Franchise Talk

Tips to better your odds in franchising

August 8th, 2007 | Author: Jack

Franchising is anything but a sure thing. Just like starting any new business from the ground up, success is far from guaranteed.

In fact, studies indicate that franchises have only a slight edge over their independent counterparts.And with new franchisors hitting the scene at a rapid rate, it can be hard for entrepreneurs to determine which franchise offers the best chance of success,

* Do find a financial advisor immediately, preferably one who has worked with franchisees before. This may sound obvious, but potential franchisees often fail to get the right kind of help. An advisor will be able to help you evaluate your financial readiness and your franchising choices.

* Don’t expect to make money in your first year. Plan to have at least one year’s living expenses to fall back on or provided for by a second household income.

* Do read the fine print. By law, all franchisors must provide you with the Uniform Franchise Offering Circular (UFOC), a routine disclosure document. It should help you assess the company’s commitment to your long-term success. For example, a front-loaded fee structure might mean that the franchisor is more interested in its own short-term gains than helping you get off the ground.

* Do know who’s in control. The span of control can vary from company to company. For example, some franchisors may allow you to purchase supplies from a variety of vendors, while others will only let you work with their approved partner. Make sure you understand – and agree with – who is responsible for what and how much decision-making leeway you have.

* Do pound the pavement. Visit local franchises – they’re listed in the UFOC – and interview the owners. Talk to a franchisee in the start-up phase to assess how much support he or she is receiving from the franchisor.

* Don’t settle for anything less than exclusivity. If the franchisor isn’t giving you some territory to yourself, you’re not getting a fair deal. The company should guarantee that it will only open a set number of franchises in your area. Ask how it arrived at this number and, if possible, work with your financial advisor to find a market research firm that can do an independent analysis.

* Do remember that it’s all about people. Many of your employees will probably be new to the workforce. Their youth, inexperience or limited abilities can present you with significant management challenges – as well as a great opportunity to teach them important job and life skills.

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