Consultants Can Help Navigate Franchise Ownership
Check out this great article from the Union Tribune on Franchise Consultants and the interview with Dr. Marc Camras!
Interested in owning a McDonald’s franchise?
The down payment will vary, but generally, the company requires a minimum of $750,000 of non-borrowed personal resources to consider someone for a franchise. But that’s really just the beginning.
Startup fees also include training, working capital reserve funds, supplies, equipment, insurance, legal fees and more. According to the International Franchising Association, total startup costs for franchises in general can range from $20,000 to more than $1 million.
For many business people, navigating the paperwork, legalities and financing can be challenging. That’s why some people who want to buy a franchise hire a consultant.
Dr. Marc Camras, president of MVision Consulting in San Diego, likens buying a franchise to buying a house or going to court.
“Would you buy a house without a real estate agent? Would you show up in court without an attorney?” he said. “A good franchise consultant is going to help you through the process and help you get through the due diligence.”
EXPECTED TO GROW
Franchises look to be a good investment in 2014.
In general, franchise sales are expected to grow, according to a study by IHS Global Insight, an economic analysis and forecasting firm. That study showed that the output of franchise establishments in nominal dollars in 2014 will increase 4.7 percent, stronger growth than the 4.3 percent recorded in 2013.
According to the U.S. Census Bureau, franchise businesses accounted for 10.5 percent of businesses with paid employees in the 295 industries for which franchising data were collected in 2007. Additionally, franchise businesses accounted for nearly $1.3 trillion of the $7.7 trillion in total sales for these industries.
GOOD AND BAD
When considering whether to purchase one of those franchises, a good consultant can be invaluable, Camras said.
Camras warns, however, that bad consultants are always on the prowl.
“If you hire someone and they have a set group of franchisors that they will direct you toward, no matter what your preferences are, you’ve got a bad one,” he said.
A good consultant, Camras said, will think of the client as an individual.
“It’s really about looking at you from a holistic standpoint. What have you done in your past? What do you want to do, and why do you want to do it?” he said. “And while nobody can tell you how well you’ll do, a good consultant should help you understand how well you’ll do if you go through that process.
“A good consultant also prepares you for conversations with the franchisor, helps you organize the legal stuff, organize your accounting stuff and helps you get financing,” he said.
CRITERIA FOR CHOOSING
There are three main criteria to evaluate when looking for a consultant, according to Camras.
The first is experience. The consultant should have at least several years in the industry on their resume. Camras said there are a lot of people who are in and out of the consulting business within two years.
The second is the process. The consultant should have a process that includes everything from evaluating the franchise, helping to locate financing and assisting with legal matters.
The final criteria is interest. Camras said some consultants may just try to qualify their client and base their involvement on how much the client can spend. The consultant should be more focused on what kind of business would work well for the client.
“In any given year, there are 2,750 franchises out there,” he said. “There are inherent risks to ones that are brand new, and there are degrees of success you’re going to have if you’re happy in a business. So it’s really a process that should require a tremendous amount of time and thinking. It shouldn’t be this quick decision.”
For more information, visit www.franchise.org www.mvisionconsulting.com
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