No Ticket To Easy Street

Is franchising your entrance into entrepreneurship?

There are approximately 320,000 franchised small businesses operating in the U.S., collectively accounting for an estimated $1 trillion in retail sales annually.

Franchising is a proven way to achieve the American dream of business ownership. However, the success or failure of a franchise could be determined by a franchisee’s own actions.

“Running a franchise is not a ticket to easy street,” warn officials from the International Franchise Association (IFA) in Washington, D.C. The association recommends asking yourself the following questions before jumping in headfirst:

  • Am I willing and able to take on the responsibilities of managing my own business? Franchising requires long hours and the ability to multitask, as well as making sure that customers and employees are getting what they want and need.
  • Will I enjoy the franchise? Determine your interest before venturing into the franchise business. Franchisees should invest in a business that’s in an industry that they will enjoy for the next 10 years, the typical length of most contracts. Visit IFA’s Website, www.franchise.org, to view a database of more than 1,000 business concepts in 75 industries.
  • Am I willing to completely follow the franchisor’s system? “When a franchisee displays the sign and trademark of a franchise, he or she is reassuring the customer that they can expect the same experience as in every other location of the franchise system,” says the IFA. This is your key to success.
  • Can I afford the franchise? Undercapitalization is one of the major causes of business failure. Franchisees will need enough money to not only open the business, but to keep it running until they turn a profit.
  • Have I studied all of the legal documents? A requirement of the franchisor is to prepare and make available a comprehensive disclosure document containing information about the company; details of any previous or pending litigation, and the names of current franchisees who have left the system within the past 36 months.
    An attorney trained in franchise law is highly recommended. Federal law stipulates that a franchisee be provided with 10 days to review the legal documents before any money exchanges hands with the franchisor.
  • Does the franchise have a track record of success? A prospective franchisee should learn the business background of the principal directors of the company along with their profitability history. Have an accountant review the company’s financial records.
  • Finally, and perhaps most importantly:
    Do you have the support of your family? The sacrifice of time is a reality in any business start-up, and franchise ownership is no different. Workweeks can be from 60 to 70 hours or more, so support and understanding should be discussed with family members well before signing on the dotted line.

For more information on franchise ownership, contact the IFA at 202-628-8000, or Franchise America at www.franchiseamerica.com.

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