performance,” she says. “They also train you and are available during tax season 24 hours to assist you.” Burton prepared nearly 2,800 returns last tax season.
There are many advantages to buying a low-cost franchise. “It is a good way to take a small bite out of entrepreneurship, rather than biting off more than you can chew,” says Terrian Barnes, vice president of minority and women’s affairs at the IFA. “Many of these low-cost franchises are businesses that can be run part-time or full-time from your home.”
Another plus is that lending institutions tend to look at franchises as proven businesses, so they’re generally easier to finance than most other small ventures. A number of franchisors offer financing for buyers, but interest rates can be high, ranging from 15%-20%.
Whether you’re getting a small business loan or using your retirement savings to finance your operation, keep in mind that low-cost does not mean low-risk. There are pitfalls that can wipe out your investment in a flash, so here are a few things to consider.
Assess your needs: “No one should just pick a business from a list,” advises Barnes. “Find out what you have a passion for, then seek to buy that kind of business.” For example, if you don’t like teenagers and a lot of noise, you may not want to purchase a fast food franchise, which tends to attract a younger staff.
Know your goals. Buying a franchise is not like buying a car. There’s no three-year trade in. Many franchise agreements lock you into ownership for up to 20 years. Ask yourself: How will this purchase impact me 15 years down the road? What if my needs and expectations change? Is this a purchase that will allow me to retire? Do I want to create jobs for the community? Proctor, also the owner of Ameri-Temps Inc., a temporary employment agency, selected a cleaning franchise to give more hours to his staff. “Many of my guys do seasonal work unloading cocoa beans from ships. When I bought the cleaning franchise, I was able to create more hours for them and more jobs,” he says.
Calculate the total cost. The franchise fee will buy the business for you. But you will need money for operations. Work with an accountant to calculate your total investment cost. Include prices for lease/rent, utilities, health insurance, salaries and operating licenses. Don’t be fooled by ads touting a low initial fee or down payment, which is just part of the actual cost to buy the franchise. If the franchisor offers to finance the balance, find out the interest rate and requirements for repayment.
Talk to other franchisees. Get feedback from other franchisees before you buy. Don’t rely on the franchisor’s hand-picked list of references. “Many franchisors offer help during the grand opening. Find out from long-time franchisees if the company offers support throughout the contract,” says Barnes.
Do some detective work. Success claims fly fast and furious in the franchise industry. Look beyond the sales hype and the gritty brochures. “If