The Seven Most Important Questions About Franchising
By Dan Citrenbaum
There is a tremendous amount of information on franchising. From the government, from colleges and universities, from non-profit “think tanks”, and from franchise companies. That’s why people new to the exploration often suffer from information overload.
Go ahead and google “franchise opportunities”. You’ll end up with more than 30 million hits.
But there are some types of information that many agree are important to know. We have boiled these down to a manageable starting point: Seven questions that people most frequently ask (or should).
- What is a franchise?
A franchise is simply a business structure in which one business licenses the right to use the name and business methods of another. Many of these arrangements have things in common such as training, franchise fees, royalties, and support.
- What types of businesses are franchised?
If you think of a business type, it has probably been franchised.
Most people start with restaurant (McDonalds) or retail (7-11). But there are medical businesses and janitorial companies. There are lawn care and financial consulting. There are franchises to help the young and others to help the old. There are franchises that serve businesses and those that serve individual consumers.
The International Franchise Association counts more than 3,000 franchises in more than 75 different industries.
- What are the “hot” franchises?
The franchises that are experiencing the fastest growth are those that benefit from long-lasting changes in the economy.
Most people are aware that the senior population is growing. One business that takes advantage of this is the franchise that provides in home care for seniors who have had some health setbacks.
We are all aware that corporate America has thinned their ranks by wave after wave of layoffs. But you might not have realized there are some franchises that benefit from these cut backs. Temp Staffing businesses, for example, have grown to assist when these too-lean businesses need some short-term additional help.
What other trends do franchises take advantage of?
Schools budgets are reduced, so academic tutoring franchises have grown.
We hear that “60 is the new 40”. Many recently retired people have the time and energy to launch a business. These people need or want additional income. They just don’t want to work full-time.
A wide range of semi-absentee businesses have come along. These can provide full-time income, with only part-time hours.
- How much does it cost to purchase a quality franchise?
Franchises have a wide, wide range of investments. Some as low as $10,000, and many with a cost into the millions of dollars.
Most people are happy to learn that the vast majority of quality franchises require a total investment of under $150,000.
- How do I tell if a franchise is a good one?
By doing your research.
The franchisor can explain the business to you. One part of this process is that they will give you a copy of the government- required booklet called the Franchise Disclosure Document. This provides company-specific information for you. You can also find lots of information by surfing the internet.
Most valuable, you can talk to actual franchisees and hear about the business directly from them. They can tell you what to watch out for and how to be successful.
- How can I tell if a franchise is good for me?
You will need to learn what is required for the particular business. What is the investment? What does is the role of the owner of the company? How many hours does the owner work?
Then you need to do an honest and thorough self-assessment to determine if you have the qualities required to succeed in this business.
- What types of outside professionals should I consult during my research?
We always suggest that you talk to an accountant and a lawyer.
The accountant can review your projections and business assumptions. They can help you to evaluate the potential of the business.
The franchise documents are long, complex, and (no surprise) filled with legal-ease. You’ll want to have a lawyer review them for you. But do not use just any lawyer. Make sure you choose a lawyer with significant franchise experience. If you use someone without a lot of franchise law experience they may not know what they need to look out for in order to protect you.
Anyone else? What if you could find an industry expert who would be your advocate? Someone who helps you with all of the evaluation, who knows which franchises are the best ones, and who helps you to navigate the research process? And what if this person’s services were completely free to you? Is there such a person?
Yes – the best advocate to help you through the entire process is a quality, experienced, franchise coach.
Dan Citrenbaum is a Franchise Coach and Entrepreneurial Consultant, and is a franchisee himself. He has spent over 25 years helping small business owners start and grow their businesses, in order to achieve their dreams. He offers a free service to help people find an existing business to buy, or a successful franchise to start. View his company’s web site at www.EntrepreneurOption.com Mr. Citrenbaum can be reached at DCitrenbaum@gmail.com or at (215) 367-5349.