With unemployment skyrocketing, many people are thinking of starting a new business. However, the risks can be high (many new businesses die within the first couple years).
So, to help boost the odds of success, another option is to get a franchise. After all, there is already a system in place to get started quickly. Also, you will get the support from the brand, advertising, and leverage with suppliers.
But, before you do this, it's a good idea to consider the following:
Due Diligence: Starting a franchise is a big investment, in terms of money and time. As a result, you should spend at least several months doing research. First, scour the internet for information. Are there negative reviews? Pending lawsuits? Has there been growth in the operations?
Next, interview several people who have franchises. Would they do it again? What lessons have they learned?
Finally, get a copy of a franchise's Uniform Franchise Offering Circular. This is an extensive legal document that covers things like management history, litigation problems, fee schedules, restrictions, capital investment requirements, and so on.
Get Experience: Perhaps the best advice is to work at a franchise first. From this, you can learn the ropes and see if this is something that you'll want to stake your hard-earned money on.
Money Suck: The ongoing expenses can be significant. For the most part, it takes awhile to build a customer base. In other words, do not expect to make much money in the first year or two. Something else: the work hours can be grueling.
Yet, if done right, the rewards can be great. Just look at the success of franchises at McDonald's, Subway, Pizza Hut, and so on.
Freedom (or lack thereof): Most franchises have strict rules. And, this is a good thing since it maintains high quality. But, of course, it also means that you have less freedom to try new ideas.
Resources: No doubt, there are many resources on franchises. One that I've found to be particularly helpful is Franchise Times Guide to Selecting, Buying & Owning a Franchise
Tom Taulli is the author of various books, including The Complete M&A Handbook, You can reach him at his personal blog.
Before the bell: Futures sharply lower on Dubai's debt problems
Will Rich Ross really have a positive impact on Disney's movie operations?
Consumers sick of recession, may spend extra on holidays
Reader Comments (Page 1 of 1)
7-27-2009 @ 12:37PM
p said...
Remember, "what the big print gives you, the small print takes away." Read it all and do not assume anything. Get every promise or guarantee in writing.
7-27-2009 @ 12:55PM
paytplay said...
They forgot to add that good credit will be needed. Not very many people have that anymore.
7-27-2009 @ 1:52PM
cindy said...
Franchises have to live under the same suffocating laws as the jobs you were layed off from. So long as the Federal gov't wants to control every penny you make NO BUSINESS IS WORTH THE EFFORT IT WILL COST IN TIME MONEY OR LIABILITY. no profit means a waste of time. This country will never never have success again in our businesses as long as it's "silent partner" is the gov't who takes more than it's fair share. Don't waste your time or money you will not make any profit.
7-27-2009 @ 2:32PM
Mark Borg said...
out of work ? well just go ahead and invest your savings into a franchise . after corporate headquarters , the bank , and the IRS are done with you , you'll be out of a job and broker than you are now . the senators will give themselves a raise with your money .
7-27-2009 @ 3:11PM
Dan said...
Just sit at home and make money on your computer. Now that's going to fix everything except for your fat ass gets bigger in the chair. Oh, then open a fitness club and everything will be OK. That's it, America becomes the fitness, fat ass leader of the world. And our greatest asset becomes our fat asses and heart attacks from exercise.
7-27-2009 @ 3:14PM
Dan said...
Depressions kill frachises too. Save your money for afterwards..........................you many need it to eat.
7-27-2009 @ 4:52PM
Woodrow Holloway said...
Having been a Franchisee for 8 years I can tell you it is never worth the envestment of your time and money. Always read to the end of the contract. You will get a document called a UFOC call everyone in it. Remember if you are already in business and you decide to roll your Business into the Franchise it becomes the property of the Franchisor so if you decide to leave at the end of your contract your Business goes with them and you are left with nothing. Most tell you it is easier to sell a Franchised Buisness than a regular Start up make them prove that to you with same store resales. Good Luck
7-27-2009 @ 11:03PM
Dale said...
I started my (non franchise) business 13 years ago. I cannot say that franchising is good or bad. If your burning desire is strong enough, and you are willing to make almost any personal sacrifice early on, then go for it. The business climate is very tough today.