Challenges of Transitioning from Employee to Franchisee

Making the switch from being an employee to being a franchisee is a big change. And no matter how excited you are about becoming your own boss, you will face some major challenges -- both psychological and operational.

One of the challenges every new franchisee faces is being chief cook and bottle-washer -- at least, at the beginning. This can be especially difficult for franchisees from a corporate environment. “Regardless of the level of support a franchisor may provide in helping the franchisee begin their new business, likely the most difficult transition is the loss of the detail level support [you] have become used to,” says Michael Seid, managing director of franchise consulting firm Michael H. Seid & Associates LLC. “When you leave the [corporate job], you leave your secretary, your human resource support and all of those things you might have taken for granted. Now, when you need something filed, you are the filing clerk.”

You’ll also face the increased responsibility of being the boss. As an employee, you could leave work problems behind at the end of the day. Now, if the alarm goes off at your restaurant franchise at 2 a.m., the buck stops with you. “The burden of running the franchise is relentless: 24 hours a day, 7 days a week,” says Mark Leonard, a former franchisee whose Web site, Your Franchise Mentor (yourfranchisementor.com) helps prospective franchisees make good franchise investment decisions.

New franchisees also must deal with a psychological issue common to every startup entrepreneur: fear. “Some people are afraid to lose the illusion of the safety net that comes with having a job,” says Dan A. Rowe, president of franchise development company Fransmart, which works with restaurant franchises. “Some people are afraid of putting their net worth at risk. We see some people getting excited about owning a franchise, going through all the steps, even verbally committing to buying the franchise, and then they chicken out at the last minute.”

Sure, you’ve got the support of a franchisor behind you -- but you’re still taking risks you never took as an employee. “As an employee, you knew your check was coming,” says Seid. “As a business owner, profits might not be there this week or month, and your paycheck will need to come from working capital you put aside. So will all of the other costs -- employees, suppliers, and so on. It is a bit discomfiting to look at the burn rate of your available capital and trust that your business will generate revenue before the working capital is gone.”

Last, but not least, new franchisees face a challenge unlike that of any independent business owner: They’ve got to follow the franchisor’s system of doing business. “The biggest challenge is the misunderstanding that the former employee is actually becoming ‘their own boss,’” contends Leonard. “They are essentially paying a lot of money to have another organization tell them what to do. Generally speaking, very little creativity is allowed, as it would ‘dilute the brand.’”

As a franchisee, you may have to do things that don’t always make sense for you, Leonard warns. “When I was a sub sandwich franchisee in a downtown San Francisco location, the franchisor forced me to stay open nights and weekends even though the profits from the sales didn’t cover the cost of goods. But the franchisor was taking money off the top, so they didn’t care.”

If following a system is likely to be a problem for you, this last challenge may prove insurmountable. “Some people always think they know a better way of doing things,” says Rowe. “The best franchisees are those who commit to the highest level of execution of the ‘system.’ The worst franchisees are those who think they know a better way, because typically they want to try it their way first. [Even if] they are right 20 percent of the time, the brand suffers from the 80 percent of the time that they misfire.”

As a franchisee, you’re representing the franchisor’s brand, and the customer has certain expectations for that brand. “Regardless of how you might wish to deliver the franchisor’s brand promise, you need to be certain that you do so as the franchisor wishes, which might not be exactly how you would do it if you were truly entrepreneurial,” says Seid. “Understanding that you are operating and executing within someone else's guidelines sometimes is a learning process -- but that lesson really needs to be learned well.”