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 (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 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.



Picking the Right Franchise - To learn more about this author, visit Katie Magers's Website.

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