Franchisors generally come in two sizes: national brands and regional brands. In January, I covered the pros and cons of each. National brands tend to have more resources and better brand recognition, but with much higher costs and more rigid business systems. Regional brands tend to have lower costs and more flexibility, but with fewer resources and possibly less opportunity for growth. If you read those blog posts and are wondering what kind of owner is the best fit for each option, you’re in luck! Last week, I covered regional franchise ownership. This week: how to tell if you’re the right kind of franchisee for a national franchise brand.
You Have Plenty of Money
As I mentioned in my previous post on national franchisors, they tend to be more expensive than regional outfits. Expect your total startup costs to be several hundred thousand dollars, at least. You should also be prepared for higher ongoing expenses. This is because national brands typically require a minimum investment of several franchises, so you’ll be paying more in royalties, marketing fees, and operating costs right from the start.
These higher costs, coupled with the multi-unit requirement, likely mean you’ll have to wait longer to break even or pay yourself a salary from your business. So a franchisee for a national brand needs to have a bigger financial cushion going into the deal. That cushion can be in the form of more savings, a side gig or day job, or other financial resources to pay your bills as you get your franchise(s) off the ground.
You Want to Be an Executive Owner
National brands usually require a multi-unit investment. Some may want you to open all your units at once, while others may allow you to spread out the launches over the first year or so. Either way, the right kind of franchisee for a national franchise brand is usually someone who wants to be an executive or semi-absentee owner. That means you’ll hire a team to manage day-to-day operations while you focus on the business strategy and long-term growth.
To be successful as an executive owner, you’ll need to be comfortable hiring and firing people, managing a team, and delegating responsibility. You’ll also need to have a solid grasp of financials and business strategy–which brings me to my next point.
You Have Solid Business Experience
You’ll be most likely to succeed as a multi-unit owner or area developer if you have significant business experience. Former executives and high-level managers, such as VPs, are great candidates for owning national franchises. Experienced entrepreneurs who have previously operated a large, successful business should also consider national franchisors. Overall, you need experience with:
- Managing business financials to profitability
- Growth and marketing strategy
- Leadership of a large, distributed organization
- Operational oversight and accountability
You’re OK with Being a Big Fish in a Big Pond
As a franchisee for a national franchise brand, you’ll have the opportunity to oversee a large business and possibly generate tens of millions of dollars in revenue. But so will all your fellow owners. You may enjoy having a network full of similarly (or even more) successful individuals. Maybe you love the competition, and it spurs you to even greater heights. Or maybe you enjoy having the opportunity to learn from colleagues who understand the challenges of operating at your level.
However, you may instead prefer to be the standout in the pack. If your sense of satisfaction in your work depends on being a big fish in a small pond, then a national franchisor is probably not the best fit for you.
The Inside Tip
Love the idea of buying into a national brand but don’t have the funds to join an established franchisor? Consider getting in on the ground floor with a new franchisor that plans to go national. Just make sure you understand the pros and cons and have the risk tolerance for being a trailblazer.
Need some more guidance as you’re deciding what to do? I’m here to help, and my services are free. Book a call with me today–it just takes 15 minutes to get started!
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