Blog: 3 Things to Know About Buying a Biz or Franchise

Many people are looking to start their own businesses and at some point the thought of buying a franchise may come up.

Last year I was introduced to Stephan Tarakji who opened the first Freshii in Newport Beach -- and the first of its kind in Orange County-- last summer. His debut spot is at the corner of MacArthur & Bison in The Bluffs Center, which has a great lunch crowd and lots of traffic. As the “master franchisee” for Orange County, Stephan has the right to open up to 20 more stores, which he intends to do. Stephan was referred to me by the local CDFI lending organization, CDC Small Business Finance, because he was having difficulty obtaining financing, which I’ll get to shortly.

He began his journey in October 2009 and after looking at several franchise opportunities --including 7-11-- determined that Freshii was the one he wanted to join. He did not want burgers or traditional food, and Freshii, which started in Canada with a U.S. headquarters in Chicago, offered unique and timely food that he thought would work well in health conscious Orange County.  He visited the Chicago office, spoke with many other franchisees (HIGHLY recommended if you are considering a similar venture) and received favorable responses. Now came the difficult part: financing.

It’s no surprise that getting loans is harder today than ever before and financing a start up, which has never been easy, is even harder. Add in the “food factor” which many lenders won’t touch and you have a trifecta of challenges. “You have to be tenacious,” Stephan shared with me over a wonderful Freshii lunch, “and I was turned down by over 100 banks. They all wanted tangible assets, i.e., real estate, which I did not have available.” As it turned out he was able to find a partner and structure a mutually beneficial arrangement for both parties.

What can you take from all this?

• BEFORE you even start looking at businesses to buy or open, be sure you have your financing in order. You may not have everything 100 percent ironed out, but knowing in advance will save you lots of time, stress, and in the long run, money. In Stefan’s case it took him almost two years to get his doors open. Would you endure being denied by 100 banks?
• If you are looking at buying a franchise or existing business, be sure you understand the work and time involved. When I asked him what was the biggest thing he did not anticipate he said, “I did not plan on working six days per week.” But you should! Especially if this is your first venture and especially if you are opening a retail or food business.
• Know yourself. Many people who buy a business do so with a vision in their mind that it will be easier than working for someone else. Not even close. When you have your own business you must be committed to keep working on it regardless of the conditions, weather, finances, employee challenges, and several factors which you cannot anticipate.