Determine if you should join a C-store franchise

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NATIONAL REPORT – In the retail world, it is often more profitable to lead than to follow. However, there is an exception to this rule if you are a small operator in a successful franchise network.

“In most cases, the franchisor has already made and corrected many of the business mistakes you probably would make, so you can now avoid those mistakes without learning the hard way,” said Ryan C. Whitfill, a Dallas-based lawyer, in Texas, an associate at Culhane Meadows, who focuses on all aspects of franchise law. “You also have the support of the franchisor and other franchisees to help and advise you. ”

One-stop shops and small operators in the convenience store sector who are considering joining a brand network should do their homework. Like any business decision, there are pros and cons to consider.

On the positive side, small operators can increase their brand awareness – and therefore their sales and customer base – by joining a franchise network. They can also buy gas and other cheaper goods because of the purchasing power and economies of scale that are not possible for a mom-and-pop store.

A franchise network typically provides a proven and proven business model with a successful track record of product innovation, successful pricing strategies, and a proven promotional paradigm.

“This dramatically increases the chances of success for franchisees operating under this mantle of goodwill, instead of venturing out and starting a new concept without many answers to the previous disciplines,” noted Kevin Burke, CEO of the company. Boston-based financial brokerage, Citizens. Capital Markets Inc.

The franchisor is responsible for products, prices and promotions, while the franchisee is responsible for quality, service and cleanliness, which attract traffic.

“When these two partners” swim in their own lane “, it produces synergies and harmonies that can grow a business much faster than if one embarks on a business plan without benefiting from a franchise network. “said Burke.

On the negative side, there is the relinquishment of control over operational issues and the payment of a franchise fee.

“As a franchisee, Mom and Pop, who are 100% in control, will have to change the way they do things, and they will be subject to franchise fees and royalties that do not apply to independent businesses.” , Whitfill said. Explain.

Additionally, while a small operator will always own their business, it is important to understand that a franchised business must operate according to the franchisor’s standards and specifications.

“Some franchisees make the mistake of buying a franchise and then trying to operate it outside of the standards and specifications set by the franchisor. This approach generally does not turn out well; this can lead to poor performance, as well as litigation, ”Whitfill advised.

Ask before you jump

Before jumping on a franchise opportunity, potential convenience store franchisees should ask tough questions, both about themselves and the franchise network they are considering.

Burke of Citizens Capital Markets said operators should examine the brand strengths, market share, product innovation capabilities and recurring sales, margin and cash flow of franchise networks before taking a decision.

According to Whitfill, the main questions retailers should be asking are:

  • What are my financial and personal goals for the business and how can I see the franchise opportunity achieving those goals?
  • Do I have a good understanding of the financial resources required to start the franchise business and do I have the sufficient resources to do so?
  • Am I comfortable following an operating system and business processes established and required by the franchisor (rather than creating my own systems and processes)?

He stressed that every business owner is different, so each person should carefully consider their individual goals and motivations before becoming a franchisee.

The key questions Whitfill believes retailers should ask the potential franchisor are:

  • What training, support and marketing systems has the franchisor developed to help franchisees be successful, and are these systems working well?
  • Has the franchisor established a strong reputation / brand and goodwill in the community where the retailer is currently operating?
  • How well does the franchisor react when franchisees have problems?
  • How does the franchisor actively plan and take action to stay ahead of the competition in branding / advertising, new products, etc. ?
  • How are existing franchisees behaving financially?
  • How has the franchise system been affected by COVID-19? If the answer is no, how has the franchise system adjusted to meet the challenges? Have the financial results of franchise businesses started to return to pre-COVID levels?

Whitfill also recommends that small operators who are considering joining a franchise system should speak with existing franchisees about that system who were specifically independent operators prior to joining the franchise.

“These franchisees will have a great idea of ​​the pros and cons and will be able to provide concrete advice on how best to make this transition a success,” he said.


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