[Free Book Preview #18] Developing a Turnkey Concept – a Franchise or a Business Opportunity

[Free Book Preview #18] Developing a Turnkey Concept – a Franchise or a Business Opportunity

Hey there, Freedom Seeker!

Welcome to the exhilarating big sky of small business entrepreneurship!

I wrote a book for you. This book reveals the Unbiased Small Business Research Formula developed from decades in the trenches of American Main Street and online business as a small business entrepreneur and a coach. Its objective is to help you become the successful creator of the new life you envision by objectively guiding you in researching and choosing the right business.

In the next weeks, I’ll share free sections of the book with you before it’s released for publication and available for purchase.

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There are four paths to business ownership: creating a business from an idea, buying a for-sale business, developing a turnkey concept, and buying one that is developed. Today we highlight the pros and cons of getting into a turnkey system (i.e., a franchise or a business opportunity) by acquiring and developing a new turnkey location.

A franchise or a business opportunity might be a practical choice as a turnkey option for business ownership. They are both businesses in a box with differences. Franchises are more regulated than business opportunities. They retain more control over how each business unit or location is operated, and they have stricter requirements than business opportunities. Franchisees will pay royalties and fees and agree to strict business operating rules. A typical franchise or business opportunity began as an independent startup, in which an owner developed the business idea and made it profitable and duplicatable. 

Most franchising and business opportunity concepts develop when a successful business owner chooses to license their concept as a method to grow and scale their enterprise rather than investing in additional locations they would need to own and manage.

Instead of building and managing additional business units or locations, the franchisor invites franchisees to invest the startup capital for ownership of one or several business locations under the umbrella of a brand. In exchange for the systems, the brand, training, and support, the franchisee/owner pays a one-time franchise fee plus recurring royalties as they operate the franchise unit.

Typically, a franchise provides more training and ongoing support to franchisees than business opportunities. Once you invest in a business opportunity, you are free to run it as you wish while usually receiving less support than you would with a franchise. 

Who this is for: 

You may choose a turnkey concept (franchise or business opportunity) if the cost of time and money to create a new business or acquire one seems too high and cumbersome. 

Franchise Business or Business School? Getting into the right franchise can be an excellent business education of learning by doing. Instead of getting into debt for a college degree, investing in a franchise can be a viable choice. With a franchise, you can learn, grow, make a living, and even sell it later.

If you are interested in starting a business in an industry that is foreign to you and where you don’t have much or any experience, a franchise can teach you to navigate that industry sector. The franchisor will provide you with training, support, and industry knowledge. A successful franchise owner welcomes the structure of a franchise system and not have to create everything from the ground up. They are willing to abide by the systems and rules set by the franchisor.

Advantages:

Owning one or multiple franchises can be an excellent entrepreneurial path for the right investor. For some individuals, building a new business concept, proving its viability, developing new products, and creating a new brand with new systems and standard operating procedures can be overwhelming or take too long. If this is you, you might prefer a plug-and-play approach and take advantage of an already proven business concept with support, as long as you don’t mind following the franchisor’s requirements. A franchise investment is often closer to having a job. You will have less freedom and flexibility than if you built or acquired a company, but you will also have fewer burdens.

A franchise is also an easier way to get into an unfamiliar sector of industry. The franchisor will teach you the best practices. 

For the same reasons that it is easier to finance an existing business, banks are also keener on funding a proven turnkey concept than startups.

A foreign national who wants to reside in the US by investing in a business is more likely to receive approval from consular officials of the United States Citizenship and Immigration Services (USCIS) for their E2 investor visa if the business is a proven and predictable turnkey concept.

Someone else, the franchisor, is worrying about research and development, branding, sourcing supplies, and developing systems. You join a community of other franchisees who can support you, share connections, and help you solve problems.

It is easier to multiply locations. Once you have successfully developed one franchise unit or location, you can use the equity built in the first business and expand by investing in additional franchise units to develop. Over half of the franchisees are multi-unit owners. Owning multiple units is how investing in franchising, with the right franchise for you, can build wealth.

The challenges: According to Frandata, a market research company, there are about 4,000 unique franchise and business opportunity brands in the US alone. Many are upstanding. Many others treat their franchisees horribly because of their lack of experience, vindictiveness, or unscrupulous practices.  In addition to picking an upstanding brand, finding the right concept for you might be like searching for a needle in a haystack. Franchise opportunities can be found in all types of industries. Although, as I mentioned earlier, it is easier to get into a sector you are unfamiliar with through a franchise, you should be extra diligent. Franchisors tend to make it sound easy to get into a sector new to you by touting the efficacy of their training and systems. Until you actually are working day in and day out in any sector, you might only have a glorified perspective of what it means in practice. You should especially take extra steps to research the business and interview not just current and past franchisees but also independent owners in the same sector.

Another dilemma when deciding to develop a franchise is whether you will find one that can actualize your life purpose. As we discussed in the first section of this chapter, having clarity on your life purpose can lead you to identify a problem to solve that will benefit others. If having a business that can actualize your life purpose is your priority, you might find the franchise model too restrictive because you will need to observe the franchisor’s rules and values.

You might engage a franchise consultant to help you source possible turnkey concepts. Most franchise consultants are limited to working with the companies in their network, representing a small fraction (generally 10% to 20%) of the total number of existing brands. These brands have agreed to compensate the consultants for your placement as a franchisee. As discussed earlier, the franchise industry, like the business brokerage industry, has inherent biases. Even though most consultants are ethical and knowledgeable, like business brokers, they don’t have the objective expertise or the time bandwidth to help you thoroughly research the business aligned with who you are and the life you wish to have. Only you and your unbiased business coach can. Through the early-stage work of researching the right concept, as discussed in this book, and the subsequent vetting stage, which is both included in the Right Business Right Life formula, you arm yourself against biases and make an impartial and clearheaded decision.  

Being a franchisee can sometimes feel akin to being an employee again, with the added burden of investing your capital. You need to trust the franchisor’s vision and ability to grow the business in the right direction. As a franchisee, you have limited decision-making power and are required to follow the systems and requirements imposed by the franchisor, even if you disagree. Leaving the strategic decision of a business to another party can be reassuring to some or very uncomfortable to others. 

The cost of recurring royalties is substantial over time, especially as your business’ revenues grow. Make sure you pick a franchisor that has a track record of providing quality support and leadership in fair proportion to the required royalties. 

Joining the VIP Waitlist

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During the private coaching session, I’ll guide you through the exercises and templates in the book. Available to the first 20 VIPs who purchase the book. To join the VIP waitlist, click here.