Should You Buy a Franchise or Go Independent?
You have decided to commit to building a car wash, so now the question is franchise or independent?
By Greg Byler
Before making a decision of this magnitude, whether your dream is to be a car wash owner or perhaps you are a current wash owner looking to expand, you need to understand the difference between becoming a franchisee and being an independent operator.
A franchisor likes to described being a franchisee as going into business for yourself but not by yourself. Franchises give you a nationally or locally known brand name while providing building plans and assistance — stock architectural plans that can be modified for your location.
A franchise should at the minimum offer comprehensive training that will cover all phases of the process, wash attendants, management and perhaps even back office operations.
You will be promised national and local advertising — both necessary to build successful franchise, but only the local part will impact you early in the game. Your best advertising is still location, location, location. For these things the franchise offers you will be paying an upfront franchise fee, ongoing franchise fees based on gross income and likely also money into the aforementioned advertising fund. So do your homework and find out what the plan is for spending your money.
Your location will be evaluated for success
Site selection assessment services tend to be more comprehensive with franchises than location services provided by the typical car wash equipment salesman. Keep in mind that franchisers make money off your sales, equipment salesmen make money off the equipment they sell you. So, their motivations are coming from a different place.
It’s also important to find out about financing solutions for a franchisee. Banks, specifically the Small Business Administration (SBA) like franchises as they tend to offer a higher success rate on startups.
•Proven method of operation: A step-by-step guide to operating a successful car wash business that also includes a corporate infrastructure to support your needs and develop beyond the current level of effectiveness.
This, along with the brand name, is the biggest and best argument for purchasing a franchise. Over the course of your ownership the franchise name will cost thousands of dollars and this is essentially why you are paying them for the initial cost and ongoing revenue-based fees.
•Technology appropriate to the industry: A point of sale computer system is just as important a piece of the success pie as the right conveyor to choose. Your choice of computer system/pay stations are your hand shake to your customer.
•Technical assistance for operational needs: equipment repair, EOM lists, fleet sales assistance, equipment maintenance/repair training etc are important.
•Product programs/discounts: Pre-arranged discount pricing for soap vendors, vending and perhaps replacement parts.
•National fleet accounts and fleet billing: Many national fleets contract through larger franchises for standard line of service and billing purposes. The arrangements are typically done through the franchisor with billing don’t through the same system.
Independent / Non-Franchise
Independent car washes are defined as facilities named and signed with no direct visible affiliation to a specific franchised brand.
Keep in mind that nearly everything that franchises offer is available to an independent through various vendors, consultants etc. It is the experience of the franchise that you are paying for with a franchise. Some would argue, and one day (not in the near future as best I can tell) there might be some of this in reality, for a car wash franchise – the McDonalds point of view. That is when you see the Golden Arches and a McDonalds you know automatically what you can/can’t get. If a car wash franchise were to get large enough, the same sort of thing would be available if the franchised car wash were to succeed to that level. There isn’t a franchise existing or on the horizon that I see that can make you that promise with any certainty.
You just need to get comfortable with paying for the help/information you get from a franchise over and over again and throughout the life of ownership. And if the franchise is dynamic and forward thinking enough, perhaps they will innovate their way into earning that ongoing cost year after year. Again, you must get comfortable with that.
Weighing the Pros and Cons
With a good franchised name brand, you are established as soon as your sign goes up and it can offer you a wealth of experience well before you open. Also, many franchise personnel are former and/or current operators that work for the franchise and have years of experience to offer.
When first entering a business, knowledge can be the difference between success and failure.
Keep in mind that the franchise is only as good as your local/regional support person. If you go this route and are not satisfied with your regional help, do not be afraid of going over his or her head to get the answers you need, because you are paying for that information in the form of ongoing franchise fees based on sales.
•Ongoing help and support: Both franchise and independent branded options give you varying levels of help and support. Even independents have a great deal of help and support through their vendors, which are an excellent source of information.
•Defined Territory of Franchise: theoretically you will have a protected area, free from competition from your franchisor adding locations without your involvement. The reality is that I have seen this get very subjective and malleable. Some equipment companies will say they will protect you within a given mileage, some area salesmen for computer POS companies try and police this, but in the end most figure that someone is going to sell them the equipment/computers or whatever and sell to people literally across the street from you. Or if you have a franchise, an independent can build down the street without any trouble whatsoever.
Disadvantages to Consider
Initial and continuing royalty fees for a typical franchise. Over time, this amounts to a lot of money paid to the franchise. Animosity or regret when paying them every quarter might do nothing but give you ulcers. Embrace the concept of paying for their help or don’t even think of becoming a franchisee. In theory, if their support is strong enough, you should be happy to send the check.
Freedom is another consideration. You get training and input from the franchise, but they require you do things a certain way. Franchises need to keep operations extremely similar from store to store to set a standard. This is what you want and are promised from other operators of your brand, so keep the agreement and do as you are required operationally.
As an independent, you can do things your way and only your way, but don’t forget that your way doesn’t come with as many years’ experience as the franchises’ way.
Franchise name brands and public perception is everything. If a bad franchisee is caught doing something it shouldn’t and it makes the news, all franchisees will suffer. Even though you may run a clean honest wash, bad news travels fast and dies hard. Add the internet and social media and it travels at the speed of light. Google and Yelp reviews are prevalent and that shows no signs of changing anytime in the near future.
The Cold, Hard Truth
No matter what option you choose there is no escaping the hard work of owning your own business. The greatest franchise name in the world cannot overcome bad management and poor business practices. In this respect, becoming a franchisee is no different than being a independent — all require commitment and working smart. The difference is a two-edged sword. Any franchise who is committed and serious about their brand/reputation will insist on operational excellence and require their franchisees (you) to perform to a certain level. If you cannot fulfill their minimum requirements, you run the risk losing the franchise and likely be forbidden legally from getting back into that niche of the business independent of the franchise.
But regardless of your choice, without the hard work, sacrifice and determination no franchise or independent will be successful, and that is the cold, hard truth.
Greg Byler is a 30+ year veteran of the car wash industry. He is president of Pit Stop Consulting (www.pitstopconsulting.com); a Springfield, MO-based firm providing equipment, sales, production, and management training for the car wash and fast lube industry.