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“Own a Franchise - No Experience Required”
…. Are You Sure???? 

“No Experience Necessary” is how many franchisors represent their franchises when talking to prospective buyers. Even though it may not be required by the franchisor, state and local laws may require experience as a prerequisite for licensing.  Therefore, before buying a franchise business, it is critical that the franchisee thoroughly understand the state and local government licensing regulations. 

Franchisors are not purposely misleading the franchisee. It is just virtually impossible for them to keep up with these requirements for every state and local government.  The burden of ensuring compliance must rest with the franchise buyer as part of his due diligence process. 

This became a particularly sensitive area for me after I purchased a contracting franchise business in Virginia.  Virginia has three levels of contracting licenses with more stringent requirements as the business grows.  Although I was in full compliance upon starting the business, my rapid success made it very difficult to keep up with the escalating requirements. 

Here are the three classes of Contractor Licenses available in the state of Virginia with their corresponding requirements: 

Class A Contractors perform or manage construction, removal, repair, or improvements when (i) the total value referred to in a single contract or project is $120,000 or more, or (ii) the total value of all such construction, removal, repair, or improvements undertaken by such person within any twelve-month period is $750,000 or more.  

Requirements: 5 years experience; Company net worth $45,000; passed 3 tests; and completed approved training course. 

Class B Contractors perform or manage construction, removal, repair, or improvements when (i) the total value referred to in a single contract or project is $7,500 or more, but less than $120,000, or (ii) the total value of all such construction, removal, repair, or improvements undertaken by such person within any twelve-month period is $150,000 or more, but less than $750,000.  

Requirements: 3 years experience; Company net worth $15,000; passed 2 tests; and completed approved training course. 

Class C Contractors perform or manage construction, removal, repair, or improvements when (i) the total value referred to in a single contract or project is over $1,000 but no more than $7,500, or (ii) the total value of all such construction, removal, repair, or improvements undertaken by such person within any twelve-month period is no more than $150,000.  

Requirements: completed approved training course. 

My franchise business generated over $700,000 in revenue our first year. As a result, we were required to have at least a Class B license but preferably a Class A to support growth. Not having any contracting experience made it very difficult to meet the experience requirements, pass the tests, or even show the appropriate level of net worth.  

Fortunately I finally did obtain a Class A license, but it wasn’t until after we were operating for very long period of time during which the business was highly exposed.  The penalties for operating without the appropriate license can be devastating, even to the point of closing the business.  

If you are not as lucky as I was and get shut down for not having the appropriate license, what is your recourse against the franchisor?  None!  It is your business and your sole responsible to understand and adhere to all federal, state, and local laws. 

It is absolutely critical that, prior to investing in your franchise of choice, you verify state and local licensing requirements for the trade you want to enter. This is just one of the many items that should be thoroughly investigated during the due diligence process.  I invite you to use FranUnite’s extensive experience to guide you each step of the way as you evaluate your franchise opportunities and develop your franchise business plan. 

Bob Wood is President and Franchise Consultant at FranUnite.