Ask yourself: Do you want to start a business? Or are you merely starting one because you’re out of a job? If you’ve always wanted to start a business — if you sat in your old job writing secret plans to conquer the world — you might be ready to launch your own operation.

In your vetting process talk to every single existing owner that you can and ask bluntly about profitability. The franchisor will provide a complete list of current owners if you get beyond the initial franchise process.

Get actual numbers and how long it took to reach those numbers. If you cannot get these answers move on.

If the numbers are “proprietary” or the existing owners will not give you firm answers, move on.

PROFITABILITY. Bluntly. Did I say PROFITABILITY? Well, yes, yes I did. You’ve been warned.

Remember: the owners have a vested interest in speaking highly favorably about their franchise experience because any negativity reflects on its value; i.e., their investment. So take things with your eyes open.

Franchisees with AT LEAST two years of experience should be included disproportionately in your talks. You need to get beyond the franchisees still in the honeymoon period (but talk to them too because they will have the best perspective on what the franchisor is doing NOW for training, etc.).

You need to know if they started their IT franchise business “from scratch” or if they had an existing IT business that they rolled over to the franchise model.

If the latter, you need to know how/if the franchisor has helped them get NEW clients and how/if the franchisor has helped them make more money off of their existing clients.

Again, specifics. The lack of specifics is a warning shot. Empty platitudes are a warning shot.

Franchisees who are “like you” who had/have a similar background as you are also imperative to speak to. Would they do it again?

Read between the lines…what are they NOT saying? Much like a new employer talking to a job candidate’s past employers.

Ask the franchisor: how many franchisees have quit or been let go since their inception? (Remember: if there wasn’t a lawsuit you won’t see it in a UFOC).

Ask the franchisees: how many franchisees are you aware of that have “disappeared” since you’ve been in the franchise? There are always some. Check this number with what the franchisor told you.

Also, if you cannot do the IT work yourself and need to hire a high-level IT pro on salary you better re-think the whole thing. You will be told that you can “manage” the IT people but the overhead may kill you, and ask how this will affect PROFITABILITY.

Of course if you’re just looking for a hobby-business and don’t care about profitability, have at it.

As the largest IT franchise, let me say – we’re already seeing it. Franchise sales are way up in Q4 this year, and the pipeline indicates next year will be great for us too. Not just franchisee recruiting, but our franchisees are busy too which is the more important part.

This recession is interesting – unlike the last downturn, which was after the so-called “dot-com bubble” burst, there haven’t been a lot of IT layoffs yet. But even folks with jobs are finding that the uncertainty of not knowing how strong their employer might really be is unsettling to them, and they look towards the self-control of self-employment.

And while you could start a business on your own, using many of the tools Lane mentions, in most cases you’ll save a lot of money by working through a franchise. Besides negotiated group discounts with most of your major vendors (including several that Lane mentions), with a decent franchise you’ll find you get more bang for your marketing buck by having tested programs ready for you to implement, and by getting immediate leads from a national advertising and national accounts program. Add to that business training (especially for MSP models), sales training (ditto), tech support, vendor deals, a coaching team, and business tools, and most folks would find the $10k-$20k franchise investment to be money well spent.

Chip

4. Leveraging Economy of Scale

Having a large organzation backing you with already selected vendors and stellar negotiated contracts could save a bundle. I’m not sure if Do IT Smarter, MSPSN or the Utlility Company has done this, but just my thoughts as I read this.

1. Infrastructure,
2. Process and
3. Brand recognition (marketing power).

Unless there is an IT franchise as recognizable as say “The Geek Squad” I don’t see that any of them meet this last requirement.

For the 1st two items, infrastructure and process reseller’s can leverage Master MSPs such as Do IT Smarter, MSPSN or The Utility Company (remember they started as a franchise and switched to the Master MSP model). Ingram Seismic, Synnex, Zenith Info Tech all offer the infrastructure side of things and MSP University can help with process.

All of these companies have a much much lower entry point than any franchise that I have seen on the market.

I know of one 2-member firm that uses the help desk of another MSP (out of state) to field all calls, provide remote support, and managed services tasks. They have been able to grow at an incredible rate this past year because they have time to focus on sales.

We should not forget that this is a credit crisis as well; markets for cash are hard as a rock already. IT related franchises are very difficult to collateralize because it is a service based business with very little hard assets and as a start up no bankable contracts either.

Furthermore I think that the people that are going to get the layoffs are going to be the folks who might be a candidate for a computer repair type franchise. Are there even MSP franchises?

Technology and Franchises in the IT related areas are a bad investment in any economy. You can bootstrap an IT business for the same cash investment and when you are out of your diapers you will be free of your “franchise tax”

I looked into this and had many discussions with many people. It was a bad Idea then and I think it still is.

Brad