By Vicky Tade

Sold But Not Open

Sold but not open franchise metric

Do you know about the “Sold But Not Open” metric? Beware of this subtle numbers game when franchise companies report on the numbers of units sold. Just because a unit is sold, it doesn’t mean that it eventually opens for business. Many companies like to sell multiple units at a time (as in “3-packs”) and these don’t always get opened.

Here is an article from Franchise Times on this franchising graphic:

Many Units Sold, Far Fewer Open for Many

Here are some interesting excerpts:

Franchising has rebounded since the recession, with the nation’s franchisors opening new units at a pace of about 12,000 a year, according to the International Franchise Association’s Economic Impact report. The report says that’s faster than non-franchised businesses.

 

But if you read the press releases and online promotions of dozens of brands, you’d believe that franchises are growing even faster. (See article for specific examples)

 

If all those franchisees actually opened the units they signed up for, individual brands would be far bigger and franchising in general would be growing much faster than its current rate. Instead, thousands of franchise sales fall into another category, called Sold But Not Open (SBNO).

 

Franchisors must report unopened units each year in their franchise disclosure documents (FDD). We asked FranchiseGrade.com, a research and analytics company in London, Ontario, to provide a list of the 50 franchisors with the greatest numbers of Sold But Not Open units from its database of FDDs from more than 2,400 systems. In their 2013 FDDs, the top 50 SBNO franchisors alone reported 12,697 unopened units.

 

Many of these units will never open because the franchisees who signed the agreements—and usually paid upfront franchise fees—are struggling to operate the one or two units they have opened; are having trouble finding sites for additional units; have lost interest or, in some cases, have run out of money and filed for bankruptcy.

 

The most obvious victim when units don’t open is the franchisee, who might have opened a single unit and flourished. But the franchisor also suffers, because the same territory could have been sold to other franchisees who might be thriving there. And franchising itself suffers, because more robust growth could strengthen the industry’s position in its legal battles against minimum-wage increases, healthcare reform and worker unionization.

Be sure to read the entire article. It’s very interesting. Give me a call to discuss!

Contact Franchise Broker Vicky Tade

Click to contact Vicky Tade Franchise Consultant to discuss the latest trends in franchise opportunities. She’ll help you understand the metrics that really matter in franchising and business opportunities.

Franchise Selection Criteria

franchise selection

As your franchise broker, our job is to stimulate your thinking about the business opportunities and franchise systems that you consider. After all, you have limited amounts of bandwidth, time and energy to spend on your franchise research. Our role is to help you focus on selecting the right franchises to investigate further.

At Franchise-Seekers.com, we belong to an association of franchise brokers that is committed to helping you make the right choice. Together, we brainstorm ways to help you make your franchise search easier and more productive. We publish articles that bring helpful information to your attention.

Here are some thoughts about some different things to keep in mind as you go through your franchise selection.

Thoughts When Choosing a Franchise

It’s pretty remarkable how many different types of franchised businesses there are available. When most people think of a franchise, images of McDonald’s, Burger King and Subway come to mind. But less often do people think of the other business concepts the franchising industry has to offer, like:

  • Clothing boutiques
  • Day Spas
  • Hair Salons
  • Business Services and Coaching
  • Childcare and Development
  • Tutoring and Education
  • Financial and Loan Services

There are literally thousands of franchise and business opportunities to invest in. And, while many people initially automatically think “I want to own a restaurant” or “I want to own a gym”, it is important to keep an open mind. This is where working with a franchise consultant such as Vicky Tade at Franchise Seekers can help.

There are important factors than can help you choose the very best business option for you.

Are you looking for:

  • Flexible schedule
  • Home office based operations
  • Low investment level
  • High return on investment
  • Quick start up
  • Small office or small number of employees

Your franchise broker can provide you with valuable guidance and assistance in sorting through these elements. Her purpose is to not only match you with the best industry for you, but also the best business model. Your work-life balance and your business goals are taken into consideration when researching your franchise options.

Do you want to:

  • Make a difference
  • Operate a green company
  • Work with other businesses and professionals
  • Provide job opportunities

It is important to take all of these items into consideration when investigating franchise and business opportunities you are interested in. While these things can be daunting, having an experienced partner in your research process can prove immensely helpful (and stress reducing!).

Franchise Broker Vicky Tade

Looking for a franchise or business opportunity? Vicky Tade believes that “Knowledge is Power” and encourages you to use the helpful franchise research resources at www.Franchise-Seekers.com to gain the edge you need. Click here to contact Franchise Broker Vicky Tade to discuss your franchise questions today.

Have You Considered a Franchise Resale?

resale franchise best practice

Dear Franchise Seekers Blog Readers:

One of our goals is to make sure that you’ve considered all the options during your franchise opportunity search. This means that we take seriously our mission to arm you with all the tricks, tips and best practices of franchises. Take a look at this important technique:

Consider a Franchise Resale

If you are considering buying a franchise perhaps there is an option that you have not thought about- a franchise resale. Statistics show that about 15% of all franchise sales are re-sales. Some of the reasons that franchisees sell their business include retirement, coming to the end of their franchise agreement and deciding to move in to a new venture or possibly a life event change.

The benefits of buying a resale are; immediate cash flow, established business with an existing customer base, opportunity to reach profitability quicker and easier to get in to a retail location without the challenges of finding a location, building out the location, tying up your capital while you wait for your franchise to open-less wait time.

It is important to conduct the same due diligence as if you were looking at any new franchise concept.

What are the standards of the franchisor? What is their corporate culture like? Examine the FDD and most important talk to existing franchisees to learn about their experience in the system.

You will need to find out why is the owner selling especially if it’s such a “great” business? Are there other mitigating factors-check with the local economic development department is there major road construction scheduled? Has the unit been successful and do they have key employees that you will retain or let go? The seller should provide you with income statements, tax returns, and balance sheets how do these numbers compare during your validation with other franchisees in the system? You may also want to have an accountant review the financial documentation.

Again it is important to do your homework and with the right resale opportunity you may be able to avoid the challenging startup period.

Franchise Seekers can assist you through this process. We have a proprietary data base listing many resale opportunities both nationally and internationally. Please contact us for more information.

Your Franchise Broker,

Vicky Tade

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Contact Franchise Broker Vicky Tade

Discuss this article with Vicky Tade, seasoned franchise consultant, and learn some key tips of selecting the right franchise system. Her insights will help you understand what you need to look for in a franchise opportunity to maximize your happiness and your success.

Click here to contact Vicky Tade.