On the edge of whether to buy a franchise

I am on the edge of deciding whether to buy a franchise or not. I’ve come close a couple of times. Deciding on what business or franchise to buy seems to depend on my mood. It's like seeing a really delicious steak that you smell and wonder what it would taste like. Unlike corporations in which acquisitions are thought of in terms of brand leverage, fit, operational synergy, and rates of return, buying a business is like buying a dream and that depends on mood.

I have a group of biking friends. We typically gripe about corporate life and dream about owning our own business on our long bike treks. Although my friends are all corporate employees, we have our radar up for starting a business or buying a franchise. We haven’t bought yet though, but it gives us something to talk about as we bike on the weekends. Corporate life has been good enough to us and it’s uncomfortable to leave. I now have two children, and my wife and I plan to have a big family. Starting my own business with more mouths coming is not an easy thing to do. Still, I recognize that life may be comfortable now but there are rough rapids ahead in the corporate world. And owning a business has many benefits. At any rate, the guys in my biking group tend to window shop a lot for businesses like my teen daughter does for clothes. Most of us go into a store, look at the business and something will hit one of us on how this could be a fun business to own. It’s more of a gut reaction.

I remember there was a time in which we walked into a bike shop one Saturday morning to buy a few things and adjust a few things before our long ride. We were all excited about bikes in general. In the bike shop, business looked pretty brisk. I wanted to quit my day job and expressed how fun it would be to own a bike shop. My accountant buddy Bill immediately went into mathematical exercises of revenue and profit estimates – all based on what we could see for the moment. He assumed that Saturday morning was this shops busiest time and that weekdays had little in business in his calculations. We managed to speak to the owner who was tinkling with a bike. He told us that although it was slower, people tended to buy bikes during the weekdays and a lot of busy repair work could get done during the week days. Bill finished his mind calculations and concluded the money to be slim. “I doubt if this guy makes money”, he concluded. At any rate, he decided that this was a shop that one had to be passionate about the sport in order to own it because profits would not be much.

Then there was another time that my accountant buddy and I discussed how hard it was to get good donuts in our neck of the woods. We became really excited about the idea. Although our city did not have many donut shops, there were local bakeries. We took turns visiting each shop during lunch. I gained 5 or more pounds that week doing my street “due diligence” to see how much of a market there was. We concluded that although we wouldn’t be millionaires owning one or even a few shops, it would be profitable and that the market would support such efforts.

We had tough questions for each other. Do we open our own shop or do we buy a franchise? Bill argued that donut shops were fairly generic. Why pay royalties if we can do it ourselves. I argued that we were not bakers. We didn’t have to re-invent the wheel and make all sorts of dumb mistakes because we weren’t bakers.We would need training to succeed and a road map, an operating manual to help us succeed. The donut brand was well recognized and would help drive people into our store.

Bill didn’t want to take orders from a franchisor and I didn't mind at all. I figured they knew best. I wanted to avoid as many mistakes as possible to help the shop succeed. And that’s where we sit today. I’m still unsure of finding the right business. I want to use my instincts in deciding the right kind of franchise and Bill tends to run the numbers to see what the market trends and financial models tell him.