When considering investing in a franchise system, the most important thing to consider is a full comprehension of what it means to be a franchisee. It is equally important to fully understand that the franchisor expects you to operate your business according to its established standards (as defined by the franchise system) and not according to your practices and ideas, which you believe will work best in the market in which you will operate.

Franchising is a method of expanding a network of stores under a specific brand name, utilized by most companies to ensure a prudent, sustainable, and consistent expansion of their network, with smaller businesses owned and operated by third-party partners known as franchisees.

It’s also crucial to understand , that you will be sharing a brand with other businesses, entrepreneurial franchisees, and the franchisor. The franchisor does not favor any franchisee over another and does not hold you in higher regard than any other member, beyond what the contractual relationship dictates. All members of the network should operate in the best interest of the brand, and consequently, the network. There may be times when you disagree with something, and although you may be right, you will need to follow the franchisor’s guidelines and adhere to the system’s rules.

The intention to join a franchise system certainly doesn’t guarantee success as an entrepreneur. Franchising isn’t the appropriate entrepreneurial solution for everyone. For an aspiring entrepreneur who wants to operate independently and implement their own ideas by making decisions on their own, becoming a franchisee can prove to be disastrous.

The successful franchisees are the ones we call “Formula Entrepreneurs“.

They are the entrepreneurs who understand their role in a system, who operate under commonly accepted rules with trained collaborators supported by the franchisor and its staff.

Before joining a franchise system, one must first agree to and enter into a lengthy and detailed contract that outlines their rights and obligations within the system for a specific period of time. It should be seriously considered that Franchise Agreements are adhesion contracts and are often characterized by a “take it or leave it” approach. While in minimal cases, some minor changes can be negotiated, in most cases, it’s not feasible.

It’s a unified contract signed by all franchisees entering the system and must be on equal terms. One of the fundamental principles governing franchising is the principle of equal treatment of all members. Therefore, it’s important to carefully study and review every aspect of the agreement with the franchisor and ensure that this is reflected in the contract. It would be advisable in any case to seriously consider recommendations or advice from a specialist consultant (lawyer, accountant, franchise consultant, etc.).

There are indeed numerous elements and prerequisites that one must examine to ascertain whether a particular franchise opportunity is suitable for them. Whether it’s a genuine opportunity that will lead to a successful investment venture or not.Elements and prerequisites that characterize an investment proposal as an OPPORTUNITY.

The concept should be characterized by innovative ideas, exceptional products and services, and should be among the current trends. The offered products and services should enjoy great appreciation and acceptance from the consumer base.

There should be a clear concept and a recognized brand with the consumer base being familiar with it.

There should be applied technology and systems supporting the operations of the system across all areas.

Extensive and effective corporate and local marketing.

Realistic, feasible and verifiable business plan and p&l.

Ability for initial and ongoing training.

Presence of competent and trained operational and support staff.

Presence of high-level logistics systems for smooth procurement operations and monitoring.

Capability to adapt and evolve the products and services of the brand, in order to adjust and meet the changing demands of consumers and the market in general.

The investor needs to have a full understanding of the initial investment amount, so they can be financially prepared not only to establish the new business but also to have the resources to sustain it until proper cash flow begins.

Disadvantages to consider beforehand

Loss of independence in decision-making, inability to choose products and services according to the investor’s preferences.

Risk of poor performance or behavior from other franchisees or from stores owned by the franchisor, which will certainly affect the market perception of the brand and the network for each store individually.

Limitation of activity to the area surrounding the store.

Restrictions on advertising and marketing.

Restrictions on the terms and procedures required to sell or transfer the business.

Unrealistic expectations. The prospective investor, before becoming a franchisee, must fully and clearly understand what the realistic financial performance of the business will be and whether it will meet their needs and expectations.

Are you willing and capable of learning and acquiring new skills?

The first thing you’ll discover as a franchisee is that you have a lot to learn. The second is that, as the operator of your business, you’ll have to take on many roles, from trainer to security guard, to serving the customer, and even acting as a financial advisor. The franchisor sets the standards and procedures of the system, but they’re not responsible for how your business operates or its day-to-day management. It’s a steep and challenging adjustment, but if you manage to conquer these new skills, you may become a successful franchisee.

One of the most critical requirements in franchising is the training that the franchisor (or the store operator) must undergo before being allowed to open a store. Most, if not all, franchise agreements include clauses or appendices that allow the franchisor to terminate the agreement if the franchisee or the operations manager cannot pass the training program.

Successful training is not, of course, a guarantee of success—but a good franchisor will not allow an inadequately trained franchisee to open and operate a business under the network’s brand. Part of the training also involves adapting the entrepreneur so they can set aside their own views on how to run the business and instead comply with the franchisor’s proposed way of operating the business.

This leads us to our next question…

Do you prefer to give or receive instructions?

As a franchisee, you agree to follow someone else’s operating system, which often includes specific requirements for :

a) the marketing materials you will use
b) the suppliers you must collaborate with

c) which specific products or services you must offer. This, along with the licensing rights and restrictions on how you can use the intellectual property of the franchisor, is essentially what you are investing in. In exchange for this ready-made operating system, the franchisee must adhere to guidelines regarding the presentation of products and services and comply with the advertising requirements of the franchisor.

Every day, week, month, and year, the franchisor will follow the protocols established by the franchisor. When the franchisee fails to meet and faithfully follow these standards set by the system, they risk violating the franchise agreement.

If you’re a creative thinker developing your own path and don’t feel comfortable following someone else’s strategies, franchising may not be suitable for you. That doesn’t mean you should deactivate your thinking process and never seek ways to improve your operations within the franchisor’s system. Many significant developments in successful and already established franchise systems have come from franchisee proposals. Additionally, a good franchisee will always add their personal skills and talents, whether through managing their employees or creating an atmosphere for customers. It’s crucial to recognize that consistency in adhering to a successful system by its members is key to a successful franchise.

Are you ready for the transition from a large to a small Business?

A former executive of a large business may indeed have the ideal profile of a future successful franchisee. This individual has broad knowledge of businesses, knows how to work within a well-organized and structured system, understands how to motivate staff, is accustomed to long working hours, and has learned to work under pressure and stress. Now, they also have the required capital to start their own business, an investment in a franchise.

While in many ways becoming a franchisee of a large franchise brand means entering under the umbrella of a very large company, a franchisee is actually the owner of a small business. This means saying goodbye to many of the perks that come with being a well-compensated employee of a larger enterprise, such as performance bonuses, retirement programs, stock options, paid sick days, holiday bonuses, vacation and leave allowances, company cars, and so on. The sign on the building may not say “McDonald’s,” but in reality, you are the boss, which means you no longer work for someone else, for better or for worse.

Indeed, one of the biggest adjustments that former mid-level executives need to achieve as new franchisees is the loss of many of the aforementioned privileges.

Success is now measured every day by the performance of your business, rather than how well your superiors believe you have done. In other words, running a franchise business requires more self-reliance than many mid-level executives may have had to demonstrate before. However, a well-structured franchise system that supports its partners with continuous assistance can turn an investor coming from a mid-level management position into a successful franchisee.

Take your time and make the right decision

If you’re still unsure whether becoming a franchisee is the right investment move for you, we recommend taking the time to review the points we discussed above. Don’t be swayed by the excitement of any franchise offer. Before making any decision, consult with an experienced and knowledgeable franchise development consultant. In addition to providing you with the necessary advice, they can also point out other opportunities that you may not have realized yet.