Top 15 Franchise Concerns SOLVED!

Worried about picking the wrong franchise, making money, or losing your investment? 🤔 In this power-packed solo episode of the Franchise Freedom Podcast, Giuseppe Grammatico tackles the Top 15 Concerns potential franchisees face! From understanding financial realities and franchisor support to navigating long-term agreements, marketing, and exit strategies, get expert answers to your most pressing questions. If you're considering franchise ownership, this episode is your essential guide to overcoming fear and making an informed decision. Don't let concerns hold you back from achieving franchise freedom!

• Key Topics Covered:
  • Picking the Right Franchise (01:30)
  • Will I Make Money? (03:05)
  • Risk of Losing Investment (04:05)
  • Franchise Workload & Hours (05:40)
  • Can First-Timers Succeed? (07:00)
  • Assessing Franchisor Support (08:20)
  • Franchise Financial Health (FDD) (09:25)
  • Long-Term Agreements (10:50)
  • Work-Life Balance (11:35)
  • Managing People (13:00)
  • Startup Capital Needed (13:40)
  • Changes After Signing (15:20)
  • Territory Limitations & Growth (16:05)
  • Marketing Responsibilities (17:25)
  • Franchise Exit Strategies (18:30)

DISCLAIMER: The information on this podcast is for general information purposes only. Franchising involves risk and careful consideration should be given before making any decisions.

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The Franchise Freedom: Discover Your New Path to Freedom Through Franchise Ownership, Book by Giuseppe Grammatico https://ggthefranchiseguide.com/book or purchase directly on Amazon.

Transcript

giuseppe_1_06-04-2025_141036: 0:00

A franchise is a business, we call it, a business on training wheels. There's no guarantee in anything. There's no guarantee in the stock market. There's no guaranteed in a business, It's a lot of hours to launch a business. Some people have a full-time job and are running this on the side. It's still gonna be a lot of work, at least initially, to get the business up and running. will I be stuck in a territory that limits my growth? So, you know, when you're buying a territory, each franchise will have different criteria. Some will be just strictly population. Others will have, an age group, senior care, maybe, the age group of 70, 75 years of age and older. If it's private pay, they're gonna look at average household income. There's gonna be opportunity for growth in the territory. So in some cases, you're gonna try to figure out what the average franchisee does in revenue as well as, profitability, so it may be one of those where you're, looking at a second territory and doubling the population that you can go after. I wouldn't say it limits your growth, but you're definitely locked in, so that you don't have other franchisees competing with you. You will, potentially look at additional franchises for growth, or, you know, either with territory or staying in your territory and know what we call vertical expansion or brand stacking where you're adding these complimentary brands, to compliment, you know, if you got the painting business and have relationships with a thousand customers you may add on a roofing business, a cleaning business, anything, involved with the home. Welcome to the Franchise Freedom Podcast. I'm your host, Giuseppe Grammatical, your franchise guide, the show where we help corporate executives experience time and financial freedom. You got me today. We just had a last minute cancellation, reschedule for a guest, and, I said, what, what can we talk about? This week and, was watching a video by Alex Hormo, which is actually perfect timing, and said, ideas for creating content sometimes are right in front of us. It could just be reviewing the last couple weeks of conversations and, questions that came up, concerns, topics, agendas, things like that. And actually using the conversations you're having, with your clients and. Customers so that's what we did today. For today's show, I thought it would be really helpful because, you know, part of franchising, right? It's, you know, really excited. It's a new chapter in life, but some fears come up and concerns. So wanted to, I. Review. I think we have here, I have, I have a long list of notes here. 15. We'll see if we can get it in one show. Worst case, we'll split this up, but we're gonna go through the top 15, concerns that, potential franchisees have when, considering franchise ownership. Glad you could join us today. If you are ready for, change and are interested in exploring franchising, give us a shout. Go to the website, gigi the franchise guide.com. Check out our book Franchise Freedom, same name as our podcast, and you can book a call directly with us. There's a quiz there, which will help you figure out, three questions. If franchising may be a good fit, take advantage of that. Worst case, you get a copy of the book, so you have nothing to lose. In diving into the, topic today, we're gonna go through 15, concerns. So, number one, what if I pick the wrong franchise? Now I think this is more for someone that's doing the research on their own, we're not guessing here. We're putting in a lot of time. A lot of effort, and I think the secret here is really. Working in reverse, figuring out what the ideal franchise looks like as opposed to just, going to a list of top 100 franchises, top 500 franchises. And I'm not saying anything wrong with those lists, but, there's not much substance, what's the criteria? How are they added to the list, you know, what if I pick the wrong franchise? We're figuring out what the ideal franchise looks like. If you've gotta keep your job and run it part-time, you want a franchise that allows for semi-absentee or part-time ownership, that franchisor will let you know. Especially on that first call, if they allow that type of ownership, it's gonna talk about the investment, right? The investment has to be aligned. The territory, the location has to be available. Employees. If you don't like a lot of employees, you're gonna put that in your franchise model what the ideal business looks like, and look for brands, that fit that model. And you're having. Multiple calls with the franchise, multiple calls with the franchisees, as well as meeting with the C-suite founders, president, as well as other potential franchise owners. So we're not guessing here, we're making an informed decision. That should not be, a concern, as long as you're spending enough time on the due diligence upfront. Number two. Interesting one, will I actually make money? And at the end of the day, what is a franchise? A franchise is a business, we call it, a business on training wheels. There's no guarantee in anything. There's no guarantee in the stock market. There's no guaranteed in a business, a mom and pop. Startup or a franchise. The franchise has a proven model, proven system. They're giving you the tools, the keys to everything. But, you need to follow that system. Sometimes you will follow that system and struggle a little bit, and being disciplined enough to go back and work with the franchisor, contact the coach. Can you make money with the franchise? Absolutely. Can you lose money? Absolutely. It is a business. It is a risk, but, if you follow the system, you wanna put as much, you know, find the right franchise, right system, check out the financials, right? You're gonna create a pro forma. Look at item seven and 19 in the, franchise disclosure document. Ultimately no one's gonna be able to, give you that info. You can talk to fellow franchisees and, check on their progress, how they've done in the past, and really putting all that information together in order to move forward with your franchise. Number three, what if I lose my investment? Well, we wanna avoid, we wanna, avoid losing an investment. And usually with losing an investment, that means like going outta business. And that goes back to, you know, the other concern of, you know, will I actually make money or even picking, will I pick, you know, what if I picked the wrong franchise? Again, risk in a Fran in, in a franchise, in, in any business. But with that being said. You know, if you are assuming that, you know, you spent the time on the due diligence and the, and the fits there, it, it's, it's a lot of work the first year. So it's setting the expectation that you may not make any money or even if you'd made any money. I usually recommend if you can afford it, reinvesting as much as you can, putting all the profits back in the business the first year so that you can. Truly, build it up. Make sure you have sufficient staff marketing and anything else needed for the business so that maybe starting in year two, you can, work more on the business versus in the business. So, you know, there is, depending how you fund it, you know that that's money that, you have to, invest in the business. We don't want you to lose that franchise fee. Franchisor doesn't want you to go outta business either, so ask for help. Talk to your fellow franchisees, follow the system. Just, you know, consistently follow. And if you're struggling with a key area, follow up. If it's not a neighboring franchisee, the franchisor can work with you and speaking with other fellow franchisees across the country. Number four, I don't wanna work 80 hours a week. When owning a business, it's a lot of work. It's a lot of hours to launch a business. Some people have a full-time job and are running this on the side. It's still gonna be a lot of work, at least initially, to get the business up and running. You gotta find that right general manager, running the day to day and staff a franchise in the water and smoke mitigation space. So it's gonna be something new. So there's a learning curve there. I don't know about exact hours, but I worked a lot of hours when I first started, I ran my business full-time. But if you're running it part-time, factoring a lot of hours, I. And kind of what, you know, how long it'll take to really get trained in the business launched. Sometimes the first hire doesn't work out and there needs to be a replacement. That's okay. That's part of business ownership. Once the business is up and running, I'll do whatever it takes to get up and running. I don't wanna work 80 hours after the first year. Okay. Or the first, six months. Okay. Who do we have to put in place? Who's handling the marketing, the franchise or great. Still need someone to review the KPIs. That would be me, the owner. Salesperson's going out. Maybe it's a weekly check-in to go over quotes and training maybe that's with the general manager. Maybe that's with you. It's really figuring out, and constantly tweaking if you're noticing that. One area's taking a lot longer. Maybe that goes to the general manager. Maybe that gets split up, over the week. So, expect to work a lot of hours, but, with the whole point to, take advantage of those systems to take a step back. I've never owned a business before. Can I really do this? Great question. A franchise is a business. A lot of people will go the franchise route because the system is in place. It's been proven, the CRMs, the marketing, the website, all that's really been handled for you. In many cases. You may even have national accounts you can tap into. The franchisor does not require experience, nor do they require business ownership experience. Specifically in that industry, they're looking for that right match for the person required financials, liquid and net worth financials as a means to fund this thing. Has the right skillset and attitude. Not saying, well, how quickly, can I make a million bucks my first month? You have to have the right attitude. Following the system. Team player, there's gonna be annual conferences you may get asked to speak with, potential franchise candidates, down the road. Absolutely. Can you really do it well? You're gonna follow the system and do whatever it takes, define your role in the business, which may change sometimes. The role. Day one is gonna be different than day 365. And kind of putting together expectations of what it is now and what that will be after the first year. These are all really good and actual questions I get, and have received. I jot them down and review them. Will the franchisor really support me now? This is a good question because, with 4,000 franchise companies out there, not all franchises are created the same. The franchisor will talk about their training on your first couple calls, the support and everything else involved. They may even give you access to their training portals. Both virtually in person what, what all that looks like. What happens if there's turnover? You have to hire a new general manager, that kind of deal. What you're gonna hear is, stage two of due diligence the validation calls with your fellow franchisees. Are you getting the support you were promised, not just initially to launch the business, but. Throughout the process, when you had issues, were they there, were they open to suggestions? So those validation calls will be crucial and, you know, give you a, a, a, an idea of what support will look like. That is a key area a lot of people skip or don't realize. They maybe talk to one franchisee and, feel that's, sufficient. I recommend speaking with a handful of franchisees. Maybe, some, veterans, some newer franchisees, some franchisees that are running it part-time versus full-time initially. That way you kind of get a nice mix, of feedback, from people that ran it maybe a little bit differently. All right, number seven. How do I know if a franchise is financially healthy? Great question. The franchisor legally, every single year has to update their FDD, the Franchise Disclosure Document. In that franchise disclosure document towards the end, are gonna be audited, financials, they're audited, there's an extra cost, you know, franchises are regulated by the FTC, and making sure those numbers are accurate. So not only are they closing the books for the year, but in that. They're gonna capture everything, financially ha have an order to go in, make sure the numbers are accurate. Check on things, make phone calls, send letters to vendors and that kind of stuff. So, so you're gonna do a mixture of that. In the FDD we will list any type of lawsuits, if that's a concern of yours. And that's, first couple items. I forget the exact item there, two or three if I'm not mistaken. You'll have everything in there. You can also, you know, at some point have a franchise franchise attorney review. Not that they're gonna be experts in the financials, but, have they heard of the brand? Are there any red flags they see? Plus any research you do online or, speaking with, your validation calls with the franchisees. Great questions here. Number eight, I'm worried about being locked into a long-term agreement. There is an agreement between you and the franchisor. Typically they average about 10 years. I've seen some brands do five. I've seen some oth, some others do 20 years. But really, you know, you're building long-term equity here that you know that there's, there's gonna take time to build, the business up. Figure out an exit strategy, how you're gonna sell. And all that. That long-term agreement locks into terms. It protects you as the franchisee. Everything has to be laid out exactly how the agreement reads, so that there's no changes. So you know that there's not gonna be any, you know, crazy changes over the, over those 10 years. And, so that is a, a typical agreement is gonna be, 10 years. But at any point in time, if you wanted to sell the agreement, you would essentially do a transfer. Someone will pay, there may be a nominal transfer fee, and then the franchisor will have to meet the buyer because that relationship will continue with the buyer. So, another good question. Number nine, can I still have a life and spend time with family? Absolutely. And that goes back to picking the right model. Spending time with family, we call that time freedom time freedom. Is definitely the number one, followed by financial. If you're running at semi absentee. They're gonna have a train to trainer program. You know, how are you gonna support me if I keep my job? And then figuring out, what is the right franchise, but also equally important, which is not on the franchise, it's on you. Is finding the right general manager to run the day-to-day. That general manager needs to be really clear on, their job function, the requirements, who handles what. Because you want there to be balanced. You need to be involved on every single call, every single issue or decision. That manager needs to be empowered to make, certain decisions. The more empower they are, the more freedom you'll have. And, you know, you're not being involved or having to be in the office just maybe checking in virtually doing an hour zoom call with the office. So, those are things to think about. And then again, going back to speaking with franchisees. Asking about their work life balance, and asking them for any recommendations on setups, roles for the manager, maybe they can share a job description. Those would all be great starting points. Number 10. What if I don't like managing people? Another great question, but it goes back to the basics. What is the right fit? You may have managing experience but don't like managing people and that's okay. Some brands will have higher staff and I. Maybe require you to be full-time, there's gonna be a big management function and maybe that's not a good fit. But if you know you don't like managing people, you're more big picture, maybe managing a small office of, two or three W2 employees. And then having, your, your technicians, your labor that are W nine contractors, you can have your GM handle that. Or you just hire someone to deal with the hr. While you're overseeing marketing and big picture stuff. It goes back to finding the right franchise where you as the owner don't have to be the manager managing the entire staff, or a portion of the staff and maybe not the technicians and the contractors. All right, how much money do I need to get started? Ranges on franchises are all over the map. Franchise fees I've seen anywhere from, 10,000 to over a hundred thousand, plus all the other costs. We've seen a lot of, non brick and mortar franchises fall in that one to$200,000 range. Can be investment be less. Absolutely. Can it be more? Absolutely. But keep in mind, this is a range that usually will cover the franchise fee. Training and startup and your first 90 days of operation. So you have some payroll, working capital and things like that. You know, brick and mortar, can get into that 3, 3 50 k, plus range. But you know what you're looking at as far as how much money, each franchise will have a net worth and liquidity requirement. But as far as cash out of pocket, if you're using a retirement rollover, it could be the entire investment. Since you're using your retirement assets, people that are using an SBA government back loan, you're looking at about 20 to 30% of the project costs. So what I recommend, if, so on a 200 K investment, it may be 40 to 60,000, but also having that buffer, right, if the business takes a little bit longer to get up and running, a territory, that, you wanna pick up a second territory or maybe there's a resale in the market that you wanna take advantage of and bundle it together with your territory or location. Always having access to funds, so liquid capital or bare minimum, a line of credit. But 20 to 30% of the project if you're doing our, and that's with the loan. If you're doing a retirement, it's your own retirement assets and you can just fund the, the entire thing. Some people use a combination and we refer everyone on these questions to Benetrends. We have a great relationship and send everyone over for a free consultation to review all those, all, all those different options. So great question. All right, we're on 12 of 15. What if the franchisor changes things after I sign? The franchise agreement spells out your rights, and you know, there's gonna be full transparency of exactly what's in the agreement. So if there is a chance of any agreement, any changes, they will let you know. Or if there's a certain lock in clause read that franchise agreement, get clear on everything, and bring it up to the franchisor. But typically that's why, you know, you sign that five, 10 plus year agreement as they lock everything in. But if there is any, type of changes, number one, it needs to be listed in the franchise agreement. Number two, the franchisor needs to communicate and be transparent about any change or any issues but that's why we have these agreements to have everything spelled out. 13, will I be stuck in a territory that limits my growth? So, you know, when you're buying a territory, each franchise will have different criteria. Some will be just strictly population. Others will have, an age group, senior care, maybe, the age group of 70, 75 years of age and older. If it's private pay, they're gonna look at average household income. There's gonna be opportunity for growth in the territory. So in some cases, you're gonna try to figure out what the average franchisee does in revenue as well as, profitability, so it may be one of those where you're, looking at a second territory and doubling the population that you can go after. I wouldn't say it limits your growth, but you're definitely locked in, so that you don't have other franchisees competing with you. You will, potentially look at additional franchises for growth, or, you know, either with territory or staying in your territory and know what we call vertical expansion or brand stacking where you're adding these complimentary brands, to compliment, you know, if you got the painting business and have relationships with a thousand customers you may add on a roofing business, a cleaning business, anything, involved with the home. Great question. 14. Do I have to do all the marketing? No, it really depends on the franchise you buy. A lot of B2B type of franchises, may not have marketing in-house, but they'll have you go out and network at the Chamber of Commerce. If you're providing a service, reducing expenses for small businesses gonna be a lot of chamber. Meetings, maybe some events, one-on-ones, and things like that. Some, which is very common in home services. B2C franchisor may handle all the, you know, the, the virtual digital, marketing for you. You're still overseeing it. Reviewing the KPIs, making sure the lead flows there, the close rate's there to figure out if the, quality of lead is a sales person getting a good quality, quality lead, but not closing it. So once you have these benchmarks and you know what the average close ratio is, if you're not meeting those numbers, you have to revisit and say, okay, what changes do we have to make in the messaging? Maybe the market's gonna be slightly different. Marketing is gonna vary, starting from scratch. If there are no, marketing, being created for you. They'll train you on that. Some cases they'll provide you the assets, the eBooks, to post on your own, but that really comes down to what that franchisor is offering to you. Excuse me, what happens if I want out? This is the exit, strategy. You sign a 10 year franchise agreement, two years go by, you wanna sell it for a profit. Maybe the fit wasn't there, whatever the reason may be. I usually recommend you still have that 10 year agreement, so you don't walk away from the agreement, you wanna, get as much as you can and sell the business. So what I recommend is, number one, speaking to the franchisor. And, seeing what your options are. The, the, the best way selling to a, a fellow franchisee, as I mentioned in a previous, you pay a transfer fee. The buyer or seller, as long as it's getting paid. Sometimes there's no transfer fee. In many cases it's just a nominal small transfer fee. If there's no neighboring franchisees or maybe the neighboring franchisees aren't interested, you can look at a broker or working directly with the franchisor where they can. Send a listing out. A broker may want exclusivity, so you wanna definitely read the agreements and speak with the franchisor first. They may know of someone right off the bat like, Hey, you know what, the whole state of New Jersey is sold out. We've been getting a lot of calls. So yeah, we may actually have a candidate, for this specific area. Always want to try to sell the business. That's the biggest thing you wanna get. Some type of multiple on the money you're taking outta the business. I understand that's not always the case, but you always wanna try to sell the business and, work with that franchisor. So, 15 great, concerns, that we get. A lot of it goes back to. The fit. If you just dive in, these concerns and questions mostly come off, you're just going in and looking at a, a blind list of brands. If you create the model and just say, there's 4,000 franchise companies. I wanna be, part-time in the business to start. While many brands won't allow that, it needs to be under a 200 k investment. Well, that's gonna rule out pretty much all brick and mortar. To have, under five employees, it needs to give back to the community. As you're adding all these characteristics, it's becoming closer to something you're looking for. Will I have to work 80 hours a week? There are brands like mosquito spraying. In certain, states in the US where you're only spraying maybe six, seven months a year, some people have second homes and who knows in Europe, and they're able to vacation because there's no work in the, in the winter season, others will take advantage and, provide a different service, maybe even do holiday lighting. So the match, I think, helps with all of this. Again, there's always gonna be a risk, you're gonna do all the due diligence you can to make sure the fits there. You understand the role. You know exactly where the franchisor is going. You understand the support. You have trust in the franchisor. You believe in the franchisor. You're doing that all upfront. And that's where, I come into play. I have my finger on the pulse of franchising. I get to talk with a lot of the founders and CEOs and presidents, and people involved with the brands. I don't know every brand. I don't know every aspect of franchising, but. On a daily basis, we are talking with another professional learning about the changes, the effects of ai. How will tariffs affect the business if there's any effect at all? So, we're here to help. There's no cost for what we do. We, get paid directly from the franchise companies. They pay our fees, so you don't have to, which is really nice. Check out the website, gigi the franchise guide.com. More than glad to review these. Questions on an intro call. There's a three question survey helping you figure out if a franchise may be a good fit, leading you to the calendar. As I mentioned, worst case scenario, you get a copy of the book, franchise Freedom. It's my exact blueprint of finding my first franchise. I would love to help you out. Thanks again for all these questions. I keep everything confidential, so if a question comes up and we're having a call, I never use names. Even in success stories we keep everything confidential. Unless we get the okay from you to share. Thanks again for joining. We really appreciate it. And we got, some exciting episodes. We have a couple franchise companies coming, back on the show. Really excited to share those. Until we talk again, take care. See you guys.