieve success in a franchise business, you have to embrace full accountability. Buying a franchise does not mean the franchisor will make your business a success. They’ll help you, of course, but they won’t do your work for you.

As you contemplate investment in a franchise business, do NOT make the mistake of equating the expression “proven model” with “instant success.” Many franchises do not make earnings claims at all; and those that do, make no guarantees about immediate cash flow.

Remember, the first year is foundation building; the second year is business building. A two-year commitment is the only way to be fair to both yourself and your business.

Let me make the important distinction between productivity measures and goals. It is important, even vital, to have goals, but those goals are often expressed as a fixed number or a “finish line.” I value productivity measures because you can, and should, use them all of the time. Productivity measures are the indicators that tell you if you’re making progress toward your goals—that’s where I see the value.

Twenty years from now you will be more disappointed in the things that you didn’t do than in the ones you did do. —Mark Twain Success is all about creating your own future. A simple reality to remember is: Those who are not working for their own dream are working for someone else’s.

Whatever you do, don’t get discouraged; the right opportunity does exist—you simply need the patience to find it.

Once you have chosen the right business, understand that it will take time and focus to build your dream business. Remember, successful business owners are not the smartest, brightest, or luckiest. They did not wait for the perfect time, nor did they wait for a large inheritance. Successful business people are simply the people who went out and did something … and then stuck with it.

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