What You Need to Know About Legacy Franchises

It is true: McDonald’s is the largest fast food franchisor in the world with US sales three times that of its nearest competitors, Wendy’s and Burger King. McDonald’s has been in business since the 1950s and franchises can be found nearly everywhere. But, if you are buying into the golden arches you’ll need a golden nest egg too as McDonald’s franchises are among the most expensive ones in the world.

If you’re shopping for a legacy (long-established) franchise, you’ll want to keep in mind several important points.

Single-Unit Operators Need Not Apply

Years ago you could buy a single-unit franchise and operate it as a mom and pop business. The advantage here was enormous: franchise owners had full control over the day-to-day operation of their business, with many owners operating as general managers.

Those days are over, especially with the legacy franchises. Today, nearly every established franchise is looking for multi-site operators, owners with dozens if not hundreds of franchises under their belts. You need ample financial resources to work in this environment which explains why many such operators are also publicly traded businesses.

Your Background is at the Forefront

Start up franchises want business savvy folk, but they’re not as stringent as legacy franchises when it comes to ownership experience. However, if you are a multi-unit operator, you’ll need not just the financial resources, but the management experience to oversee your operation.

Franchise groups are run like a corporation with chairman, a board, and management accountability. Unit managers must have business experience, assembling the staff and crew to run each operation. It isn’t enough to market a product, rather staff development is essential to making money.

Franchise Oversight is a Drag

From the franchisor’s perspective, a single-unit operator is a drag. After all, if the company must keep tabs on 100 different operators instead of five or six mega operators, the administrative task becomes a burden.

It isn’t that franchisors are lazy. Rather, they are in the business of making a profit. Those profits are best realized when each unit is operated successfully. With strong, multi-unit franchises at play, higher profit margins are realized. And higher profits make for happy shareholders.

Real Estate is Too Expensive

Have you checked out land prices recently? Try finding anything cheap these days and you’ll be disappointed. Especially within 50 miles of most metropolitan areas. America’s population has increased sharply, with density raising the price of real estate.

Way back when you could buy land cheaply, pay for an inexpensive franchise and manage your business. Today, few individuals have the pockets to come up with the franchise fee, buy land and build a unit. That is if you’re looking to establish a legacy franchise.

Franchise Alternatives

Fortunately, there are dozens of smaller franchise operations that require much smaller upfront costs. Some don’t even require you to purchase real estate especially a business that is launched and managed from your home.

Alternative franchises can be found in a variety of fields including commercial cleaning, travel, exercise, tax preparation, auto glass repair, supplemental education, cabinet refinishing, corporate event planning, property management, and sewer cleaning.

Start up costs range from just under $3,000 to about $50,000 with each of the examples given. Add in your bookkeeping, attorney review, licensing and related fees and you just may have four an affordable franchise where single-unit operators dominate and are warmly embraced.

Peter Bowman is a professional blogger that provides tips and information on franchise opportunities you should invest in. He writes for Franchise Expo, the place to find the best franchise opportunities available.