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Deciding whether IT franchise ownership is right for you

Buying an IT services franchise is a viable path to business ownership, but is the business model a good fit for you? Experienced franchise owners weigh in on the benefits and drawbacks.

Going into business for one's self is a big decision that involves many other decisions along the way, including whether to build a business from the ground up or buy a franchise. While there are only a handful of IT services companies that offer franchises, the option is a viable one. Depending on your professional experience and business goals, the benefits of owning an IT franchise versus being an independent business owner may be worth the trade-offs.

Steve Hinch, general manager and owner of TeamLogic IT in Santa Rosa, Caif., often speaks to potential franchise owners about his experiences purchasing and running his franchise. He said two types of people tend to call him. "[The first type] are people similar to me. They've been in the corporate world and, for one reason or another, have decided or been forced to exit the corporate world, and they are looking at what to do next in life. … The other [type] has an independent IT company with one or two people, and they want to grow. They wonder whether joining the TeamLogic IT franchise would give them the ability to grow faster than on their own."

Both types of IT franchise owners have the potential to be successful, Hinch said. "It's not a black-and-white kind of decision. As with any career choice, nobody is going to be perfect for this, and what you have to do is identify your strengths and where you're not so strong, and decide that you need to build a team around you that is going to fill in your gaps," he said.

According to Charles Weaver, CEO of MSPAlliance, a Chico, Calif.-based organization for managed service providers (MSPs) and cloud providers, entrepreneurs are typically attracted to the franchise model. "Someone more heavy on business skills and less heavy on technical skills would see a franchise as an opportunity to sell a solution made available to them. 'I can sell it, market it, bill it and build a business that way.' There's nothing wrong with that, and it plays nicely with the skill set."

Having come from the corporate world and moved up the ranks from engineer to senior manager, Hinch knew he wanted to own his own business. He decided to venture out on his own when given the option to relocate to Colorado Springs, Colo., to keep his management position at Agilent Technologies or take an early-retirement package. Before looking at franchises, however, he considered putting together a startup. "I decided that while starting a new startup from scratch could pay off, it had a lot of risk, and I wasn't ready to take on that level of risk at this point in my career. So instead, I looked at how I could still own my own business but reduce the risk of failure to a more acceptable level."

IT franchises support networks

Linda Kuppersmith, president and chief technology advisor at CMIT Solutions of Stamford, Conn., had straddled the line between business and technology throughout her career and was looking to move from the back office to the front office. "I was looking to get away from just managing technology to working more closely with how to generate revenue with technology," she said.

Kuppersmith met with a Score association coach who helped her consider her options, including starting a business on her own or buying a franchise. "We looked at the options, and, by the end, it was clear that there was a big value proposition by doing this as a franchise. There is much less risk as well as capabilities that I wouldn't have gotten as an individual."

Buying an IT franchise requires an upfront investment as well as monthly royalty fees. However, both Hinch and Kuppersmith believe it is worth the investment. "I believe it was less of an investment for me to start a business through the franchise than it would've been [if] had I [started a business] on my own. I know that there are one-person IT companies that start with little money and they hang in there and do quite well as an individually owned business, but that was not my objective," Hinch said.

That's something I would not have if I were on my own -- experienced people that have insight into what 60 other franchises are doing, and what works and what doesn't work.
Steve Hinch, general manager and owner of TeamLogic IT, Santa Rosa

He explained further: "My objective was to be more than a [$1]-million-a-year company as quickly as I could and even get to $2 million a year. In order to do that, you need to make a significant investment. By buying a franchise, a lot of the work around marketing [and] generating a list of target customers was all done for me and by people who know what they're doing."

Kuppersmith also values the expertise and support she receives as a franchise owner. "I have access to an incredible network of other owners. We don't work competitively because we have service areas. There are 140 owners, and a vast majority of them have a minimum of 15 to 20 years of experience in IS and IT and management, so it's an incredible network. If I need advice, I can send an email to the network and get people's experiences with a particular vendor or solution."

Hinch said he meets fairly regularly with the TeamLogic IT CEO and COO of headquarters to bounce ideas around. "That's something I would not have if I were on my own -- experienced people that have insight into what 60 other franchises are doing, and what works and what doesn't work. I run sales pitches past them before pitching clients and get their feedback."

Staffing challenges, business model restrictions

While Hinch and Kuppersmith are very happy with their experience as IT franchise owners, they have encountered some challenges.

"My biggest challenge was staffing, and I think that's pretty true with any IT company, whether a franchise like us or independently owned," Hinch said. "Finding good talent is always a challenge. When we opened our doors, it was still in the middle of a recession, so it was a little easier. I had lots and lots of applicants for my first position." However, because Hinch had an aggressive growth plan, he needed to ramp up his staff quickly to attract customers that would facilitate that growth.

Staffing was less of an issue for Kuppersmith. "Most owners end up starting their offices with part-time help or engineers from a neighboring office. A lot of times, the owner cannot make the investment into hiring people before they are producing an income," she said.

"The thing that does frustrate me is that small organizations can be nimble and quick to change, and we're large enough where we're not quick to change anymore. In order to be able to implement some of the ideas that are unique to being able to have this kind of model and network, it means you need to coordinate 140 entrepreneurs," Kuppersmith said. "Building consensus is like herding cats." She said that six months might go by before a new product or technology gets vetted and is on the company's product roadmap.

This is one of the restrictions of owning an IT franchise. "You can only do what the franchise is doing," Weaver said. "You may have customers that don't lend themselves to a franchise model. IT services is not like McDonald's, where you get a repeatable hamburger at a fixed price wherever you go. Consuming IT services is very sensitive. There's a different perception from the customer."

That being said, both Hinch and Kuppersmith said they are happy with the state of their businesses. Hinch now has seven technicians on staff, which enables him to focus on business development work. His franchise has earned the award for fastest-growing TeamLogic IT franchise year-over-year for two years in a row, and he attributes that to "following the franchise process."

According to Kuppersmith, she wouldn't be where she is without a franchise. "Success as a franchise owner is measured a little differently. It's not just about the money you're making, but for me, it's the control I have over my life," she explained. "If I needed to leave the office early to attend an event with my kids or go to a doctor's appointment with my parents, although my employers were great about allowing that, I had that guilt. As a business owner, I have no guilt. If I want to take off an afternoon or a day or a week, there's no guilt. There are no expectations I have to meet but my own."

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Which would you choose: Launch a startup or buy an IT franchise?
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The allure of starting a business from scratch is tempting, but I would advise investors to consider an existing franchise since the infrastructure is already in place. Regardless, whichever direction you choose, good luck in your technological endeavors!
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Depends a lot on what your end goal is. If the desire is to make something that has never been made before, startup is the way to go. If working in an area where the problem domain is well understood, and the services to manage it are what you want to do, the franchise route is compelling.
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