Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wednesday on Twitter from 8-9pm ET. This is excerpted from my recent interview with Joel Libava @franchiseking. Joel has been involved in some facet of the franchise business for 20 years. His focus for the last 11 years has been on franchise buyers. He provides straightforward advice on how to buy and research franchises. He’s the author of Become a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, and Owning What You Do” (J. Wiley and Sons, 2011) http://www.becomeafranchiseowner.biz
Smallbizlady: How did you get nickname “The Franchise King®”?
Joel Libava: I attended a large business function at a local chamber of commerce here in Cleveland, and as I entered the expo hall, Tom Sudow, the executive director of the chamber at the time yelled out, “Hey! It’s The Franchise King!
The name kind of stuck. It’s funny; most people think that it’s an “ego” thing. But, it’s not. It’s just turned out to be a nice fit for my personality. As a matter of fact, it fit so well, my friend (and really smart internet marketer), Jim Kukral hammered on me relentlessly to get a business attorney to help me trademark the name. So I did. It’s official. I’m only person in the US that’s allowed to call themselves The Franchise King®.
Smallbizlady: How did you get into the franchise business?
Joel Libava: Well, I actually came from the franchise business. I was in automobile franchise management, and got downsized, from a job in 2000. My late father, Jerry Libava, was a franchise consultant at the time, and gently (not at all) encouraged me to join his firm. After about 2 months or so, I did.
Smallbizlady: Why did you decide to join your dad in business?
Joel Libava: People that go into business are either to, “moving away” from something unpleasant, or are, “moving towards” something that has the potential to be pleasant- like being their own bosses. I was in enough pain to try something else. My dad thought that I’d be a real good fit for his business. I would be a consultant–a franchise broker. I would hold seminars-(public speaking has always been one of my strongest skills) and I’d do sales and marketing, too. And matchmaking, of course.
Smallbizlady: Your father’s business was a franchise. How did you like being a franchisee?
Joel Libava: I didn’t. I don’t mind working with others, as long as they’re ethical, unselfish, and genuine. I’m very picky about who become strategic partners with. It’s the rules that I have issues with, especially if they’re stupid and meaningless. I just want to cut to the chase and do some business!
I was a lousy franchisee; that’s one of the reasons why I’m a super-valuable resource for people that are considering franchise ownership. I know how to spot good potential franchisees, and I know how to spot bad ones.
Smallbizlady: What are some of the common misconceptions about the franchise industry?
Joel Libava: Here’s the deal; there’s no such thing as a turnkey business. Some folks in the franchise industry still seems to use that term to sell franchises to unsuspecting prospective franchisees. It’s wrong. People have this totally unrealistic sense that all they have to do is plunk down $100,000-$200,000 attend a few days of training, and they’re in business. And of course their business (from day one) will have hundreds- if not thousands of eager customers opening up their wallets to them, which will lead them right to millionaire’s row…in a flash.
Buying a franchise is risky. The franchise business model isn’t bad—as a matter of fact, it’s the best business model ever developed. It’s just not for everyone, and it’s not easy to be successful. The hours are crazy, it takes a while to actually bring in income, and there’s a ton of pressure.
Smallbizlady: I have heard that many franchises offer financing, how common is that? How much money do you need to be prepared to invest if you are looking for financing for your franchise?
Some franchisors provide franchise funding, but mostly it’s in the form of financing a portion of the franchise fee, which averages around $30k. If youre going to invest in a franchise, you should have a $300k net worth and the ability to write a check for $40,000-$50,000 of your own money. Plan on applying for a small business loan for the balance of your total investment @SBAGov.
Smallbizlady: You sound a bit negative on franchising, Are you?
Joel Libava: “Some” people say that. Interestingly enough, I’ve been getting more and more people emailing me and calling me to tell me that they love my style. They LOVE my honesty. They feel that I can be trusted.
I don’t care what others in the franchise industry think of me. I only care what the folks that are about to buy into The American Dream think of my work. I’m talking to them, and I’m trying to protect them. At the same time, I’m trying to teach them how to properly choose and carefully research franchises, so that if they do say yes when the franchise development representative asks them to sign their 30-page franchise contract, they can do so and not lose a minute of sleep.
Smallbizlady: How do you work with prospective franchisees?
Joel Libava: I provide very personalized franchise consulting services. I work with people who are just starting their search for a franchise. I also work with people that are just about ready to sign a franchise contract, but want to make sure that they aren’t missing anything. And…lately, I’ve been getting calls from people that are thinking of becoming franchise brokers.
I’ve written well over 1,000 articles about franchising on my own blog-The Franchise King Blog. I’m also a regular contributor at Small Business Trends, Open Forum by American Express, and I’m the exclusive franchise blogger over at SBA.gov, The US Small Business Administration’s website. So, if people want to learn about franchising from A-Z, I’ve been providing factual content online for over 7 years now.
I’ve also produced lots of franchise videos, and recently, have done several for Franchise Direct, a company that has several very popular franchise directories. So, if people like “watching,” and learn better like that, I’ve been providing video content since 2007.
I just published my first book, “Become a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, and Owning What You Do” (J. Wiley and Sons, 2011) The website for the book is http://www.becomeafranchiseowner.biz and there’s a blog there with lots of how to’s for people interested in becoming franchise owners.
Smallbizlady: What do you think of franchise brokers?
Joel Libava: Well, since I was one for almost 10 years….I think there’s value in using one. Like in any sales-related business, there are good ones and lousy ones. Working with a quality franchise broker can be a good thing. It depends. Ask them lots of questions before signing on. While their services are free, (brokers get paid very generous commissions) they’re really not going to help you find a franchise that they don’t work with, so your choices may be limited.
If you’re going to work with a broker, get some names…names of people who worked with the broker, and call them.
Smallbizlady: What’s the hottest franchise now?
Joel Libava: Senior Care franchises are still hot. Lots of people look into them, and for good reason; demographics. The graying of America. Here’s a tip for anyone considering becoming the owner of a Senior Care franchise -You need to be a real strong salesperson. (Or have the money to hire one.) It’s a sales and marketing business. Seniors and their families aren’t really coming to you. You have to find them-which will require you to build up a referral network. You’ll need to sell yourself, and your services. And, it’s a crowded sector. (But a good one!)
Smallbizlady: Where should people look for great franchises?
Joel Libava: After they figure out what they should be looking for– they can start by going to a few of the better franchise websites. Franchise Direct, already. http://www.franchisedirect.com is one. Here’s a link to 9 more; http://thefranchiseking.com/the-top-10-franchise-opportunity-websites
Smallbizlady: What does the future hold in franchising?
Joel Libava: Like other industries, micro-niches are going to start forming. Very specialized food offerings will start to become popular. Senior care franchises will start expanding by offering other services that all seniors can use…household cleaning, landscaping services, errand running, things like that.
There will be more transparency. More numbers will start to be revealed by the franchisors. More earning statements will become available for franchise buyers to analyze. That is a good thing.
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