‘Business in a Box’

There are many advantages in purchasing a franchise over starting a business from scratch, according to the International Franchise Association (IFA) in Washington, D.C.  Franchisees not only receive training, rights and direction for advertising and marketing, ongoing advice, research and development and business synergy through being a part of a franchise family, but they also receive a proven business model, the IFA says.  "Franchises are like a business in a box," said Chip Baranowski a strategic franchise advisor for FranNet in Brookfield.

Franchisees receive an invaluable amount of direction and help with business strategy, operations, marketing, accounting, advertising, employee training and managing a business from both the franchise company and the past experience of other franchisees, Baranowski said.  Having this information up front, in addition to a proven business model or nationally recognized brand name, saves franchisees time, money and helps them avoid many mistakes in the first years of owning a business, Baranowski said.  Franchisees can learn from the mistakes made by other franchisees. For example, a franchisee thinking about trying to advertise on the radio may consult the franchise company and find out that other franchisees have tried radio advertising in the past and discovered it was not worth the money spent, Baranowski said.

Franchise advisors such as Baranowski help those who are looking to purchase a franchise find the right fit for their needs and personal goals, but can also offer ongoing support, Baranowski said.  FranNet is a franchised company in which franchisees act as independent consultants and run their own businesses. The network of independent consultants work together as executive recruiters to match a potential franchisee with a franchise company, Baranowski said.  Thedco Consulting is also a franchise of independent consultants and its operations work similar to FranNet.   "We help people understand the business model, if they qualify, and walk through the process with them at no cost or obligation for service," said Hank Edmunds, president of Thedco Consulting, Inc; in Cedarburg. "We are paid by the franchisor only if a client purchases one of franchises we introduced."

When people meet with franchise consultants such as Baranowski and Edmunds before deciding to purchase a franchise, the consultants explain the process of owning a business, provide guides and surveys to see if they are ready for the task and then determine which type of franchise would be best for the client, Baranowski said.  "(Food) is the most visible form of franchising, so many people think it is the only choice they have," Edmunds said.  Other franchise options include businesses in the automotive aftermarket, retail, business-to-business services, personal services and children’s services, Edmunds said.

The total cost of establishing a food franchise will be at least $20,000 to $400,000 per unit and require working seven days a week, Edmunds said. Establishing a children’s services franchise will have an investment range of $5,000 to $300,000. Those franchises include tutoring centers, entertainment centers and computer training centers, Edmunds said.

Franchise selection do’s and don’ts

Purchasing a franchise has many advantages for an entrepreneur over starting a business from scratch, said Chip Baranowski, a strategic franchise advisor for Brookfield-based FranNet. The advantages include owning a proven product or service under a national name, being able to start a business with limited experience and capital and being provided material for local advertising and promotion, he said. However, before deciding to purchase a franchise, entrepreneurs should be aware of some do’s and don’ts involved in franchise selection, Baranowski said.

DO’S

1. Talk to and visit as many franchisees as possible.
2. Talk to and visit the franchisor and get to know the history and experience of the officers and managers.
3. Consult any and all advisors that can be helpful, including the franchise attorney.
4. Ask any and all questions. Nothing is too trivial to ask.
5. Take the time to be thorough in the investigation.
6. Create a comparable analysis of other franchises in the same and other businesses.
7. Evaluate yourself as compared to other franchisees that you meet and talk to.
8. Read and understand the sales literature, Uniform Franchise Offering Circular (UFOC) and know all of the terms of the agreement.
9. Give plenty of room to maneuver financially. Plan for more expense and slower profitability than may actually occur.
10. Research, research, research. The more you know, the better your decision is likely to be. Remember, only you can determine if any franchise is the right one for you.

DON’Ts

1. Don’t hurry. Short-cutting research can increase the likelihood of failure.
2. Don’t over-extend or be optimistic about personal finances. Be realistic and if anything, conservative.
3. Don’t skip consulting with professionals. Saving fees may deprive you of information that would be critical to making a good decision.
4. Don’t settle. Get the business that you want and not the first one that comes along.
5. Don’t take anyone’s word. Find out for yourself. It is your money, your risk and your opportunity. You know what is best for you, so investigate first hand.