What questions has your family asked you about your franchising ideas?
My clients hear a variety of questions…
- Don’t most businesses fail?
- You haven’t run a business before. What if it doesn’t work?
- If you’re unhappy with work, why don’t you change jobs?
- So-and-so lost a lot of money on his business. Why don’t you hold off?
These questions are all legitimate concerns about risk and reward. It’s human nature (for most people) to fear losses more than they look forward to rewards. Entrepreneurs often seem to be hardwired differently, but that isn’t always the case for their friends and family.
A gender difference can complicate matters even further. Taking a risk with a large amount of money can trigger stress. Under stress, research has shown that men tend to take more risk, while women tend to avoid risk.
So, how can a prospective franchisee and their family get on the same page?
Here’s how I would respond when someone raises questions or concerns about a franchise you’re considering.
Acknowledge the risk
First, I’d acknowledge that a franchise is a risk.
Chances are, you’ve taken a number of important risks in your life… the risk to apply to a college or a job you dreamed of, the risk to start your first business, the risk to ask out your spouse when you first met.
The life you live today is a result of the risks you’ve taken.
If the person you’re talking to is a numbers person, you can go beyond philosophizing.
According to the Bureau of Labor Statistics, half of US businesses fail within 5 years.
That number is better for franchisees. A study by FranNet showed that 85% of franchisees were still in business after 5 years.
On top of that, your risk is not the same as a business owner who decides to open a Subway or Jimmy John’s (statistically, not great investments).
And that brings us to the next point.
Show how you’ve mitigated risk
Your friend or family member wants to see you succeed. So walk them through how you’ve de-risked your investment.
- You’ve looked into proven franchises to minimize risk and accelerate your timeline compared to starting a business from scratch.
- You’ve written off the 20 franchises with the highest loan default rate per the Small Business Administration. Who needs those?
- You’ve worked with a franchise consultant to choose a franchise that fits your lifestyle and location.
- You’ve looked into several strong franchise opportunities and you’re diligently researching the right one.
- You’ve saved up enough so that the business is sufficiently capitalized.
Those stats about “half of business owners failing” include businesses that have made mistakes that are frankly avoidable. What would a stat on business success look like if everyone included in the stat took the same safety measures you’re taking?
As with most things in life, you can take something risky and make it quite safe by mitigating risks.
Depending on whether you want advice, you can also ask the person you’re talking to what they can think of that you can do to de-risk the business idea even further.
Share that a franchise de-risks your investment
The franchise model itself minimizes risk.
You have proven products, proven systems, proven procedures, national brand recognition, group buying power, expert training, committed support from the franchise, and a network of support from other franchisees.
Convey why you can take a risk
While you know you won’t succeed at everything you ever try, what counts is that you succeed at enough things you try, and that you don’t take a risk you can’t recover from. That last part is important so that you can continue making calculated risks throughout your career.
Chances are, if you’re reading this, you make enough money annually that you absolutely can recover from a failed business opportunity… or two or three.
Express what drives you
Next, I’d talk about your passion… What makes you want to run a franchise?
Are you after semi-passive income? A family legacy? Freedom from working 9 to 5, day after day?
Chances are the person asking you questions cares about your passions or even shares the same dreams.
Discuss the upside
You have to invest your money somewhere, and nothing is risk-free. So it’s worth talking about the financial upside of a franchise compared to other investments.
With stocks, bonds, and passive real estate, you invest your money, wait, and watch what happens. Since anyone can do this, the returns are not that generous unless you take on substantial risks.
With franchising, you can get rewarded for how you apply your talents, experience, leadership, and business acumen. In this way, a franchise business allows you to drive exceptional results through your business skill rather than your appetite for excessive risk.
Talk about the cost of doing nothing
Finally (and this is a famous technique from sales), I’d talk about the cost of doing nothing….
- What happens when you get replaced at your company by someone younger and cheaper?
- What happens when the stock market takes a downturn?
- What happens if you over-leverage yourself in real estate?
- What happens when inflation devalues your nest egg?
A franchise is a cash flow business that can supplement or replace your salary from a full-time job. A franchise is less vulnerable to the whims of the market, especially if you choose one that is recession resistant. A franchise also keeps up with inflation since customers are generally willing to pay market prices for the goods and services they want.
Let your conversation make your business stronger
If you read enough biographies, you’ll know this: There is no shortage of entrepreneurs who had questioning friends, upset families, and angry spouses.
I want you to achieve your dreams of business ownership and an income you can count on.
I also want you to take a sober look at your risks rather than jumping into something without adequate consideration.
Without exception, every successful business I’ve had a hand in has a few things in common:
- The entrepreneur took a careful look at the market and thought through their investment carefully.
- The entrepreneur set aside adequate capital.
- The entrepreneur was willing to invest time and money over a sustained period knowing that results would take time.
If you can cover the points we discussed, and a franchise still seems like a good investment, then you’ll be all the more prepared to stay the course with your decision until you succeed.
So, use the discussions as an opportunity to think through your investment, and find a business (or other opportunity) that fits with your desired levels of risk and reward.
If you can get through defending your franchise idea, and it still sounds like a good idea to you, you’ll be all the more committed to your business.
As you probably know, that’s a great thing! When you’re committed, you’re more likely to choose the best franchise (rather than the cheapest), capitalize properly (rather than allocating too little), and invest the time necessary (rather than getting cold feet).
Interested in more help?
Do you need more help on how to answer questions from your friends and family?
Schedule a free call, and I’ll be happy to talk through anything on your mind.