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One final question (for now). Franchise or.....


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I don't want to keep asking all these questions, but this site is where the rubber meets the road and has invaluable information. The question is, "Since there is such a high failure rate for HI's, should I become a franchisee?" I know that franchises cost a lot of money, but if I failed (on my own) six months down the road, that also would cost a lot of money.

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Franchises can be good for people who have little or no experience in the HI profession and/or no business experience and skills. They can also be good for those wanting quicker name recognition. You'll probably find RE agents and brokers more receptive to your marketing because of this name recognition.

I use to think that there were no benefit for buying a franchise in this line of work. After seeing a couple people fail miserably at this business, I've changed my outlook. I'm sure good support from a franchise could have helped two of them be successful. They simply had no idea how to operate their business's.

A franchise should offer you training in the field and in the office (biz end), start up marketing materials, support, insurance, office supplies, etc. Plus it wouldn't hurt if they held your hand for a few weeks either. Some will, some wont so be sure to check around.

A franchise will not guarantee you success. It's no quick fix either. You'll have to pay up front and then a % of your gross income. There's alway a trade off no matter which road you go down. You have to decide what the trade offs are.

Be sure to research any franchise you decide to go with. Check with you state's AG office to see if they have had any complaints. Personally, if I were going the franchise track, I'd choose one of the larger companies with a good track record. Stay away from those you've never heard of or those who offer little in the way of support or materials. Their priority should be your success.

Good Luck

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If you do go with a franchise, do it a little creative. Have your wife buy/own/run it, you are just a hired inspector.

This way, later on down the road, if you chose not to renew the franchise agreement, YOU won't have to deal with the non-compete clause.

Th franchise I owned (I am unable to mention the name, see, according to then, the last 8 years of my life didn't exist) did very well for training, continued support and continuing education.

Darren

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When I think about the franchisees I know in this business, I think that the franchise itself was meaningless. Guys who probably would have succeeded, have. Guys who would probably have struggled, have. As far as I can see, the franchise just sucks up a lot of dough, and prolongs the inevitable success or implosion of a business.

Have you thought about applying for a position at an established business?

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I ask questions on this site because of responses such as Hausdok's. Incredibly informative. This city (Shreveport) has a little over 200K in population. There are 9 home inspectors/companies listed in the "Real" yellow pages. Since this is Louisiana, things get here last. Home inspections are just beginning to really catch on. There are no large inspection companies to work for. I'll probably take the "independent" route. I don't want a franchisor controlling my life.

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I came from a similar background as Mike, with over 12 years active duty USMC. I have been a franchise owner for over twelve years and have renewed one territory once and another territory twice (five/ten year renewals). I am an AmeriSpec owner in the Jacksonville, Florida area.

I selected a Franchise for the following reasons:

Initial training, both business and technical

Master E&O policy

Business Consultants (Corporate-Franchiser to Franchisee support)

On staff (Franchiser) technical support

Continuing technical/business training (regional/annual conferences)

Business modeling (sharing business models/growth curves, systems development, etc.)

Brand Building (increasing value in the brand = more value as name recognition increases)

National Advertising Fund

Coop advertising

Perception of being part of a large company

Easier market penetration

Success rate versus failure rate as independent

Shared success/failure- colleagues – easier communications within system

Possible more value at sale

Shared best-case worst case marketing, business, technical incubators from corporate stores

As one looks and makes a selection of a Franchise (if that is direction they want to go), needs to also consider the following

Size of territory (number of re-sale transactions in a given territory)

What are the royalties and when do they start?

Success rate (is the franchise in the business of churning territories or supporting those they have).

What are the growth requirements?

Is the franchise a small privately held entity (nimble)? Or a large corporate entity (less nimble)

What is the corporate climate and are you going to fit in?

Financial health of the Franchise.

Total customer level revenue of the system. Will provide a true picture of system health.

As Mike has stated, being a Franchise can be troubling at times, especially if you do not see value in the royalties that you pay. I have paid several hundred thousand dollars into the franchise system over twelve years. The reason I stray is relatively simple. I believe I have a vested stake in the value of the brand and that when I go to sell this business or transition this business, I may be in a better position than others.

What I mean by this is that small business are often difficult to sell (unless you hold the note) and can have a huge range in sales price from 30 percent to 130 percent of gross receipts. Running my firm like a business and having demonstrated/provable owner dividends, after direct owner benefits, and a positive growth curve, coupled with a valuable brand, my offset the royalty payments (business plan + proven revenue stream + brand = higher value + ability to finance over time) when I sell this business.

In closing, you should also look at the philosophy of the franchise and ensure you are comfortable with their marketing ideals, techniques and focus.

Charles

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  • 4 years later...

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