In my journey from being an appraiser, to becoming a founding partner of a national franchise, I've worn many hats. In my experience, I’ve always found that a little expert guidance can steer you clear of common pitfalls and towards entrepreneurial success.
As soon as you start fishing for advice, you might start feeling like you’re caught between cautionary tales and fairy tales. As always, there are a lot of conflicting messages online. Some consultants warn you about the dangers lurking in franchising to the point that you feel you need to rely heavily on an army of consultants. Others paint inspirational stories of successful people without ever mentioning all the advisors they relied on to make their successful decisions.
But let's get real. Most people do not need all the advisors that it’s possible to hire. At the same time, every businessperson I know has leaned on advisors to support their success. Especially when an advisor brings greater expertise than you have in a critical area, it might make sense to work with someone to leverage that insider knowledge or hard won wisdom.
In this guide, I’ll aim to give you a comprehensive overview of how you can best leverage advisors. You’ll learn who you should seek out, what questions to ask, pitfalls to be aware of, and how to use the advice you gather.
5 Rules to Select Great Advisors
The first lesson you need to remember is that not every expert is right for you. You need to find the experts who align with your dreams and your vision for your business.
So, how do you do that?
Remember these four rules.
- Relevant Experience Matters: Ensure your advisor's expertise aligns with the specific insights you're seeking. You don't want to ask your accountant a question that is more appropriate for a franchise lawyer.
- Background Check: A referral alone isn’t going to cut it. Do a little detective work. A Google search can tell you a lot about an advisor's credibility.
- Expert Advice ≠ Decision Making: Your advisors are here to guide, not decide. Ask them questions, understand their perspective, but form your own conclusions.
- Explore Biases: Bias is a part of expertise. Ask probing questions to understand an expert’s experiences that shaped their views.
- Mutual Respect: A good advisor respects your decision, even if it differs from their advice. If they can't, it's time to seek guidance elsewhere.
Next, let’s explore how specific advisors can turbocharge your franchise journey.
8 Experts to Guide Your Franchising Venture
Your success isn't just about choosing the right franchise. It's also about choosing the right team of advisors to guide you. Let’s jump right into the key players who can help you as you get into the franchising world.
1. A Franchise Coach to Lead the Way
A franchise coach or consultant has been there, done that, and can help you do it too. They can:
- Save you time by pointing you toward compatible franchises to explore
- Offer advice about the investigative and closing processes
- Connect you with their own network of experts
- Make you aware of pitfalls to avoid in certain brands or industries
Be cautious: There are many franchise coach “imposters” with little to no experience who are in this game for the wrong reasons. Sometimes they failed at their own business and decided to just focus on giving advice to others. In other cases, you’ll find franchise coaches and consultants who have never owned a franchise to begin with.
It’s much better to work with someone who “walks the talk”.
Research a franchise advisor online, get a referral from another franchisee, and interview your potential advisor to ascertain their experience. You want an advisor who has been around the block – someone who has owned franchises and possibly has experience as both a franchisor and franchisee.
2. An Accountant to Crunch the Numbers
After you have a grasp of franchising basics, dig into the numbers. Before you start a franchise, you should create a Profit & Loss statement (also known as “projections” or “pro formas”) . This way, you’ll know what to expect and you can prepare appropriately.
Once you've built a Profit & Loss statement, an accountant can help ensure your P&L is accurate and that you haven’t forgotten anything important.
Additionally, a good accountant might ask you some relevant questions about your P&L. If you can’t answer their questions, you can ask your franchisor these questions to better understand the business.
Accountants can offer insights, but don't expect them to predict the future. An accountant cannot accurately tell you whether you will make money in a business. Their expertise lies in understanding the numbers, not forecasting demand for your business.
So, work with an accountant to understand the financials of your franchise business. But remember that it’s your job to understand the business as a whole and decide whether it is right for you and the community where you plan to operate.
3. A Tax Accountant to Be Your Financial Guardian
A tax accountant can help you choose the right type of business entity to set up and help guide you in making that effective with your personal finances in a way that maximizes your deductions. In fact, every dollar you spend understanding the world of franchising can be a tax deduction.
In addition to helping with your taxes, an accountant can connect you with outsourced professionals to handle your bookkeeping and payroll. Outsourcing these tasks will allow you to focus your time on higher leverage activities.
If you don’t already have a tax accountant, you can ask your franchise coach, franchisor, or fellow franchisees for a recommendation. Check their Google reviews to ensure that you’re working with an experienced accountant with a track record of helping similar businesses.
4. A Franchise Attorney to Review the FDD
A franchise lawyer can help you interpret the Franchise Disclosure Document for any franchise you’re interested in.
This document is designed to be read by the average person. As you read, highlight any details that you don’t fully understand. When you finish reading, you can discuss anything you highlighted with the franchisor.
After discussing with the franchisor, if anything is still confusing, or if you’d just like an unbiased perspective on the document, then it’s a good idea to reach out to an experienced franchise attorney.
About half of the candidates I consult with end up speaking to a franchise attorney. Most spend between $1,000 and $3,000. Of course, most FDDs are set in stone, so your attorney will not be able to help you alter the terms of the agreement. Nonetheless, your investment can still ensure that you’re getting a fair deal and that you’re comfortable with each FDD item before you sign.
Make sure the attorney specializes in franchising and reviewing FDD’s. Otherwise, you may end up wasting money on legal fees for the time a non-specialist spends trying to change the FDD.
5. A Business Lawyer to Set Up Your Business Entity
A business lawyer can help with common legal tasks associated with starting a business.
- Choosing the Right Entity: You’ll need to register an LLC, S-Corp or other corporate entity to govern your business. Different entities offer various tax benefits and liabilities. A lawyer will assess your business model and recommend the best fit.
- Drafting Bylaws: These are the internal operating rules for your corporation. Crafting them accurately can prevent future internal disputes and ambiguities.
- Creating Articles of Incorporation: This crucial document officially recognizes your business entity with the state.
- Protecting Intellectual Property: Beyond just entity setup, a business lawyer can safeguard any local brand assets with trademarks or copyrights.
Typically an attorney’s fees for these tasks come out to less than $1,500. Given the importance of this work, investing in a lawyer's expertise is a wise move to ensure the legal longevity of your franchise.
6. Professional Employer Organization (PEO) to Be Your HR Handyman
If you have 5 or more employees, imagine juggling hiring, firing, training, payroll, and more. A PEO acts as your outsourced HR department, streamlining all these processes.
If you get to a point in your business where you feel you need extra assistance with human resources, you can consider hiring a PEO to save time and eliminate headaches.
PEOs can help with common HR tasks.
- HR Management: PEOs handle everything from recruitment processes, to employment contracts and performance evaluations.
- Regulatory Compliance: PEOs stay updated on labor laws, ensuring your business remains compliant and avoids potential legal pitfalls.
- Benefits Management: PEOs can help you offer competitive benefits packages to your employees, enhancing your appeal as an employer.
- Reducing Overhead: By consolidating multiple HR functions, PEOs often reduce administrative costs.
7. A Retirement Plan Administrator to Secure Your Future
Retirement Plan Administrators are professionals who specialize in setting up, maintaining, and managing retirement plans for businesses. These individuals or firms possess deep expertise in regulatory standards, investment management, and financial planning, ensuring your retirement strategy is not only compliant but also tailored to your specific needs.
While your first priority might be to establish and grow your business, it’s crucial to think long-term. Your years of hard work should translate into a comfortable retirement. An effective retirement plan will help you plan for financial security in your retirement years.
Properly structured retirement plans can also provide significant tax benefits. Your contributions made to these plans are often tax-deferred, thus reducing your current taxable income.
Types of Retirement Plans and Their Importance
- ESOP (Employee Stock Ownership Plan): This plan allows employees to become shareholders in the company. For a franchisee, this strategy can motivate and reward employees, aligning their goals with the success of the business.
- Defined Benefit Plan: Often known as pension plans, these guarantee a specified retirement benefit amount for employees. They're based on factors such as salary history and duration of employment. For franchise owners, this can be a way to offer predictable retirement benefits to themselves and their employees.
- Profit-Sharing Plan: This plan gives employees a share in the profits of the company. Each employee receives a percentage of the company's profits based on its quarterly or annual earnings. It’s a great way to foster a sense of ownership and motivation among employees, as their rewards are directly tied to the company's success.
Retirement Plan Administrators will not only help you understand the nuances of each plan but will also assess your business model, financial projections, and long-term goals to recommend the most suitable plan for your franchise.
As an added bonus, offering a solid retirement plan can make your franchise more appealing to potential employees. It's a clear indication that you’re invested in their long-term well-being.
8. A Local Real Estate Agent to Scout Locations
Location, location, location. Most franchises depend on a physical location. In fact, many franchises genuinely succeed or fail based on their location.
A local real estate agent typically is free for you since landlords usually pay them a commission.
Here’s an overview of what you can expect to gain from a relationship with a real estate agent:
- Local Data: Local agents possess an intimate knowledge of neighborhoods, traffic patterns, and demographic trends – crucial details when selecting a business location.
- Franchise Liaison: An agent can interface with your franchisor to ensure the locations they recommend align with your target customer and brand.
- Negotiation Support: A good agent should be able to negotiate on your behalf to secure favorable lease terms or purchase prices. This can significantly reduce your operational costs.
- Zoning Law Navigation: Certain businesses require specific zoning permissions. Real estate agents can help you identify properties that align with zoning regulations or assist in obtaining necessary permissions.
Take time to collect multiple referrals and then interview a few agents before you make a hiring decision. Most of the time, franchisees will only engage a real estate agent after they have committed to a specific franchise.
A good franchise will already have a network of local realtors that they will introduce you to. These realtors are experts in their market and they already have experience working with the brand you’re franchising.
Trust Experts but Make Your Own Choices
Embarking on the franchise journey requires both research and introspection. You will likely encounter various advisors who can provide valuable insights. However, there is a pivotal distinction between listening to advice and being governed by it.
Ultimately, your purpose in consulting advisors is to get good information so that you can be well-informed. It’s up to you to make a good decision with that information.
Here are some principles to remember.
- Expertise is an Asset, Not a Mandate: Expert opinions help illuminate the path. But remember, they offer guidance based on their experience and knowledge, not a definitive verdict.
- You Hold the Reins: It's your investment and your future. You will live with the outcomes, so your comfort and conviction in your decisions are paramount.
- Synthesize, Don’t Just Absorb: The process of assimilation involves not just collecting information, but also evaluating its relevance and impact on your goals. You’ll want to weigh the advice you receive, but it’s most important to trust your instincts based on your overall understanding of the market opportunity.
- Diversify Your Information Pool: Instead of relying solely on one expert, tap into multiple sources. This provides you with varied perspectives and sometimes highlights differences in opinions.
- Follow Your Purpose: You embarked on this journey with a goal and vision. Don’t let external voices drown out your internal compass. Stay anchored to your objectives and aspirations.
Wrap-Up
Each player on your advisory team brings a unique skill set to the table. While you might be tempted to don many hats and handle things solo, remember that even superheroes have sidekicks.
Assembling the right team is crucial to your franchising journey, ensuring you have experts to consult at every turn.
In our next guide, we'll explore how to manage and nurture these relationships effectively.
Building a team is just the first step. Making it work harmoniously is a whole other challenge!