Earlier this year, my wife and I decided to investigate starting our own business. For a variety of reasons, though both of us were employed, neither was happy with our current circumstances. (In my case, my current job, at the time, was going to come to an end in approximately 6 months, so the urge to start a business was initially stronger on my side.) Back in late May, we hit upon an idea that we both liked quite a bit, so we're currently running with it.
I thought it might be interesting to others in this community to see what it was like, from the ground up, to start a business. I'm not an expert, but I'll pass along what we've found out, and encountered, along the way. And I'll try to tie that into some of the economic themes the site has been discussing lately. I'll do this in a series of diaries, sort of bite-size stories about our still-in-progress push to start our own business, for as long as the community seems interested.
The first part is over the fold.
To Franchise Or Not To Franchise? That Is The (First) Question!
The first decision we had to make was what kind of business to start up? Well, I thought that, not actually having run a business before, going for a franchise would be the smart play. After all, you get a name (that is supposedly recognized), a business model that works, and a lot of start-up help. Many franchisors also state they're looking for people who are new to the industry, or new to running their own business.
So we did some initial investigating through a company called FranChoice (which is itself a franchise). I'd recommend going through them, or someone like them, if you aren't sure what kind of business to start. The first official call with their rep (after the initial "we're interested in working with you to find a franchise" call) was a 1.5 hour questionnaire on our experience, likes, dislikes, personality traits, and so on. A week later, we had a second call, during which the rep said she had found five potential matches for us, and described each one in some detail. Two we knew right off the bat were not for us, one was iffy, and two sounded interesting. Unfortunately, the one that sounded most interesting to me was not interesting at all to my wife, and vice versa. We called the two companies to do a little further investigating, and our initial levels of interest (or disinterest) were confirmed, we decided to punt on doing a franchise.
One of the reasons we decided to punt was the franchise fee. When getting into a franchise, not only is every aspect of the business controlled by the franchisor (for one franchise, we didn't even appear to own the equipment, to be obtained from the franchisor, critical for running the business), but the franchisor mandates that you send them around 6% of your gross profits every month. That's a significant amount, right off the top, especially when you consider that a lot of businesses have net profits only in the 10% range or so. Moreover, the franchisors we looked at mandate certain minimum amounts for local and national advertising. We looked at each other, said "Have you ever heard of these guys? Then why are we paying for national advertising?" and put that down as a strong reason not to franchise.
We decided shortly after the last calls that franchising wouldn't be the way to go for us. But what to do instead? After mulling things for a week, my wife rushed in one day saying she had a great idea for a business, and it was a great idea. But we'd be doing it alone, from the ground up, with not much experience. But we did have friends with expertise. We hopped on a plane (we had some free tickets) and took a cross-country trip to look at a local business (at four sites) that was doing something similar. The product was fantastic. We asked around while we were there, and the locals all loved the business. We headed back home knowing that that type of business was the one we wanted to run.
What kind of business was it? Well, I'm being deliberately vague because we're still in the process of getting ours going, but it will be enough to say it will be a restaurant.
Next up - You know what you want to do; now how do you get it off the ground?