The Bibby Group

06/04/2022

Franchise Due Diligence Is A Must For Buyers

Without question, franchise due diligence is the most important aspect of buying a franchise. But the vast majority of buyers don't take it seriously or take it far enough. That's for two reasons.

First, they don't know how to conduct an adequate investigation. Why would they, it's new territory. And second, great salesmanship can be viewed as a substitute for actual research.

Every franchise buyer will say that they conducted due diligence, and that's true to some extent. But it's the meaning of the word 'extent' that causes problems.

For some, due diligence means trusting the sales process. For others it means reading disclosure documents (which are confusing at best). And still others visit an attorney or accountant, but those resources are probably not franchise specialists.

And last, the franchise industry has always advertised itself as an almost 'no-fail' approach to business ownership. That's not at all true. Franchise failure is rampant.

The bottom line is that true franchise due diligence is often viewed as unnecessary, but it's the most important part of the process.

Expert due diligence is the only way to level the playing field and gain protection

  Buying A Franchise Is Risky Business - We Limit Risk Buying a Franchise Is Has Many Pitfalls. Look Before You Leap. Who Are You

04/05/2022

HOW MUCH MONEY CAN I MAKE WITH THIS FRANCHISE?
Every First Time Franchise Buyer's Question
How much will this franchise make?

With the exception of experienced buyers, most franchises are purchased based on salesmanship and the dream of making big money. And of course, anything in franchising that smacks of making money, whether subtly weaved into a conversation or stated in some very crafty, almost meaningless earnings claim, is just extra stardust in the franchise sales process. Franchise buyers hear what they want to hear and any hint of an answer as to how much money can/will be earned keeps the buyer’s interest. Unfortunately, buying a franchise shouldn't include wishful thinking, but it usually does. Unless backed up by a well defined and useful FPR (Financial Performance Representation), what a franchise seller says about income must be verified by the buyer. (See this excellent examination of facts on FPR’s.)

Years ago, the FTC allowed the easy to understand term ‘earnings claims’ in franchise disclosure documents. That has morphed into ‘financial performance representations.' They essentially mean the same thing, but along with the name change came more control over what was being claimed and how those claims could be stated. (And for those of you who are interested, those claims are found in Item 19 of the disclosure documents.) So, when buyers ask ‘how much money can I make with this franchise’, the best source of information would be that Item 19 and the FPR. But keep this caveat in mind. That information is only a starting point and no indication of how any given new unit might fare.

Mr. Franchisee, How Much Money Can I Make With This Franchise?

Obviously a good source of performance information is existing franchisees. But again there are caveats. For example, on what performance tier does that particular franchise fit within the system? Have you been pointed to a given franchisee by the salesman or broker you are dealing with?

When buying a franchise, everyone wants to know how much money they can make, but even with quality due diligence you will never know until your particular unit is up and operating.

The real shame is that most buyers never even perform the most basic of pre-purchase due diligence when searching for options. So can you imagine how they are starting out? I’ll tell you. Their heads are in the clouds and reality is about to strike.

How Many Franchisors Provide FPR’s?

Back in the 90's perhaps 20-25% of franchisors offered 'earnings claims.' As time marched on and competition demanded that more information be available for buyers, the numbers went up. Today you’ll find 50%+ providing some type of financial performance representation. Good luck as you go forward. Ultimately, it won’t be ‘Mr. Salesman, how much money can I make with this franchise?’ The seller is not your information source for that question. It will be you gathering your own real data from many sources (including an FPR) and making a worthwhile forecast.

04/05/2022

WHICH DO YOU CHOOSE? FRANCHISE OR INDEPENDENT BUSINESS.

A Most Common Dilemma - Should I Buy A Franchise Or Be Independent?
Franchise Or Independent - The Struggle

Deciding whether or not to buy a franchise is a very common struggle. If, like many corporate folks, you don't have a marketable trade, buying a franchise can make a lot of sense. While you may understand business, that business must have a trade focus of some kind. A franchise is going to provide that trade or skill set. A quality franchise offers training, set-up, support, and on-going assistance in running the business. Ask yourself the following questions: Are my chances of success greater on my own, especially if I have to learn as I go? Do I need to buy a franchise for the training and support team behind me? Note that we say quality franchise, not just any franchise.

Note: If Buying A Franchise turns out to be your goal, opt for protection and serious due diligence - https://www.bibbygroup.com/buying-a-franchise/

Franchise Or Independent - The Personality Test

Personality is a huge part of the decision to buy a franchise. If you're a particularly independent person and not a fan of other people's rules, franchising is bound to rub you the wrong way. Franchising requires that you follow the given structure in all respects. I you don't there will be a heavy price to pay. Frankly, this might be the most important factor for anyone to consider when making the franchise versus independent choice.

Of course, there is an entirely different path to entrepreneurship made up of non-franchised business opportunities. If you take that road, you'll be taught how to run a particular business, but not be affiliated with the opportunity seller after training. Business opportunity sellers offer to teach you their business concept and then leave you alone.

And last, if you’re trying to decide what type of business, if any, is the right one for you to choose, then take a look at the program we developed specifically for the countless people facing difficult decisions about their entrepreneurship. The Focus Program for Emerging Entrepreneurs will guide you toward discovering and defining your entrepreneurial self and from there your business choices will be made more clear.

04/05/2022

THE REAL COST OF SMALL BUSINESS FAILURE - Part One

Here is totally new thinking regarding the nature of small business and the real cost of small business failure. This isn't an attack on traditional thinking found within government agencies or schools. Neither is it an attack on other accepted entrepreneurial authorities. Instead, this is a comment on the more personal aspects of entrepreneurship; the real heart of the issue that goes completely addressed by government, financial institutions and educators year after year.

It's a new perspective on solving a difficult problem. Old thinking about entrepreneurship and small business isn’t working and hasn’t worked for decades. It’s time to approach the problem of small business failure from a totally different position. It’s time to look at the real cost of failure in terms of the personal and financial devastation it causes on many levels. Perhaps knowledge of the suffering resulting from small business failure will lead to more new thinking.

Statistics Attest To The Real Cost Of Small Business Failure

Let’s begin our analysis with an often stated, yet unfortunately true, piece of information. According to government statistics, one-half of all new businesses will fail before they are five years old. Most of us who are interested in entrepreneurship have heard that statement many times. In fact, we hear it so often that we may become immune to its implications. And even for those who have experienced the bruises of entrepreneurship, the true meaning of that statistic doesn't register until the actual numbers are considered.

The magnitude of the problem has impacted my thinking for a very long time. And eventually, the need to find a way for entrepreneurs to win more and suffer less became essential. That mission is the core of this article as well as the basis of a program, a system, and a methodology designed to reduce small business failure. A link to that online program and methodology is provided below.

Real Numbers To Consider

While percentages are one way of expressing statistics, those same statistics can take on greater meaning when we consider the actual numbers they represent. For example, if we state, and accurately so, that 5% of the total number of businesses in existence are start-ups, that percentage doesn’t sound particularly significant. But, to recognize that same 5% as 700,000 unique entities, the number takes on a whole new meaning. Surprized by the total number of U.S. start-ups? It's a huge mass by any standard. (Note: There are somewhere between 12 and 14 million total businesses in North America, ranging from General Motors to Pete’s Ice Cream truck and includes every demographic of age, race, and economic level. The percentages, the numbers, and the facts touch every entrepreneur and every free enterprise. No demographic escapes the reality of small business start-ups and failures.)

Small Business Is More About People Than We Ever Consider - Unless We're The Owner Or Employee

The goal here is to stop thinking about small businesses as inert objects and see the people behind and within them. The goal is to recognize the need find a way to help these brave individuals succeed more often than they do in our current framework of entrepreneurship. Of course there's financial loss, but what about the real cost of time and human suffering?

The Focus Program for Emerging Entrepreneurs results from a lifetime of studying family, friends and clients in various stages of entrepreneurial success and failure. That system, that methodology, is a means of making better decisions about self-employment and small business ownership. Use this link to reach part Part Two of this article.

04/05/2022

THE REAL COST OF SMALL BUSINESS FAILURE – Part Two

Recognize The Enormity And Cost Of Small Business Failure

Part One of this piece pointed out the need for new thinking concerning the high rate of small business failure. The problem demands examination from a whole new perspective. Aspiring entrepreneurs require and deserve a better road map than the one currently offered by government, educators and supposed ‘experts.’

Small Business Failure In Terms Of Lives
Let’s begin by examining small business failure in terms of humanity. If my math is right, 66% of 700,000 is roughly 455,000. That’s an estimate of failed or failing businesses that exist at any given time in the U.S. (Estimates on annual start-ups vary, but 700,000 new businesses starting and two-thirds predicted to fail are realistic numbers.) Focus on the size of that population for a minute. That’s Four Hundred Fifty Five Thousand businesses in the process of failing at any given moment. How many people might that involve when employees and families are added? However the numbers are manipulated, there is an enormous population in trouble at any given time.

The Problem is Given Lip Service at Best
If all of Boston, Dallas or Detroit were in a death grip, a state of emergency would be declared and forces would be mobilized to fix whatever was wrong. I’m a conservative thinker on most issues, and not one for more interference in our lives, from the government or any other source. But given those numbers, don’t you think some real help in the form of a solution for decreasing failure is in order? With such a high loss rate, you would think that a real effort to at least address the problem would be a shoe-in. But that’s not the case. In most instances, the best response to failing owners is a heavy dose of empathy. And why is that? It’s because the people living the problem are living it alone while the rest of society is unaffected.

How is the carnage of 455,000 failing businesses felt and assessed? That would be done in terms of life savings lost, torn up families, health problems, and literally lives lost. The net cost to society is in absorbing the fallout of these problems. And of course, there is a dampening on the economy as opposed to an employment and revenue boon.

Where Is The Real Problem Found?
Entrepreneurship is the lifeblood of all free societies, but small business owners are scorned on many levels. We offer great assistance to the unemployed and the needy, and that is proper, but our entrepreneurs are extremely valuable commodities that deserve care and nurturing as well. Our governments and work forces, indeed, our entire economic base is grounded in the concept of entrepreneurship.

The seeds of small business failure are planted long before a venture is launched. They are also planted long before a business plan is written, if one feels that is important. But that’s a separate article. We have found that failed entrepreneurs did not properly plan for ‘themselves’ to be in business. And that’s a totally different issue than planning for the business itself. We’ve taken a giant step in creating a process for entrepreneurs to plan personally for the challenge so as to start with conviction and strength.

The Focus Program for Emerging Entrepreneurs is our offering. The Focus Program takes off the gloves and dares to say that our current approach to self-employment is inept and inadequate. It considers the entrepreneur first because that is the correct order of things. Entrepreneurship is first about the person not the business. A business doesn’t make an entrepreneur successful. It’s the other way around. The entrepreneur who has a dream, and then the courage to step out and express their independence is the backbone of a free society. Our entrepreneurs deserve the best possible chance for success.

06/30/2017

ABOUT 'FREE FRANCHISE CONSULTING'

People who offer “free” services to help us find the right franchise can make life a bit confusing . Their focus is on selling an opportunity that pays a commission, while all the time making us feel that our needs are being met. Nothing is free and these folks are not consultants. They're commissioned sales people and brokers.Under this arrangement, the broker, called a consultant, has established relationships with certain franchisors that have agreed to pay a commission when a sale is made.

The process can work for the purposes of introductions, but the negative side is quite negative. Here's why. In order to know the truth about a possible franchise purchase, due diligence must be performed. Without such analysis the only information is that provided by the franchisor or the broker. Do you think they'll be any negatives on the table? No. If there are negatives about the franchise is the broker going to highlight them? Maybe, if they know about them, or maybe not. The commission is on the table.

Protect yourself with serious franchise due diligence and analysis - https://www.bibbygroup.com/buying-a-franchise/

Choosing a Franchise is YOUR Decision; no one else matters. This is a recent inquiry that others might find interesting.Choosing a franchise can be confusing"I recently went through an evaluation with a franchise placement company to get help with choosing a franchise. They concluded