Franchising has advantages, but do your research first
NEW YORK — For many people, buying and operating a franchise is the easiest way to become a small business owner. But choosing a franchise out of the hundreds of possibilities shouldn’t be a snap decision — it requires careful consideration of a variety of business and personal factors.
Owning a franchise appeals to many prospective entrepreneurs because it doesn’t involve the same risks as starting a company from scratch. Someone else has already come up with the concept and tried it out, and except for a very young, very small franchisor, it’s a known quantity that a banker is more likely to be willing to lend to.
Marketing is often easier with a franchise, particularly one with widespread name recognition. The franchisor usually supplies marketing materials and helps with cooperative advertising.
But running a franchise can be more complicated than it might seem at first. Each franchisor has its own requirements for franchisees. There are financial obligations, including the initial franchise fee and ongoing royalties. You may have to purchase inventory from the franchisor and operate the business under the franchisor’s rules.
The Internet is an excellent place to start learning about franchising in general, something you should do before you start looking into specific franchising opportunities. The International Franchise Association’s Web site, www.franchise.org, has a free online course called Franchising Basics, easily accessible from the trade group’s home page.
The IFA’s site also includes a link to the Federal Trade Commission’s “Consumer Guide to Buying a Franchise.” You can also access the guide at the FTC’s own site, www.ftc.gov/bcp/menu-fran.htm, where there are other online brochures including “Could ‘Biz Opp’ Offers Be Out For Your Coffers?”, which warns prospective entrepreneurs against falling for potential scams.
Books on franchising such as “Franchising for Dummies” can also be a good introduction.
There are also excellent resources throughout your town or neighborhood — franchise owners. The people who own the local fast-food, lawn care or business services companies can tell you the pluses and minuses of owning a franchise.