To Franchise, Or Not To Franchise

Ask Score

(Saturday, April 21, 2007) -
During the past several decades, franchising has become not only a uniquely American institution, but also one of the leading doorways into small business ownership in America. Every year, thousands of individuals choose to get into business ownership via the franchise route.


According to the U.S. Department of Commerce, franchise businesses are more likely to succeed than individual new start-ups, particularly if you look at the figures over time. Figures from the Department of Commerce reveal that 91 percent of new franchises are still in business after seven years, as compared to only 20 percent of individual new start-up businesses. In addition, the selection of opportunities is huge with an estimated 6,000 franchise companies operating in the country.


While a review of the statistics might point to franchise ownership as the best option, there is actually much more for a potential business buyer to consider. It all starts with the question, "Is going the franchise route really a better choice for me?"


Jeff Mann of Mann Financial & Consulting, a franchise advisor and SCORE volunteer, notes that there are disadvantages as well as advantages to buying a franchise.


"If you are an entrepreneurial individual, with a strong passion for creating your own business, you may not find a franchise flexible enough," Mann said. He explained that many of the franchises have very firm regulations and rules that must be followed. An owner of most franchises will not have the option of modifying the business based on the market.


Other potential disadvantages include the upfront and on-going franchise costs, required training and store updates, and greater complexity when it comes to selling the franchise. Typically, the sale of a franchise will involve transfer fees, approval of a buyer, possible store and equipment updates prior to sale, and training for the new owner. Before buying a franchise, it is a good idea to make certain that you are aware of not only what it takes to open, but also on-going requirements. It is important to do your homework.


Mann stressed that anyone considering a franchise should have the contract reviewed by an attorney and make sure that they understand all of the terms, conditions and implications of the contract.


"Talk to other franchisees within the system. Find past operators who have sold their franchise and get their opinion. Know your competition in the marketplace, and confirm the corporate support you will receive," Mann suggested.


If your research is positive, a franchise could be the right option for you. By owning the right franchise, you will have solid corporate support that will enable your business to thrive. There will be a support group of fellow franchisees, corporate marketing and advertising assistance, buying power and quality control, training assistance, and brand recognition and awareness. Statistically, the odds are in your favor and you will have a much greater chance of making your business work.


"Franchising offers an individual a map or plan for success by allowing you to mirror your business off of the success of others within the concepts franchise family," Mann concluded.


If you'd like further information about buying a franchise or have other business concerns, contact the Green Bay Chapter of SCORE "Counselors to America's Small Business," a proud partner of the Business Assistance Center at NWTC. Visit www.greenbayscore.org or call Cindy Gokey at (920) 496-8930 for information on counseling, resources and upcoming workshops.

Tina Dettman-Bielefeldt is co-owner of DB Commercial Real Estate in Green Bay and Chapter Chairman for the Green Bay SCORE group.

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