There are pros and cons to being the first franchisee, and it is certainly not without its risks. While everyone businessperson would have loved to have been the first franchisee for a system such as McDonald's or Wendy's, it does not always work out that way, and, even if it does, success does not come without significant work, Entrepreneur magazine writes.
One of the benefits of becoming a franchisee is the extensive system of support they receive, including field support, cooperative buying and proven marketing and advertising strategies. However, with a new franchisor, these may be underdeveloped or even nonexistent. The first franchise unit will be the system's pilot program - or their guinea pig - on which they tryout training programs, management tactics and promotional campaigns. "In fact, just about everything the franchisor will know about operating a franchise system will come from working with you," the magazine writes.
A new system will not only be untested, but sometimes understaffed - each employee could be doing two to three jobs at a time. They may even be using a franchise broker to sell units and attract franchisees.
Being the first franchisee has its perks, as well, especially if the franchisor has done his or her homework. Within a startup franchise, the establishment will likely be more flexible with unit owners as they continue to experiment and try out new strategies. A system will be just as excited to have a franchisee on board as the unit owner will be to be working with them and possibly offer them perks such as reduced or deferred franchisor fees.
Additionally, opening the first unit, gives franchisees a wide selection of locations to choose from - they may even be able to negotiate an exclusive territory deal or wrangle an agreement for additional training, headquarters and field support or more customized marketing and advertising, according to Entrepreneur.
Before investing in an untested franchise system, potential buyers should take some time to also consider their own personalities. They must be more accepting of risk than a normal investor and welcoming of change and unforeseen circumstances to truly succeed.
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