Category: Blog

In the new normal, job seekers must think differently about their employment options, including self-employment, starting or buying a business, or buying a franchise, in addition to traditional job search. Recently I had a very interesting experience putting a former Chemical Industry CEO in contact with an intriguing Business to Business Franchise Concept. I thought it would have been a perfect fit. Unfortunately, it did not go well.
The breadth of options to invest in a franchise business concept is staggering; from Ice Cream Parlors, to Spas, Hotels, and Automobile Dealerships. The upfront investments can range accordingly from low five to high eight figures, depending on the nature of the business. Like buying a home, or any other business, it is a big transaction that most people don’t fully understand. Franchise acquisition is a process with a lot of steps, governed by Federal and State Regulations. Franchisers utilize a Franchise Disclosure Document (FDD) to formally offer and educate you on all aspects of their business. FDDs are similar to a Prospectus given to investors contemplating the purchase of public securities but unlike a Prospectus, FDDs are often not up to date or always accurate. The good news is that a simple Google search will reveal a lot of relevant information to get you started. Better yet, I recommend that you begin by visiting www.franchise.org. This website, sponsored by the International Franchise Association, IFA, provides a wealth of information to help you evaluate options and navigate the process. Additionally, LinkedIn has a number of franchise related groups worth your consideration.
Before getting too deep into the process of evaluating franchise options, I recommend that you take stock of your personal situation, including a personality assessment. You may have the financial resources to buy a franchise, but you also need to assess your risk tolerance. It would be well worth your while to see a professional to help you understand your psychology as it relates to entrepreneurship and managing your own business. Some people are meant to be entrepreneurs, but most are not. You can save yourself a lot of money and headaches if you understand your suitability, for business ownership.
If you want to buy into a franchise you must be prepared to do a lot of research to find an affordable opportunity that fits your goals and aspirations. Understanding the opportunity and the acquisition process early on is vital to a successful outcome. Talking with existing franchisees, visiting multiple locations, and understanding how to achieve success with the franchise is recommended. Due to the nature of the transaction and due-diligence required, the prospective franchisee must consider the value of other professionals for help. Franchise Consultants/Brokers, Financial advisers, Attorneys, and Accountants should be employed to help the prospect.
The franchiser will manage the process, and the expectations of the prospect, including time-frame to closing, financial return, training, life-style, and on-going marketing and operations support. Franchisers want to ensure that the prospective franchisee has a full and realistic picture of their business. You must become confident that the franchiser has a commitment to the success of the franchisee. Fundamentally, this is what you are buying. Larry Bader, a Chief Development Officer candidate advises that; “Failed closings are usually due to a lack of confidence in the executive team.” Understanding the culture and competence of the management team providing stewardship over the franchise brand is an essential part of your due-diligence. As a prospective franchisee, you must be confident that management shares your values, goals, and ethics. You should gain an understanding of the system-wide relationship; are the franchisees generally happy and successful, or pursuing lawsuits against the franchiser. Calls to existing franchisees are a very helpful activity in this connection. The process needs some structure, but it must provide an honest representation about the concept, its viability, and current business climate.
My CEO friend added that, “Franchise attorneys are critical in the due diligence phase of evaluating a franchise. An experienced franchise attorney will recognize FDD’s that are written well and fair. They will advise you about areas you need to discuss/negotiate with the franchiser. Listen to your attorney’s input.” According to Jim Squire, a highly respected franchising professional; “The prospect needs to be careful about the legal adviser they choose. Some things are negotiable, like leases, buildings, and equipment costs, but some things are not. Franchise agreements are generally not negotiable. The agreement is designed to protect the brand.” You are well advised to hire an attorney who has expertise in franchise law.
To summarize, you must have the financial wherewithal and personal characteristics of a successful entrepreneur. You must be comfortable with risk and have confidence in you abilities. You will be expected to be good partner to the franchiser, so you must be a team player too. Extensive research is required to find the right concept for you. Using professionals to help you along the way, like hiring a lawyer who knows franchising and employing franchise brokers among others is another step toward successful franchise acquisition. Speaking with existing franchisees working the brand is highly recommended.
So, what killed my deal? Well, after discussions with representatives from the franchising brand, and the prospective franchisee, I learned that some things went well and some did not. There was clearly a clash of values and styles as the franchiser employed high-pressure sales tactics that did not go over well. Eventually the prospect became comfortable with the opportunity having done his due-diligence correctly and arrived at a clear understanding of the potential sales within his professional network. Furthermore, he chose an attorney well-versed in franchising. This attorney pointed out a number of questionable stipulations which my CEO friend attempted to negotiate. I was told that just prior to the scheduled closing date, the franchiser advised of their refusal to discuss changes to the Franchise Agreement. This was a big surprise to my CEO friend, who decided not to proceed to closing.
The fundamental lesson I learned was to direct people to a franchise broker/consultant as opposed to sending them directly to the franchiser. If I had done that originally, a lot of time and effort would have been saved. Fortunately it was not a costly lesson for any of us, and we are all still friends.

This past week was focused on networking in the Franchising arena with some interesting learning on one concept in particular. Franchising companies are the bread and butter of my search practice so it is natural that I will spend a lot of time with professionals from this segment, both clients and networking contacts. The recession has not been kind to the franchisors I support. The capital crunch has made it difficult, if not impossible, to close new franchise development deals. In fact, when the market crashed in the early fall of 2008, many franchisors gutted their development departments as they understood that the prospect of granting new franchise licenses would be dim for the foreseeable future. As one would expect, the concepts requiring the greatest capital investment were severely impacted.
The week began learning about a compelling new, well new to me, franchising concept called Firestorm. I was first introduced to the concept at the February meeting of the Southeast Franchise Forum when I met Hutch Hodgson, their EVP of Franchise Sales. Hutch is a very engaging gentleman who has had a full career as a Fortune 500 executive, and later as an entrepreneur building The Heavenly Ham Franchising Brand. He has now come full circle to help a start-up company build their market share through franchising. Hutch and I really hit it off. I told him a little about my background, my business, and my writing projects. He graciously agreed to contribute to this series and suggested that I learn more about Firestorm prior to our interview by attending their weekly webinar. I gladly accepted. It was a fascinating presentation moderated by the company’s CEO and co-founder, Jim Satterfield. More about that later. The next day, Hutch and I met to talk about my article.
Before we started, I gave Hutch the set up. I told him that I am convinced that the economy is restructuring into a “new normal” with leaner companies using out-sourced contractors over full time employees. Further, it is my opinion that many of the over-50 aged executives riffed this time will not find suitable employment opportunities in their field, at the same level. Self-employment, and entrepreneurial pursuits, like franchising, will take on a whole new level of importance. Hutch agreed. “All too often, you hear people say; I’ve lost my job! I need to find a new job!’
He began by telling me that the current recession reminded him of the early 80’s. At that time, companies were reorganizing and downsizing which resulted in a lot of corporate-types willing to consider franchising as a viable career alternative. Personal Computers were just hitting the market, but the Internet was still over a decade off. He went on to say that “at least there was financing in the 80’s. Franchise brokerage was new. Now, franchise brokerage is mature, but funds are scarce.”
Clearly, Hutch has a great deal of empathy for the unemployed. “It is tough to be out of work. The wife and the kids are on their case. Egos are bruised, especially for men, whose self-worth is tied to their careers. They know that they must take charge of their own destiny and that franchise opportunities should be given due consideration, but that is risky and can be frightening. ” Hutch went on to say that unemployed executives spend too much time looking for a new job before looking at other alternatives. By the time they consider buying a franchise, they have burned through their assets and have no funds to make the investment. They need to get to that point early on.”
Hutch went on to confirm what other folks have told me recently. The first thing that the unemployed executive must do is to take stock of their personal situation. “They need to write down on paper, those things that are important to them. What are their values? What income level do they need? What are their outside interests? Who do they want to work with?” The gist of his message is that one must know one’s strengths and weaknesses; the resources at their disposal; the needs of their families; and the kind of work that best suits their personality. Hutch suggested that they commit to four or five major objectives, develop a plan, and work it. If owning a business fits with ones skill base and resources then that option should be part of the plan. The message to me was clear. I need to help my candidates get to a better place early in their job search process, before they have exhausted their finances and emotional strength.
Back to Firestorm. This is the kind of franchise that any recently displaced corporate type should give serious consideration. Firestorm’s business is “business continuity.” Their concept is directed at disaster preparedness planning for businesses. Their slogan is “Predict, Plan, Perform.” Over the years, I have met many professionals in the disaster recovery business. Those folks help companies get back in business after a disaster, but usually focus on a limited slice of the business like electronic data systems. The Firestorm concept is proactive, identifying business risks before they occur, putting plans in place to mitigate those risks when and if they do occur. This is a business to business concept that is ideal for a former corporate executive as one would be selling this service in an environment they know and understand. Additionally, the investment required is modest by comparison to other franchise concepts requiring almost no investment in plant and equipment. This results in a very attractive revenue to investment ratio. The labor component is nil as well, unless the franchisee wanted to hire sales people to help build the business. For more information about Firestorm, you will enjoy visiting their website at: www.firestorm.com
It did not take me long to put Hutch’s advice into action. The following day I met with a candidate over lunch. Doug, is a newly displaced CEO, who I had recently met and decided to get to know better. As you would expect, Doug is a very polished executive with a clear understanding of his strengths and career aspirations. His focus is on mid-cap companies in the chemical industry. We had a good exchange with both of us sharing a lot about our careers and interests. I learned that he was just getting into the networking phase of his job search, but was not all that familiar with the landscape in Atlanta. So, I told Doug about The Kettering Group, an excellent networking venue for senior executives who are employed or between situations. As membership in The Kettering Group requires a sponsor and validation of the candidates career progress, I committed to him that I would connect him with a friend who is a member. He attended his first meeting this past week.
Toward the end of our time together, I told Doug about my recent discussions with the folks at Firestorm. I gave him a brief overview of the concept and offered to make a personal introduction if he was interested. Doug is a smart guy who knows the value of looking at various opportunities so he gave me the green light to make an introduction and share his resume with Hutch. Things moved fast after that introduction. Doug attended their webinar and was presented with Firestorm’s franchise disclosure documents for further consideration. I don’t have a financial interest in this transaction, but I am curious as to Doug’s take on this concept and its potential fit with his goals.
The key learning this week is to help the newly-unemployed executive candidate face the reality of the new normal, encouraging them to look at all of their options, including interesting concepts like Firestorm. When one finds themselves between situations, looking for a new career opportunity, it is vital that one’s first action is to put some effort into understanding their situation. One must know one’s strengths and capabilities; interests; ideal work situation; and personal financial situation among other important considerations. One must also consider all of the career options, including self-employment and business ownership, which match their personal inventory. In this environment, it makes a lot of sense to explore all potential career options at the beginning of the job search when one’s resources are still solid and intact.