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7 Things You Need to Know Before Becoming a Franchise Owner

Recently, I was sitting, drinking an iced latte macchiato at a well-known chain, when my wife said to me, “We spend so much time in here that maybe we should think of starting one ourselves.”

Which she promptly followed up with, “I’ve always wanted to run my own business, and let’s face it: How hard can making lattes be? Everywhere we go, [this chain is] opening a new franchise. So, it’s got to be an easier option than starting my own business right?”

Well, not exactly.

My wife is not the only one to think the way she does, given that franchise-growth rates in 2016 again exceeded non-franchise business growth rates and continue to increase by 2.6 percent per year. There’s reason for this, specifically the 300 franchise business lines that already cover ten distinct business areas (automotive, business services, commercial and residential services, lodging, personal services, quick service restaurants, real estate, retail food, retail products and services and table/full-service restaurants.

So, not only are there a lot of franchise categories and companies to choose among, but there are advantages to opening a franchise as opposed to starting your own business from scratch.

Still, those choices and advantages don’t mean a franchise is a guaranteed success. To get to that point, you still need to do your due diligence to increase your chances of making it work.

To better grasp the challenges of running a franchise, I met with Tom Portesy, CEO of MVF Expositions, which runs franchise expositions around the world. I asked Portesy his thoughts on what a new entrepreneur should know before taking on this challenge.

Here are the seven things he said to be aware of before you dive into that franchise opportunity.

1. How much will it cost?

The first thing to know is the total investment to get your franchise up and running. This should include the purchase costs, your opening inventory and the amount of working capital you are going to need before you break even. Understanding these costs is crucial, as you don’t want to run out of money when you are on the verge of success.

In addition, you also need to know how you are going to finance the business, as many people can actually afford a bigger franchise opportunity than they think.

2. What are you good at, and what are you passionate about?

You don’t have to love coffee to open your own franchise coffee shop. Nor do you have to do all the work.

When it comes to running that shop, you’re actually the business owner and can hire people to deliver the service or sell the products; you don’t have to do all of that yourself. Success is dependent on how well you work on the business, not just in the business. 

Still, not everyone is cut out to be a franchisee, to thrive within someone else’s system. “Before buying a franchise,” Portesy told me, “one of the most important questions to ask yourself is, “Do I have the right personality to be a franchisee? People are all different, and so are franchises.

“As a result, one of the worst mistakes you can make is buying a franchise when you are not suited to be a franchisee, or compatible with the business.”

3. How much time do you need to invest?

While starting a franchise is different from starting your own business, it is still a business, and you won’t be the first person who’s traded a 10-hour-a-day job he (or she) hated for a 16-hour-a-day job he hates.

So, make sure you understand what’s involved. There are seasonal franchises that require you to work especially hard at certain times of the year; but it’s still your business that you’re going to be running, and you need to be clear about how much time you will need to invest to make it a success.

4. What is the franchisor like?

Not all franchisors are the same, so you need to do your research and get to know everything you can about the franchisor. This includes things such as how long has this company been in business, what is its average success rate and how long do franchisees stay on average.

Just because a franchisor is new doesn’t mean it’s not a great opportunity, but the more you know, the better informed your decision can be.

5. What does it take to run a successful franchise?

When you do your due diligence, make sure that you speak to other franchisees and not just the most successful ones. Ask them:

  • What were the key success factors they found?  
  • What were some of the challenges, and how’d they overcome then?
  • If they were starting today, knowing what they now know, what would they do differently?
  • For those that failed, what were the factors that caused that to happen, e.g. poor location, weak marketing, etc? 
  • How long did it take for them to start to make a profit?

It’s great to learn from your mistakes. It’s even better if you can learn from those of others so that you don’t repeat them.

6. What kind of help does the franchisor provide?

When you take on a franchise, unlike starting your own business, you’re not alone, and that can be a great comfort. Just make sure you know how much support you will get from the franchisor, what other people’s experiences were and how much help the company offered those people when the going got tough. How much support did those other franchisees receive, or were they left to their own devices?

One of the hardest things is asking for help when things are going wrong. But if you know that the support will be there and that the franchisor is willing to help, the process will be a little easier.

7. What’s your end game?

I am a big fan of Stephen Covey’s “second habit” of highly successful people:  Start with the end in mind. 

plies to franchising. Before you take up your franchise, know and understand what your exit strategy is going to be. Are you planning to leave the franchise to your children, are you looking sell it or do you plan to just run it for a couple of years and then get out?

The better you know and understand your end game, the easier time you’ll have selecting the right kind of franchise opportunity, which fits you in the short term, and supports your long-term objectives.

Running a franchise can be a great way to start running your own business, but you need to understand why you are getting into it, what you are getting into, whom you’re getting into it with and of course how you plan to get out of it. The better you understand the answers to these questions, the better your probability of selecting the franchise segment and company with the best potential for you.

By Gordon Tredgold

Original article from Entrepreneur.com, November 22, 2017

What Xceligent’s Bankruptcy Says About the Property Data Business
Some in the sector lamented the loss of another competitor in an increasingly narrow field.

In the wake of commercial real estate data firm Xceligent filing for bankruptcy protection, the property data industry was not surprised—it’s an expensive field to be in. Still, some in the sector lamented the loss of another competitor in an increasingly narrow field.

Before it filed for Chapter 7 liquidation, the firm was embroiled in a lawsuit with real estate data giant CoStar Group Inc. The lawsuit will now fall under the jurisdiction of the bankruptcy court in Delaware, where Xceligent filed its case—a move that puts more knots in an already thorny case. “It complicates things even further. It delays things even further,” says Carl W. Hittinger, partner in the Philadelphia office of law firm BakerHostetler.

Last year, CoStar sued Xceligent in federal court in Missouri, where Xceligent is headquartered, alleging the company had stolen copyrighted commercial property information, which CoStar sells for a subscription fee, and re-sold the information for a lower price. In June 2017, Xceligent denied the allegations and in turn alleged that CoStar engages in anti-competitive practices to raise competitor prices, drive competitors out of business and keep its “monopoly” on the commercial real estate information industry. Last week, Xceligent, owned by the London-based Daily Mail and General Trust PLC (DMGT), filed for Chapter 7 bankruptcy and will seek liquidation. It immediately shut down its website and laid off hundreds of employees.

“DMGT had fully impaired Xceligent at the end of [fiscal year 2017], following weaker than expected revenues from its NYC rollout and other challenges, including lower renewal rates,” wrote Alex Moorhouse, head of communications at DMGT, in an email. “Ultimately, in light of these challenges, the Xceligent management team was unable to identify a way for it to operate on a sustainable basis and recommended filing for Chapter 7 liquidation. The CoStar litigation was not a direct factor, but of course did create additional cost for the business.”

Moorhouse declined to respond to CoStar’s comments.

Meanwhile, the firm’s exit from the field has opened up new business opportunities for its competitors. A google search for Xceligent brings up ads from firms including Property Shark and CrediFi offering themselves as alternative service providers to Xceligent’s clients. Employees from CoStar and 42Floors, a San Francisco-based website that also has a national database of commercial property listings, have reached out to brokers, so transactions could continue without interruption. An executive with RealMassive, a listings marketplace, said it reached out to former Xceligent employees for support.

“No one wants to see a good company—even a competitor—go down like that, because there are so many people’s lives affected,” says Jason Freedman, CEO of 42Floors, which was formed in 2011.

Unable to compete?

While antitrust claims are difficult cases to prove, filing for bankruptcy may lend some credence to Xceligent’s claim that it was unable to compete, says Andre P. Barlow, partner in the Washington, D.C. office of law firm Doyle, Barlow & Mazard PLLC. “Clearly the damages are much larger now, because now we’re talking about the loss of the business,” Barlow says. CoStar’s dominance in the sector was compounded by its 2012 acquisition of marketing platform LoopNet.com, which was approved by the Federal Trade Commission (FTC) as long as CoStar spun off Xceligent from LoopNet and adhered to a set of conditions that would allow competition to thrive. “The behavioral solutions that the FTC required in allowing that merger didn’t appear to work here,” Barlow adds. Moorhouse declined to comment on the litigation, as DMGT is not involved.

However, bankruptcies happen, even in light of the FTC’s review, according to Hittinger. “That’s just the competitive world we live in. There are casualties,” Hittinger says. However, while antitrust laws are not designed to prop up inefficient businesses, these laws still protect against anti-competitive practices that could lead to bankruptcies, he notes.

Still, Xceligent’s liquidation could put a chill on others trying to compete with CoStar, which has a history of litigation against other commercial property data companies, including LoopNet, Barlow says. “It certainly makes it difficult for all these smaller competitors to exist and to grow,” he notes.

According to Linnington, though CoStar is dominant in its field, it embraces competition and will continue to innovate. Accusations that the company is anti-competitive are “fictional,” he says.

Competition is good for the industry as it creates an incentive for innovation and more options for the brokers, says Kevin Green, vice president of marketing for Austin, Texas-based RealMassive, which also settled a lawsuit filed by CoStar in 2016. “Now there’s one less choice for brokers in the marketplace,” he notes. While it may be too soon to tell how the case with Xceligent—and its subsequent bankruptcy—will affect the industry overall, Green says there is still room for players with different value propositions. “The market is made up of different brokers and people who have different needs.”

What lies ahead

Xceligent’s fall points to what some in the industry—not affiliated with CoStar—say is a fundamental business issue: It is difficult to have enough human and capital resources to match CoStar’s database, one the company has constructed over three decades, and finding new ways to create such information more efficiently.

“People underestimate what it takes to build a property database, and all the research that goes into building a database like that,” says Andrew Bermudez, CEO of Digsy AI, a commercial property interface which is based in Fullerton, Calif. and was founded two-and-a-half years ago. Even if a company were to match CoStar’s reach—as Xceligent was attempting to do—many brokers would be prone to stick with whatever service they were using, Freedman notes. Commercial brokerages are not required to use CoStar—unlike the MLS on the residential side—but many do, sometimes in addition to internal databases.

While Bermudez does not fault CoStar for filing a lawsuit against Xceligent—“It would be irresponsible to them to not try to protect its asset,” he notes—he says the industry itself is in need of disruption. Similarly to how crowdfunding has shifted the fundraising industry, “The paradigm needs to change all together, taking economics and process and human resources into account,” he says.

Mary Diduch | Dec 22, 2017

Original article published by National Real Estate Investor at NREIOnline.com

Most Franchises Struggle to Grow, but Then There’s the 20%

We routinely write about young franchise concepts because everybody likes to know what’s new in franchising, but a study released recently by Franchise Grade shows how long the odds are for those so-called emerging brands.

Just over 30 percent of brands that started four years ago had one or fewer locations, the study said, while 52 percent that started 10 years ago had 50 or fewer franchise locations, according to Ed Teixeira, COO for Franchise Grade, the market research company for franchising in Long Island.

But of course that leaves 20 percent, the percentage of franchises that started from six to 10 years ago and reached or surpassed 100 locations—in other words, the amount that causes prospective franchisees and emerging franchisors to keep on trying.

Emerging franchise systems are defined as having 100 franchised outlets or fewer and account for 71 percent of franchise systems in the United States. Fifty-seven percent of all franchise systems in the United States have 50 or fewer locations, the study says.

“We did it for a couple of reasons, not the least there’s been so much attention lately on emerging franchises,” said Teixeira, about why Franchise Grade did the study. He cited the Springboard event in Philadelphia in September that drew hundreds of emerging franchises, and the International Franchise Association’s offerings for young brands. “Last year the IFA had a workshop for emerging franchises,” after its annual convention, and it drew a standing-room only crowd. In early November the IFA is hosting an Emerging Franchisors Conference in Phoenix.

He said the stats aren’t depressing, as I had opined, “but rather just to show what the situation’s like.” Twenty percent are doing great, the study shows. “Unfortunately there are some others that either should not have franchised, or maybe should have waited until they had more units up and operating or more working capital,” he said.

“The whole idea of this is not only to shine a light on what these startups and emerging franchises look like, but what’s needed to get them off the mark, so to speak,” Teixeira said. “It’s always grow, grow, grow, which is important, but maybe there should be more focus on having a sound system in the first place.”

Franchise Grade has 2,500 FDDs or franchise disclosure documents in its database, and based its study on those franchises it could identify as start-ups. Part two of the study, expected to be completed in about a month, will drill down into industry sectors and compare systems’ growth patterns.

Original article by Beth Ewen

Published 10.24.17 on FranchiseTimes.com

Meet The Commercial Real Estate Industry’s Military Veterans

Many of the skills needed to excel in the commercial real estate industry parallel those learned while serving in the United States military: Discipline. Preparedness. The ability to stay calm and think rationally in heated situations. Integrity.  Bisnow spoke with nearly two dozen military veterans from across the country ahead of Veterans Day on Nov. 11 to gain insight into their experiences in the military and how those years of service have influenced their careers in real estate. 

See below for information on a few of these remarkable professionals in our industry, and check out the full article for the complete listings and photos!


St. Croix Capital Advisors Senior Vice President Stephen DePizzo

City: Austin

Military Rank: Army, Engineer Officer – Captain

Years Served: Six

Military Memories: The greatest memories during my time in the military [were from] being able to lead young men and women. The time we spent was priceless. I also had the opportunity to be an Aide de Camp to a two-star general. Being mentored by a high-ranking officer was one of the best experiences I have ever had. 

How has your military service shaped your life and career? The military shaped the way I look at all situations in my life and in business. It taught me to be patient, to analyze all situations from different perspectives and to pay attention to all the details. I’ve been able to use my skills and military experience in all aspects of commercial real estate.  

Newmark Knight Frank Executive Managing Director Jeff Castleton


City: Denver

Military Rank: Navy Lieutenant Commander

Years Served: May 1981-February 1991

Military Memories: Castleton graduated with honors from the United States Naval Academy, where he earned his bachelor of science in mechanical engineering.

What lessons from your military service carried over into real estate? Leadership skills to focus on the team and ensure all members are enabled and motivated to succeed. 

CBRE Advisory & Transaction Services associate John Bernatz


City: Portland

Military Rank: Army; E6, Staff Sergeant

Years Served: Six years, from 1995 to 2001

Military Memories: I highly enjoyed my years of service in the U.S. Army. I was stationed out of Fort Bragg, North Carolina, and had a lot of great experiences. My job while in the Army was combat medic, and one of my fondest memories was during initial basic training. Growing up, I was involved in Boy Scouts and attained the rank of Eagle, so camping and backpacking were an important part of my life. During our sixth week of training, it was time for the 15-mile ruck to camp and we spent several days in the woods learning how to be better soldiers. I always backpacked trying to carry as little as possible, but in the Army it’s about carrying as much as possible. About halfway into the hike, a few of my battle buddies started falling out due to their back weight, and so instead of getting in trouble with our drill sergeant I started carrying some of their gear. By the time we got to camp I had more than doubled my weight and thought that I was going to crumble. Hoping that we would have some time to rest, I dropped gear and reached for a snack. To my dismay in my efforts to help my friends, it brought attention to the one person we were trying not to alert, Drill Sergeant Cambell. Once he saw how well we did during the march and that I was just ‘sitting around’ snacking, he felt it would be a good time to do some additional training. We were then put through the ringer for the next three hours doing physical training in the rain and mud. The next three days were torture. And to top it off, since I was such a great help on the march there, he decided to let me carry their gear on the way back, too. Soldiers do the stupidest things. As a medic we have to spend time in the hospital emergency room treating soldiers and families when we are not deployed or in the field. It was a little after midnight (I always seemed to be stuck with that shift) on a Sunday night, and the ER was silent. We were all dozing on the beds, recovering from a rough Saturday night when all of a sudden, a soldier barges into the ER screaming for help. The guy looked oddly familiar, but I couldn’t quite place the face. The group of us went into solution treatment mode and got him on a bed and started shearing off his uniform. We begin to cut off his underclothes, when suddenly four snakes fall to the floor. His body is covered in little bites, and now there are four loose snakes in the ER. We found out that he and his buddies had been playing a drinking game, which he was losing. Every time he lost a round, they put another snake in his uniform, keeping it buttoned up and the snakes tucked under his clothes. We gave him some medication to calm down, dropped an IV on him to sober him up and then spent the rest of the night catching snakes in the ER. Needless to say, he and his buddies were in deep with their commanding officer, and we only recovered one snake that night.

How has your military service shaped your life and career? Military experience has shaped every aspect of my professional career, but has come in extremely handy in commercial real estate. My experience has taught me to stay cool under pressure, think clearly and remain unemotional in stressful situations. Being able to dissect a situation in my head rapidly and make quick decisions has proved to be a valuable skill.

Original article posted November 9, 2017 on Bisnow.com

Featured Client: DoubleDave’s Pizzaworks

DoubleDave’s Pizzaworks is a regional pizza chain based in Austin, with locations throughout Texas and into Oklahoma. The first restaurant was founded by David Davydd Miller in College Station in 1984. In addition to several varieties of fresh, hand-tossed, scratch-made pizza, the chain is famous for its delicious ‘Peproni Rolls.’ 

DoubleDave’s is currently seeking sites throughout the greater Austin area.

Real Estate Requirements:

  • 1,200 – 2,400 sf (3 prototype models)
  • Prefer 2nd gen restaurants
  • 3+ miles away from existing locations

The Retail Strategy is proud to represent Stretch Yoga, a boutique yoga studio. They provide yoga that is accessible, uplifting, and transformational for all, regardless of experience! Stretch Yoga is based in East Austin and also offers pop-up classes and special yoga events around town.

Stretch Yoga is currently seeking sites in Austin.

Real Estate Requirements:

Approximately 2,000 SF

Primarily interested in East Austin sites 

Why Becoming a Franchisee Offers the Best of Both Worlds

Partnering with the right franchise can help an entrepreneur reach their dream of financial independence—without the common pitfalls.

According to the U.S. Census Bureau’s Survey of Entrepreneurs, the key drivers for entrepreneurship are earning more income and the desire to be one’s own boss.

No surprise there.

As the chief development officer for Überrito, I see that every day in my efforts to drive franchise sales and development for the company. My daily interactions are with highly motivated individuals looking to grow their income while maintaining their autonomy by working for themselves.

To be sure, the lure of independence and the ability to control one’s destiny has created many a entrepreneur.

However, there can be considerable unforeseen pitfalls along the way:

Lack of guidance: Many entrepreneurs will tell you, it can get lonely at the top. It helps to have someone with experience in all of the aforementioned areas—and many others—that can provide guidance and examples of what has worked and what has not—and why.

Building a customer base: Everyone thinks they are a marketing expert, but it is easier said than done. Marketing is part art and part science, and it’s important to get it right to be successful. When the time comes to develop and execute marketing strategies that will bring foot traffic to your door, and keep those customers coming back again and again in a crowded marketplace, having access to a team that has a strategy that is successful and repeatable is extremely valuable and is a key to success.  

When you consider the advent of Twitter, Facebook, Yelp, and more, there are countless ways to reach customers. Geotargeting and other methods can be much more precise in promoting your brand and measuring results. Social media is constantly evolving and while it can be extremely positive, there are also just as many ways for it to have a negative impact.  

It makes less sense to swim upstream alone in such a noisy, fragmented marketplace. Tapping into the marketing resources of a franchise enables entrepreneurs to focus on day-to-day operations, and, profitability.

Unforeseen start-up costs: A blank slate is difficult to build from. If you are negotiating a lease, or choosing a contractor to build a storefront—the margin for error is thin and will impact your business for years. It doesn’t take much to come out of the gate in a deeper hole than anticipated.

Furthermore, the amount of decisions to be made in terms of location, layout, and finishing touches can be paralyzing. If you are going to operate a storefront, it can be useful to rely on experts regarding items such as traffic flow, point-of-sale considerations and more.

Human Resources quagmires: Most entrepreneurs are driven by success. They like to set goals and then attain them. The endorphin rush from making a sale or achieving purchase goals is hard to beat.

But nothing disrupts such positive momentum more than navigating complex human resources issues. While these are important issues that must be resolved, they can become burdensome, and get in the way of making sales. They are often fraught with legal considerations and are best left to those who are up to date on labor laws and best practices.

Beyond managing current employees, attracting and hiring the right ones presents its own challenges. A national franchise can be a helpful resource on many of these issues.

Distribution and Inventory control: It is a simple concept that you cannot sell what you do not have. Yet one of the most critical mistakes a business owner can make is having an incorrect amount of inventory, whether that is having too much or not enough. This is critically important in the food-services industry where product can often have a very limited shelf life.  Over ordering product often results in spoilage while under ordering results in unhappy customers and a loss of sale.

Even if you do not have product that can spoil, all products have a shelf life to consider. Timing is everything and it is of great benefit to have an idea as to what to expect and what has worked for others.

Finding distributors to supply your raw material needs—especially if those needs include fresh food items—can be difficult and costly if you are operating alone. Having the purchasing power and relationships afforded by a franchise eliminates guesswork in choosing distributors and promotes favorable costs. 

Financing considerations also come into play here. Depending on the carrying cost it may be that alternative financing can be provided through a franchise, often at more competitive rates and terms than what a traditional bank offers.

This is a small sample and many of these misadventures can be mitigated when partnering with a proven franchise.

While these issues can pose a significant challenge to a startup, it is very likely these issues have already been considered and solved on a franchise level.

A franchisor is aware of all the nuances and challenges franchisees may encounter. Much of this knowledge is taken into consideration when removing or alleviating barriers to entry.  This experience also better positions franchisees for success due to the systems that have been tested and put in place.

A franchise only does well if its franchisees are doing well and it is in a franchise’s best interests to help its franchisees succeed.

Partnering with the right franchise provides a stronger likelihood of your reaching your dream of financial independence—without the common pitfalls that plague many entrepreneurs.

By Peter Ortiz, September 2017

Original Article from QSRMagazine.com

Peter Ortiz is the Chief Development Officer for Überrito, a fast-casual concept that is part of Mexican Restaurants Inc., which currently operates 47 Mexican restaurant locations across five brands: Überrito, Casa Ole, Monterey’s Little Mexico, Tortuga Mexican Kitchen, and Crazy Jose’s.