The majority of people interested in franchising are first-timers and have a particular interest in the branding, support, and infrastructure provided by franchise chains, for that, the journey in their business will be much easier and more convenient.

Without prior business experience, potential franchisees will not have a similar frame of reference in the decision-making process and therefore often apply the same processes as used in other acquisitions of great value, such as buying a car or buying a house.

Whether buying a car or buying a home, the buyer still has to conduct an in-depth due diligence to protect his or her interests, and basically, buying a home (like most cars) requires to sign a contract.

And of course, the nature of due diligence between car and home purchases is very different from the due diligence required to acquire a business, although many of the same principles apply. One of the commonalities between the two is emotional investing in the decisions that are made. People buy cars to drive and houses to live in based on a number of factors, but it all boils down to how they like the car or the house.

This sentiment-based decision (along with the gradual elimination of options that buyers don’t like) then becomes the frame of reference for buyers to also seek franchises (i.e. they seek to buy a something they like), but they don’t know that the excitement of something isn’t enough for them to actually make any money from it.

The main difference between buying a car or home and franchising is the outcome, but many potential franchisees won’t fully understand this outcome.

The result mentioned here is ownership. When a buyer spends money to buy a car or a house (or refrigerator, TV, or anything else), the item becomes theirs. Ownership of the item (even if it is mortgaged to a financial institution) gives the buyer the freedom to do most of what they want with the item.

If they don’t like the color of the house, they can repaint it. If the house is too small, they can expand the area. If the house is too old, they can renovate it, etc.

Similar to buying a car. The new owner can control the vehicle fast or slow, on asphalt or dirt roads, with or without roof racks, and can “refurbish” to his liking by changing the color of the windows, installing bumpers, entertainment system, wheel rims, and more.

Cars and homes are often purchased under a financing agreement, and when conditions are applied to ownership of the item, the item is usually the subject of the loan amount that needs to be repaid and is updated on a regular basis.

Buying car accessories or home furniture has a similar process, with the buyer choosing what they want, paying for it, and then choosing what to do with those items in the future.

The point is that by paying, the buyer can do almost anything they want with the item they bought. Ownership allows them the freedom to determine the look, feel, style, use, function and value of the item purchased, and in general, this freedom of choice is determined almost entirely. relies entirely on the buyer’s ability to pay for the item and whatever they want to do with it in the future.

Accordingly, let’s take a look at the franchise acquisition. In a way, this transaction involves a process similar to “buying” an item, but the outcome is completely different.

The “buyer” will go through a similar process to find something that they find attractive (or have a lot of interest in) in a price range they can afford, like when they buy a car. or a house.

While we can buy a car or a house with just enough money, money is only one of the considerations in a franchise purchase, which is why Why can’t commercial privileges be “purchased outright and sold out”.

Franchising is defined as a conditional licensing transaction, which is very different from full ownership. The conditions attached to the award of franchise are set by the franchisor to ensure the best interests of the system and the brand but are subject to change from time to time. Failure to comply with the licensing conditions may result in the franchise being revoked at any time.

So, unlike in the case of a home or car purchase where the seller pays and then no longer has an interest or interest in the item sold, the franchisor doesn’t just get the upfront payment (plus a fee). continuity), but also with special attention to the future welfare and business performance of the franchise. After all, the franchisor still has the right to revoke the franchise if the franchisee fails to follow the principles of the system they are required to follow.

Therefore, buying a franchise is not the same as buying other items, yet very few franchisees are aware of this information before commencing the transaction.

Because in their perception, potential franchisees often equate the purchase of franchise with the purchase of a car or a house, they also consider affordability and desirability.” purchase” is enough to conduct a purchase or sale transaction.

But the truth is always the truth. Most franchise systems have strict selection criteria and look for the specific characteristics of potential franchisees, which cannot be achieved with money and desire along.

Without knowing this, potential franchisees can find it confusing and frustrating to learn that they do not have the necessary features to enter the system they are targeting.

For this reason, potential franchisees need to be informed in advance that there are no factors that will guarantee their success in the franchise transaction. Many systems actually made this correct statement by changing some of the words used in the franchise application process.

The first step, which is very simple, is to “call” potential franchisees as candidates rather than buyers, prospects, etc. The use of the word candidate conveys the idea. This means that results in the selection process cannot be guaranteed, no matter how much money the person has or how much their desire to join the franchise is.

To be a successful candidate and beat the others, one must have the necessary qualities to pass some screening or exclusion process. Unfortunately, because the candidate assumed that buying a franchise was the same as buying a car or a house, the candidates initially assumed that affordability was the only criterion required for the award. commercial privilege.

By calling potential franchisees candidates and explaining the selection process in advance, franchisors can effectively identify suitable and non-suitable candidates, and improve the quality of their work. number of new entrants into the system, while at the same time demonstrating the validity of the franchise awarded.

In doing so, the franchisor further emphasizes the conditional nature of the franchise transaction, making it clear to prospective franchisees that if they wish to expand their business, like when renovating a car or a new house, they must get the consent of the franchisor and cannot do what they like.

In short, all other franchisees in the same network have an equal investment, and to protect the value of those investments, all franchisees must comply with the standards in conducting their business.

For these reasons, “buying” a franchise is not the same as buying a home, and both franchisors and franchisees should take a completely different approach.