Tweet

Picking the Right Franchise

Written by: Katie Magers

Article Overview: Dan Rowe lends some advice to the readers of the Washington Business Journal on the booming franchising industry.

Picking the Right Franchise

Picking the Right Franchise
by Lucy Webb
Washington Business Journal
August 4-10, 2005

Mark Rubin narrowed his choices to 1-800-Got-Junk? and Smoothie King. In the end, the smoothies lost.

Less than four years later, he and his wife, Claudine Rubin, now own a 1-800-Got-Junk? franchise, a Doody Calls pet waste-removal franchise and a business of their own, Just Moulding, which they’re hoping to franchise some day.

But is the Rubins’ life for you?

We have the good, the bad and the answer to why some people prefer pet poop and strangers’ junk to mango smoothies.

WHAT’S TO LOVE ABOUT FRANCHISING

In a franchise, you don’t have to come up with your own systems. That’s what the franchisor is selling, really: systems that are proven to work. Generally, the franchisor also provides training in those systems.

Additionally, the franchisor offers support you might not be able to afford if you had to pay for it in your own small batches: call centers, advertising, inventory, equipment.

Because the franchisor typically does all the research and development, according to the International Franchise Association, you don’t have to invest in developing new products or services. And franchisors have the expertise to offer advice on an ongoing basis.

Depending on the system, you may enter the market as a known quantity, able to take advantage of existing customer loyalty. No one’s heard of Lucy Webb’s Doughnut Shop (yet), but Dunkin’ Donuts evokes strong feelings.

Financing is easily available through the SBA, according to Dan Rowe, president and CEO of Fransmart, an Alexandria-based company that helps businesses such as Five Guys and Vienna-based Hair Cuttery put together those systems as they begin to franchise. Rowe has two franchise investments of his own (a Five Guys and a ZPizza).

WHAT’S TO HATE ABOUT FRANCHISING

You don’t get to come up with your own systems, either. You do it the way it’s done. Franchisors are aiming for consistency. They’re staking their reputations on your willingness to follow through with that consistency, Rowe says.

In many franchises (heck, many businesses), there are two ways to make money: Sell more, spend less.

“Spend less” may mean not paying your people piles and piles of money; many franchisors, Rowe says, have set their systems up so that employees need not be highly skilled and can be easily replaced. If you dislike the idea of making money from the low-paid labor of others, find something else to do, Rowe says.

Even with established systems, a franchise is still a business, which means long hours and hard work. IFA says that new franchisees sometimes expect instant success, having seen others succeed. Ain’t gonna happen.

And a franchise is still an investment, with all the risks that implies.

PICKING THE RIGHT FRANCHISE

In searching for a franchise, Mark Rubin ultimately decided he wanted a service business rather than a retail one. He wanted to go to his customers, rather than requiring them to come to him.

Rubin chose 1-800-Got-Junk? After seeing one of the trucks on the road, and then finding an article about the business in Fortune magazine.

A service business also appealed to Rubin because he could add other businesses to it and thus take advantage of possibly overlapping customer bases.

Claudine Rubin talks about the comfort of selling jobs worth hundreds of dollars rather than offering a $3 item.

Rowe, on the other hand, has put his money into burgers and pizza. He likes them because, intuitively, they should work; people eat burgers and pizza every day.

So consider, first and foremost, Rowe says, what you want out of your franchise.

Are you trying to buy a job? Are you hoping to passively invest in several restaurants? How much risk can you take? How much money are you trying to make over how long a period? Are you looking for opportunities to add ZIP codes or operating units, or are you looking for growth within your one unit?

When you’ve narrowed the field, talk to other franchisees, as many as you can. The franchisor will give you a disclosure document, with, among other things, a list of other franchisees. Ask whether they’d do it again if you get a “no”, head for the hills, Rowe says. Ask whether they would have opened more operating units sooner if they could have.

Find franchises with systems and leadership you trust. If you don’t believe you can make the business work the way you’ll be required to do it, you’re courting disaster.

Give your trust cautiously. Do your homework. Besides talking to franchisees, look into the company’s (and the individual’s) background and litigation history. Check with the Better Business Bureau. Check with the Federal Trade Commission.

Look at exactly how much input is required of you and ask yourself whether that’s something you’re able to do.

Look at the requirements the franchisor has put on your operations. Can you live with them?

Look at the commitment that’s expected of you. A 10-year (or 15-year or 20-year) contract is not atypical. Does that work for you? If not, what would?

Of course, consider the costs too. And wile you’re thinking about money, think about maintenance and inventory costs. Oh, and what you’ll live on until you make a profit.

FINDING MORE RESOURCES

There’s a lot out there, if you know where to look.

Start with the International Franchise Association (www.franchise.org).

On IFA’s Web site, you’ll find IFA University (including a free, online course on Franchising Basics), articles and a database of available franchises.

The Federal Trade Commission (http://ftc.gov) has information for prospective franchisees, but honestly, it’s much easier to find at the IFA’s site. Look for the link to “FTC Guide to Buying a franchise” at the top left of the IFA home page. It contains great checklists and things to consider as you explore specific franchises.

If you insist on looking at a government Web site, the SBA has some good information. Go to www.sba.gov/starting_business/, click on “Free Small Business Startup Guide.” From there, click on “Buying a Franchise.” It’s not especially comprehensive, but it’s something, and it is surrounded by other good startup advice.

The American Franchisee Association (www.franchisee.org) also has a Web site that’s not very comprehensive, but it’s worth a look around. Especially check out the “Buying a Franchise?” link; there’s some technical, very useful info there.

Related Articles
  Find Your Perfect Franchise Fit With the Help of a Directory
  Franchising with all its Success
  About 60% of all franchise opportunities have less than 50 units.
  Why Use a Franchise Consultant?
  Did you know: NIIT Franchise was present in Malaysia in 1997?

Article Tags:



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Gas bills go up by 18% can we take any more

How to Develop Your Powers of Thought.

Working Across Borders

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.