Franchise Industry Shakeout Coming {Part 1}

What happens to a segment of an industry that has too many players?

The segment that I am talking about is one that is very close to my heart.....

Our type of business {Franchise Consulting-Brokering}has been around since the late 1980's.
Until 2001 or so, our local firm has had very few competitors.
However, our part of the vast franchise industry, like a lot of other industries, is getting rather crowded.

There seems to be a sense that doing what we do is well...easy.

Simple, and easy stuff, what we do.
We try to help those wishing to explore business ownership, get into business!
There are just gobs of folks that can write a check for $50k-75k, go to a bank for more, and prepare themselves mentally to possibly not make any money for the first year!                                                                                                                                     
So what we have now is a bunch of "franchise brokering groups" that are themselves selling franchises to folks to sell franchises. HUH?
Folks that are paying $75k-$100k for these "home based" franchises are in for some surprises.First of all, the folks that are buying these unproven franchise brokering franchises are usually folks who have never been in the franchise industry! Their familiarity of the franchise industry consists of eating at burger and donut restaurants...
This is not anything personal against some of the folks that are writing the checks to buy into these franchise concepts, but, this is not "easy money"! What is really going on is that franchising is "HOT", and more and more folks want to learn more. Learning and doing {writing a big fat check!} are two vastly different things.  Sure a nice comfy "home based" business sounds good. But in reality, one is not "home." One is out networking, and figuring out where these "people" are, that want to buy franchises.One is also spending lots of money advertising, and marketing, and advertising to find a couple of "interested parties."

{End of Part 1} Part 2 coming soon......

Comments

[Don Sniegowski]

Hey Franchise King,

You make some very good points. I have a few questions for you. When you say, "There are just gobs of folks that can write a check for $50k-75k", it sounds like the demand for franchises is up with franchise buyers. Is that your take?

The worst scenario for those who match franchises with buyers would probably be a boom in franchise broker firms while the number of franchise buyers is soft.

If the franchise consultant sector, "like a lot of other industries, is getting rather crowded", then what does it take nowadays for a franchise consultant/broker to be competitive?

Don

[Joel Libava]

Don,
Of course I hope you know that I was being sarcastic when I referred to the "gobs of folks who can write checks for $50k-$75k."
The franchise industry is down this year with regards to the number of "leads" that are being received. I know this on a personal level, as well from conversations with major franchise companies that I talk with on a regular basis.
As for competitiveness, that is a simple one. Be a professional resource for your candidates on the local level, lease an office space, and get in the game!
Franpro

[Don Sniegowski]

I missed the sarcasm, but knowing you, I should've caught it.

There aren't much in the way of metrics out there for the industry. But I'm with you. The market feels soft. (At bluemaumau.org, we are hungry for hard data, so let me know if you find anything.)

Don Sniegowski

[Joel Libava]

Don,
You WILL be the second one to know about hard data..
Franpro