SHOULD I BUY INTO A FRANCHISE OR START A BUSINESS FROM SCRATCH?
Nexus Property Management® has been around for over a decade and has been franchising since 2017. When CEO and founder, Nick D’Agnillo, put the company together, it cost him $30,000 to get off the ground. That was just to open the door. It didn’t include any systems, proprietary software, advertising, brand recognition, or search engine presence…all essential pieces when it comes to being competitive and enabling growth. None of that…and still 30K.
Nexus’ franchise fee is $25,000 and from time to time interested parties will respond, “I can start my own business without you for much less”. While we want to be encouraging, we know they’re wrong, or at the very most they’ll build something that either won’t last or will cost far more than they originally thought. Ultimately, the big question is, why should someone buy into a franchise rather than just starting their own business from scratch?
THE THREE REASONS NOT TO BUY INTO A FRANCHISE
1. YOU DON’T WANT TO PAY SOMEONE THEIR FRANCHISE FEE
We get it. If you’re going to spend a large sum of money, sometimes your life savings, you want it to go directly toward your operation. You want as much financial flexibility as possible. You know that opening a business is a large risk and the more you spend up front, the greater that risk feels.
2. YOU WANT TO PURSUE YOUR OWN VISION
This would be the big one for me. I’m a creative-type and I want as much autonomy as possible. My vision is my vision and I can be open-minded, but if it’s my name on the line, I want to be in control. Following someone else’s lead is not how I want to build my name and reputation.
3. YOU’RE WARY OF THE STRINGS ATTACHED
Similar to points one and two, you know that with a franchise there will be other fees along the way and other requirements you must meet. Be it a separate advertising fee that you need to pay to the franchisor and your having to let them handle the advertising all together. If you don’t want to pay the 25K up front to begin with, and you want more control over your vision, surely these “strings” are going to be difficult to live with.
WHY THOSE THREE REASONS SHOULDN’T MATTER
1. YOU DON’T WANT TO PAY SOMEONE THEIR FRANCHISE FEE
The natural first question, and the one that needs to be front-of-brain if you have any chance at succeeding in the business world, is what value am I actually getting for that cost? Is this simply a barrier to entry or is it an investment in the future of my business?
Asking this question gives you an opportunity to learn more about a specific franchise and whether or not they’re worth your time. For this fee you should be receiving the vast majority of the following:
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Is this company already successful and well known?
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Will help immensely in advertising and hiring high quality staff
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Can more quickly build upon their experience (don’t have to rely on learning from your own hardships)
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Clear and consistent operations and policies born out of best practices
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A strong training and support system
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Online platforms and systems preferred
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To increase efficiency and communication with clients (and tenants if managing property)
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A proven advertising system
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A strong online presence
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Including website creation, Google presence, and SEO success
2. YOU WANT TO PURSUE YOUR OWN VISION
With a franchise, there should still be some room for your vision, but walls, built out of past learning and successes, exist as a foundation. If this is a concern for you, you should be very upfront and ask about systems the franchisor has for soliciting franchisee feedback. As much as franchise systems can be top down, you’ll want to find a company that portrays a team-like atmosphere where your voice has a place. Researching the company’s compensation/incentive structure can be a good place to find out how much they value team members up and down the ladder.
3. YOU’RE WARY OF THE STRINGS ATTACHED
These strings can be seen as opportunities to be at the table, rather than annoying costs or barriers. In the example above, we used advertising as an example. If you’re paying toward the advertising budget you should be more comfortable sharing feedback and asking important questions about the company’s advertising strategy. The monthly fees that may exist help universalize company systems so you fit under those umbrellas, so again, fees are more appropriately viewed as investments. If you don’t think the franchisor’s systems are strong enough to warrant your investment, look elsewhere!
LEARN MORE: The Power of the Franchise: Interview with Dean deTonnancourt of HomeSmart
THE REALITY OF SMALL BUSINESSES: WHY RISK INCREASES WHEN YOU GO IT ALONE
The sad truth is that 90% of small businesses will fail. The odds have always been against startups, but here are several reasons why this is the case here and now:
First of all, finding a market for your services or goods is harder than ever. The giants (think Amazon) are getting bigger and disrupting more and more markets, especially after Covid conditioned so many people to seek the comfort of their homes. Familiarity has become synonymous with safe and reliable, so it’s harder than ever to enter the fray. Opting to buy into a franchise counters this trend by instantly making you familiar.
Second, it’s harder than ever to find reliable help. More and more job applicants are unqualified or just as common, not showing up. Unemployment is at record lows and as a small business you rely very heavily on the team you can recruit from day one. You don’t have time to sift through the weeds. Your reputation lies with your employees. Brand name recognition helps with attracting quality applicants and the support and experience of a franchisor can help make the right decisions when it comes to hiring.
Finally, starting your own business on your own is really two jobs. You’ve got the business you got into, whether it be property management, making burritos, or selling sports equipment, but there’s also the back of the house “business-business” that is often not at all related to the skill-set that led you to open your doors in the first place. Time and time again, we see small business owners constantly spending time on things that aren’t the focus of their business (i.e. building a website, shopping around for insurance, dealing with personnel conflicts, addressing legal issues). These are all things that a franchisor will handle or support you with. By buying into a franchise, you are giving yourself the opportunity to focus on the part of the business you’re most interested in.
LEARN MORE: The Franchise Opportunities That Exist In Property Management
CONCLUSION: DO YOU WANT THE BALL IN YOUR HAND OR DO YOU WANT TO BATTLE TO GET ON THE FIELD?
Starting your small business as part of a franchise system provides countless benefits that should easily outweigh the upfront franchise fee. When you enter the market as part of a franchise, you’ve ultimately got the ball in your hands with teammates there to offer support. Should you opt to go it alone, you’ve gotta start by just trying to get onto the field. Can you do it? Maybe. Is it going to be easy?…not a chance.
If there is one positive that came out of the way our society dealt with Covid, it’s the returned focus on the importance of relationships. Our Nexus team highly recommends that you take the time to explore working with a franchise team that can offer support based on their experience and success. It’ll be well worth the time and when you find the right franchisor, it’ll be well worth the franchise fee.
Nexus Property Management® has been managing residential and commercial properties for over a decade and is the largest property manager in Southern New England. With franchise opportunities available nationwide, we take great pride in helping to rewrite the norms of real estate investment. Contact our team to learn more or inquire about joining our team.
WHAT OTHER PEOPLE ARE READING:
Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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The Real Estate Investing Authority®
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