What about franchising

What about franchising?

Web posted Saturday, October 28, 2000

Franchising is frequently and inaccurately described as a business or industry. It is really a method of doing business. Franchising has been used by a broad variety of industries and businesses as a low-cost means of expansion.

Under a franchise system, an individually owned business is operated as though it was a part of a large company. The parent company authorizes the franchise outlet to use its trademark and generally mandates a standard design for the business' facility and the use of certain equipment, products and services.

Franchising offers many advantages to the small-business person. The franchiser should provide solid advice on site selection, management, demographics, advertising, accounting, and product research and development. Greater efficiency generally results.

Is the concept of a franchise the right choice for you? It depends.

To make your franchise business a success, you must be willing to accept orders and procedures from the franchiser - your new boss. Any ideas you have for diverting from the proven formula must typically be approved by the franchiser. In a sense, you forego some of the independence you may have sought in starting your own firm. Of course, that loss must be weighed against the increased chance for success.

As in any small business, long hours and hard work are required. With many franchises, it is likely to be three or more years before you can begin to take money other than your salary out of the business. However, there is no guarantee that you would make a profit any earlier with a business you started on your own.

The following are several factors you should take into consideration when evaluating franchise opportunities.

* How much money can you invest?

Before you invest in a franchise outlet, make sure you can afford any fees charged by the franchiser. Do you have the background necessary to make the business a success? Do you have experience in whatever field you are going into? Do you fully understand the total contract with the franchiser? Bear in mind, all of the above should be totally understood prior to developing a business plan.

* What is the outlook for the type of business in which you want to invest?

Be sure to research trends in the industry. Remember, "hoola hoops" are not the big sellers they were in the '70s and '80s, same for Daniel Boone hats and "zoot" suits.

* What are the terms of the franchise agreement?

It would be in your best interest to have your lawyer examine the franchise contract carefully.