Five Questions For Potential Franchise Owners in 2018

Now that the glittery ball has dropped, we all approach the new year with bright ambition, eager to improve the wealth and security for our families. Over the months to come, thousands of adults will research an array of new opportunities. While our original Shuckin' Shack was founded a decade ago, we are still considered an "emerging" franchise, with 12 restaurants operating in the Southeast. We are often compared to other emerging franchises by prospects, but we've found these five simple questions to be helpful when attempting to vet the new, legitimate opportunities versus those that may be destined for the courthouse:

#1 Is the franchise listed on the Small Business Administration (SBA) registry?

By definition, emerging franchises have fewer than 50 units, so bankers may not have heard of the opportunity you may need a loan or line of credit for.  Legitimate franchisors go through the process of maintaining approval from the Small Business Administration (SBA) and are placed on their registry - available here.  This "seal of approval" from the SBA helps lenders be more comfortable with new franchise opportunities and may result in a lower interest rate for the new franchisees!

#2 How many corporate owned units are operating?

It's the responsibility of franchisors to constantly test new products and services, while improving operational methods, marketing campaigns and training systems.  Franchisors that depends solely on their franchisees for keeping their model fresh, do so at the possible expense of those franchisees.  Be sure to visit the corporate flagship model(s) to see for yourself how this franchise expects its brand to be represented.

#3 How many franchisees are active multi-unit operators?

In franchising, it's fairly easy to award a single unit to a person or family, but true success is when proven systems empower one franchisee to effectively operate two, ten or 200 units profitably.  If you are considering an opportunity without any multi-unit franchisees, research their management systems thoroughly if you aspire to be more than a single-unit owner/operator.  If you discover happy multi-unit franchisees, with multiple locations open, ideally preparing to open additional units, you've found a legitimate franchise opportunity.

#4 Is the franchise a member of the International Franchise Association (IFA)?

The franchise industry represents a major portion of our nation's gross national product, so our  trade association - The International Franchise Association (IFA) - legally represents franchise companies, franchisees and suppliers as well.  A franchise that is an IFA member is likely to have greater awareness of current labor laws, federal regulations and best business practices necessary for on-going success.  While it would be easier, and less expensive, for emerging franchises to opt-out of this association, the franchises that are active IFA members should be viewed as more current and proactive in their day-to-day business methods.

#5 Does the Franchise Disclosure Document (FDD) include an Item 7 and an Item 19?

The first legal document provided by a franchisor is their Franchise Disclosure Document (FDD). Each franchisor's FDD is approved annually by Federal Trade Commission (FTC).  If you review the FTC's guide to buying a franchise, you'll find descriptions about Item 7 - what it usually costs to open and run that franchise, and Item 19  - the historic sales performance of existing franchisees.  Because franchisors are involved with the opening of each unit, and since 98% of franchisors also require franchisees to report sales to pay royalties, ALL franchises should publish these pertinent details within their FDD.  If you are sent a FDD without these financial figures, take serious precautions!

As our team prepares for a brand new year, we wish to thank the hundreds of people who expressed interest in the Shuckin' Shack during 2017, and to our many happy franchisees who have committed to make our Oyster Bar & Sports Pub restaurants one of the biggest opportunities to watch in 2018!   If you have an interest in bringing the Shuckin' Shack Oyster Bar to the Richmond, VA market in 2018, please visit this special information page today!