Is Owning a Franchise for you? Tips for Buying a Franchise

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The job market remains sluggish as our economy slowly emerges from one of the deepest recessions in U.S. history.

 

It is a good time to think about what you want to be doing in your career.  One thing for sure, is that business is being conducted differently than in the past as the internet, use of social media and an international workforce has changed the way we do business, forever!

 

Rather than go back into the same position you had before you were laid off, or stay in a position that you feel is unstable and/or not fulfilling anymore, is it time to consider buying a franchise?  So what exactly is a franchise? And, why should you be interested in buying one?  The legal definition of the word franchise is as follows:

 

A form of business organization in which a firm which already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee.

 

First of all, there are thousands of franchises to choose from with more being created everyday.  Buying into a franchise can cost a low as $25,000 to well over a million dollars, depending on what you are buying, such as: the strength of the brand and the protected prospect market you can sell to.  It all depends on what financial resources you have and how adverse you are to risk.  You can count on, as in any new business venture, some risk of ownership.  Due to strict FTC rules and guidelines, franchisors will not guarantee any income that may be generated from your franchise investment rather they will give you a range of income their franchisees have made in their first few years of business.

 

I met with Greg Kaufman, owner of the only SMARTBOX (http://www.smartboxusa.com/Chicago) franchise in the Chicago area, to get his take on owning a franchise.  Greg was a banker for 15 years working both as a personal banker, investment specialist, and in the commercial lending division.  He left banking to work for a technology company that built web-sites, but left after 2 years when the company became a “tech causality” when the technology bubble imploded.  Greg went back to work for a bank, but after an unfortunate incident at the bank he decided that he needed to have more control over his career. 

 

He contacted Mike Waller (mawaller@juno.com), a franchise broker who was a former customer of his at the bank. Mike’s job was to make the process simplified by looking for a good match for Greg for a franchise.  After a “franchise interview” process, where Mike conducted an analysis of both Greg’s financial demands and interests, he came up with six potential franchises to consider.  Though it was the highest point of entry to buy into, Greg liked SMARTBOX the best and signed on with them after a two-day seminar at the company headquarters in Richmond, VA.  There’s more involved, such as, securing space, financing, and contract negotiations, but, the two-day seminar is what sealed the deal for Greg.

 

This was a turning point in Greg’s life.  He is married to a child psychologist and has a son, Hunter, who was not born at the time of his franchise purchase.  Just prior to committing to the SMARTBOX franchise, he was called by LaSalle Bank extending a generous offer for him to work at the bank; he turned them down.  Greg said, “I found it liberating to know I was choosing SMARTBOX, not that I had no other options.”

 

Greg offered me some Pros & Cons of owning a franchise which can help you make your own decision whether to purchase a franchise.

 

Pros

 

  • Business already established for those that aren’t creative enough to come up with a business model.
  • Built in recognition of a brand, rather than having to spend money creating a brand.
  • Have built-in support systems to assist you run your business.

 

Cons

 

  • Having to put more money down to buy a franchise.
  • Depending on the franchise, you may have limited control over pricing of product and design of marketing materials.  Younger franchise organizations tend to be more flexible.
  • You are not working for yourself-this depends on what franchise you select and how strict they are.
  • Obligations to put more money into the business to keep it going.

     

Greg also offered the following tips when considering buying a franchise:

 

·        Use a franchise broker to do the leg work for you. He highly recommends. Mike Waller, Entrepreneur’s Source, but do your own research as well.

·        Once you have narrowed down what franchises you are interested in, talk to as many franchisees as possible; both older and newer owners.

·        Project how much money you will need for your new franchise and add at least 20% to this number! There are always unexpected costs that you didn’t anticipate.

·        Consider buying a franchise that is not oversold. Get the area you are allowed to do business in, in writing.

 

Franchise ownership is not for everyone. Yet, it can be lucrative and is a good alternative for someone that wants to own their own business, but doesn’t want to build one from scratch. Remember that owning your own franchise takes a major time commitment, patience and solid financing. Owning a franchise is for the true entrepreneur.  Greg left me with this quote from one of his social networking mentors, Mark Carter, “Entrepreneurs are… people who are willing to live a few years how most people WON‘T, so they can live the rest of their lives that most people only DREAM”

 

For more information on franchise ownership and opportunities check out www.franchise.com.

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