The Last Word: Customer Solutions Profit Ideas

This economic environment is of great concern to many industries, but the restaurant industry – which operates on narrow margins as it is – is definitely feeling the pressure.

In addition to the pressures on independent restaurant owners, franchisees are also feeling the pinch. I read recently (Wall Street Journal, “Credit Crunch Squeezes Franchisees,” September 29, 2008) that “lenders are tightening credit to restaurant franchisees.”

This will inevitably make it more difficult for owners to buy or remodel locations. But, what concerns me the most is that this trend will lead to fewer people being able to buy into a franchised business.

Franchising has been known as a way for people to step into business ownership by adopting proven operational concepts. Now, they have to come to the table with at least 50% of the costs in equities.

Internal Stress, Like Employee Theft, Should Also Be Evaluated

What I hope is that anyone considering the purchase of an existing franchise will investigate the current operational data – sales, performance, rank within the region (and overall network), staff assessment, cost percentages, shrinkage, employee theft, leases on property and equipment, etc.

In a troubled economy, you can expect to see instances of employee theft escalate. Look at how your candidate handles workplace theft during this troubled economy, whether they use suggestive selling techniques, etc. You may need to retrain the staff.

Another way of looking at is that their lax business practices may devalue the current performance yet offer you ample upside opportunity with better management practices. Bargain time, anyone?

Doing the due diligence and understanding the health of the operations is the only prudent approach to considering the purchase of a franchise these days. And, this investigation will help to successfully launch the business and maximize 90-day performance.