There is a great debate when it comes to investing in a franchise or opening an independently-owned small business. Although having your own business where you make all the decisions and start your own brand may sound rewarding, what many entrepreneurs fail to realize is how much work, time, and money it takes to actually have a shot at being successful. With an independently-owned business, you don’t get the training or support that franchises do, and you don’t have a business model that has been proven to work. Find out the pros that come with franchises such as the franchise disclosure document, the resources, and the power of the network, and many of the cons as well to help you decide whether or not franchising is right for you.
Many people don’t realize how many pros there are to investing in a well-established franchise brand as opposed to starting from scratch. For example, if you are wondering how to start a landscaping business, a better alternative may be to invest in a U.S. Lawns franchise. We have over 250 owners who enjoy the freedom to work for themselves while also having the benefit of a well-known brand name on their side. This isn’t the only plus for investing in a brand like ours. Here are some others:
Franchises are great because they have business models that have already been established and proven to work. We have been in business for over 30 years, and our 250 franchise owners prove that our business model works for investors across the country.
One of the biggest benefits of investing in any franchise is the training and support you get prior to opening your location. When you go into business by yourself, you don’t have anyone behind you to help guide you through the twists and turns. With a franchise, you know there is someone there that you can call if you ever have a question, and you will have industry and franchise training right from the beginning to open your doors with confidence.
Another pro to franchising is that there are no surprises when it comes to costs. Before you even sign the franchise agreement, you will be presented with the franchise disclosure document. The franchise disclosure document is an-depth, 23-item document that explains everything you need to know about the franchise brand. It also breaks down the total cost and explains what your initial investment will cover.
In the franchise disclosure document, there is an optional section called the Item 19, where the franchisor provides information on individual franchise performance. When reading the franchise disclosure document, it is important to make a note about whether or not the franchisor shares that information, because knowing how much you can make is a huge pro when it comes to making the decision to open a franchise. U.S. Lawns is proud to disclose information on our franchise performance to prospective franchisees. We also encourage you to speak with some of our existing franchisees to validate your earnings expectations and hear first-hand what it is like to own a U.S. Lawns franchise.
Something that we at U.S. Lawns particularly take pride in is the power of the network. With a franchise, you are part of something bigger than yourself – a network of others who share the same values and goals as you. We promote our franchise owners to communicate with one another and share the best practices, which helps all them stay on a path toward success. With a franchise, you are not in it alone like you would be if you chose to open an independent landscaping business.
Of course, if there were only pros to investing in a franchise, then everyone would have one. Opening a franchise is a great option if you are looking to go into business for yourself, but there are some elements to franchises that should be explained before you invest.
When you invest in a franchise, you are buying someone else’s brand name. If you are committed to operating your business under your own name, this may sound like a con, but what you are really paying for is what the name comes with – the recognizability, the proven systems, the established business model, and more assets that make the franchise successful and draw in customers. It all comes back to the power of the network. If you’re wondering how to start a landscaping business, you want to start off on the right foot with a well-established national brand.
It is true – with any franchise investment, you have to pay a small percentage of your profits to the brand. However, the payoff is well worth it! Those royalties go toward things like systems that keep customers happy, support that helps you with any issues that may arise, and annual events that share goals and values and bring owners together. Not to mention the ongoing training that you can utilize years down the line after you open your doors.
These policies and procedures are in place for franchise owners to be successful. We created ours to bring all U.S. Lawns customers consistency and quality regardless of location. The franchise disclosure document includes policies and procedures that the brand has in place for owners to follow that have been proven to work.
We can provide comprehensive support, endless training, and endless resources, but we could never guarantee success. What many people do not realize is that a franchise is a small business, and the amount of time and care you put into your business determines your success. However, with a franchise, you get that extra training, support, and resources that can greatly increase your chances as opposed to going it alone.
There are several pros and cons to both franchising and starting a business from scratch, and it is always best to weigh those before you make such a big decision. If you are wondering how to start a landscaping business, a U.S. Lawns franchise may be the best opportunity for you because of our business model, tools and systems, training, support, and more.
Contact us today to learn more about the U.S. Lawns brand and request our franchise disclosure document.
In the last section, we learned what is item 19 and why the Item 19 is a very important part of the Franchise Disclosure Document (FDD) despite being optional to include. As a prospective franchisee, you want to know how much you can make with a franchise under a certain brand, and Item 19 can answer just that. There are a lot of reasons why a brand may choose to not include their Item 19, but it is up to the franchisee to know and research what a good franchise is and how much money they can earn with a franchise. Here is what a strong Item 19 looks like and why you should invest in a franchise who has one.
Most franchisors who include data in Item 19 will show some breakdown of top line revenue numbers. Some will show bottom line profitability and some will show complete P&L data for some or all locations. In many cases, the amount of information a franchisor shares is limited by the amount of information they collect from their franchisees.
For example, U.S. Lawns shows, among other data points in their 2018 Item 19, that of the 205 franchised territories that were operating for the entire calendar year or 2017 the average produced gross sales of $726,503. That information is broken down further to show highs, lows, medians and performance by quartile. A similar break down is shown for gross profits where those same 205 franchised territories averaged $226,609 in the same period. This information provides a great place for candidates to start in building their own financial model.
In most cases, some information is better than none, but beware of franchisors who mask performance data by excluding a large number of units from their calculations. A striking example of this is an unnamed brand with more than 1,000 units who only shares financial information for 12 company owned units that significantly outperform their franchised units.
In any case, it is important to note that the data shared in Item 19 is just the beginning when it comes to understanding the potential financial performance of a franchise. Use the information provided to guide your conversations with existing franchisees. This will help you develop the most accurate picture of financial performance.
Now that you know what Item 19 is and why brands may leave it out of the FDD, you may be thinking that a brand without one could prove to not be a worthwhile investment. There are many brands out there that are proud of their financial performance representations and feel that honesty and transparency between franchisor and franchisee are important.
At U.S. Lawns, we recognize the direct correlation between the success of franchisees and the success of a brand, which is why we include Item 19 in our franchise disclosure document. A relationship between a franchisor and franchisee based on trust and transparency leads to better communication and less surprises, and we believe that including Item 19 in the FDD is a first step in the right direction.
For more information to answer the question “What is Item 19 of the franchise disclosure document?”, contact us today.
The franchise disclosure document (FDD) is the most important document that stands between franchisees and their new opportunity. Entrepreneur Magazine explains that the FDD includes 23 standardized sections to break down all associated costs, obligations, restrictions, regulations, and benefits that come with the investment in a specific franchise. The FDD, which is required by the Federal Trade Commission (FTC) is designed to make it easier for candidates to compare one franchise opportunity against others. Item 19, however, does not seem to fit this mold as it is the only item that franchisors have the option whether or not to disclose. Additionally, franchisors are given a lot of leeway as far as what or how they disclose the information in Item 19 making it difficult to compare one against another.
You are probably wondering, “What is Item 19?”, “What does a strong Item 19 look like?” and “Why would franchisors choose to exclude it?” Let’s see if we can answer these questions.
All Business Magazine defines Item 19 as a section of the FDD that displays what is called “Earnings Claims” or “Financial Performance Representations.” Many franchisors fear it because it answers the biggest question potential franchisees have: “How much money can I make with this franchise?” This is the section where franchisors can show off exactly how profitable, or unprofitable, their franchise could potentially be. However, because there is no standard format prescribed by the FTC for Item 19, the information contained within can vary significantly from brand to brand. This doesn’t mean you can’t trust the information found in Item 19 as franchisors are required to have substantiated data behind any claims made within and are not allowed to provide any other information regarding earnings outside of Item 19.
Brands who include Item 19 are showing some level transparency between them and their new franchisee by providing this information; however, not every brand is as transparent as they could be or has a financial performance representation they feel will be beneficial if they show it to prospects. That brings us to the next question.
There are many reasons why a brand may choose to not include Item 19 on their FDD: they could be a newer franchise, they may be in a unique industry that is not super profitable or well-known yet, or they may just be falling behind the competition.
Regardless of the reason, the lack of having Item 19 in the FDD could portray that the brand has something to hide from knowledgeable franchise candidates. This lack of transparency can create distrust between the brand and the prospective franchisee and can ultimately cost the sale. Knowing what the Item 19 is and why it is important prior to investing in a franchise can save franchisees from investing in a brand that may not bring them the success they want or expected.
Find out what a strong Item 19 looks like and why you should choose a brand who has one in their FDD in the second part of this article.
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