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Doing Your Homework: How To Get The Facts On A Small Business Franchise

Written by: Candice Clem

Article Overview: The old adage of "look before you leap" is never more true than when it comes to starting your own small business franchise. Knowing all the facts before starting your own home based business is a must and will set your business up for success. Here's some good information on what to expect and what it takes to start your own small business franchise.

Doing Your Homework: How To Get The Facts On A Small Business Franchise

Public relations play a major role in today’s business world. Each year, businesses spend hundreds of millions of dollars, paying highly skilled men and women who know how to make everything from hamburgers to airlines look as good as possible in the public eye. It’s not that most businesses, products, and services aren’t as outstanding as they present themselves to be, but it can be hard to tell which representations are most accurate. So when a hopeful entrepreneur browses through a list of franchises and finds that many work at home businesses appear too good to be true, he may have a difficult time deciding which one to choose. That is, unless he has resources at his disposal to confirm that these business opportunities are legitimate. And as it turns out, though many potential franchisees don’t realize it, such resources are available; a person just has to know where to look.

The Franchise Disclosure Document

Because it can be so hard to determine a viable home based business from a total scam, all franchisors, by law, are required to have a Franchise Disclosure Document (or FDD) available to any prospective franchisee. It provides a complete overview of everything about the business, its goals, its history, and its practices that anyone could ever possibly want to know. In fact, a quick jaunt over to the Federal Trade Commission’s website shows exactly how precise and complete a disclosure the government expects from all franchises: they provide a 150-page Franchise Rule document to clarify exactly what information a business must supply in order to comply with the law. If there is anything fishy about the franchise you’ve got your eye on, the FDD will reveal it to both you and the government.

The SBA Franchise Registry

Another easy way to spot potential franchise trouble before it hatches is to check out the Small Business Administration’s Franchise Registry. The SBA is a very helpful branch of the US government that specializes in supporting small businesses, including franchises, in any way they can, and one such way is by providing financial backing to small businesses that otherwise couldn’t get off the ground. In the case of a franchise, the SBA asks for company information to ensure that the business model is a sound one, there is a history of success, and future success is fairly certain before they provide the financial support. What this practice has inadvertently produced is the Franchise Registry: a list of all the franchise companies that have already submitted their businesses for financial support when a new franchisee starts out. If a franchise is on the list, then the government has given it their stamp of approval and their trust, and so can you.

Learn From Other People

This seems like the most straightforward way to get information, and it truly is. If you want to find out what Adventures in Advertising is really like, talk to one of their franchisees. There is no one who will know better what the strengths and weaknesses of the franchise are, how effectively the business runs, and whether or not it’s a worthy investment. Of course, talking with only one DVDNow dvd rental kiosk franchisee may not give you a true perspective on things; because if one person has a negative opinion simply because a work from home vending business just wasn’t a good fit for him. But if you talk to a dozen franchisees, you should be able to figure out exactly what your future franchise will be like. You don’t have to stop at franchisees, the Better Business Bureau can also offer you information on the franchise you’re looking at, based on the reviews of concerned consumers. If, in their database, the BBB has 200 negative consumer reports in regard to the internet business that’s recently caught your eye as a potential opportunity, you may want to rethink the choice, because that many unique negative reports probably means there is some merit to the complaints.

When you’re looking at franchise businesses, there is no such thing as over-researching. Truly, most opportunities that you’ll find, especially through franchise brokers, are trustworthy businesses. But even if research doesn’t unearth a huge moral or professional flaw in the infrastructure of the business, it might just tell you some things about the way they practically run that won’t mesh well with your personality, lifestyle, and goals. There are plenty of factors to consider when starting a new business, and any knowledge you can get along the way will inevitably be helpful.

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These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
canada resources - I used to have a connection to a franchise consultant in Canada at "Franchise Officer" in Toronto. I wish I could remember his name ( but I can check my files at the office tomorrow). Anyway, he had a lot of connections to banks in Canada. He may know of them and may be able to offer some feedback. If you are looking for a business loan, Canada has similar business loan programs to that of the USA's Small Business Administration (SBA). I think its SLBS in Cananda, and I probably have the list of it's lenders in my office also. Do you think either can be helpful? If so, I can get back to you with this information tomorrow. Let me know!
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Re: Biz Plan Competition - i just wanted to say that posting Small Business Events on CanadaOne is a great resource. Thanks Julie!


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