Am I Ready To Open A Franchise?
By Geoffrey Stebbins

Four questions which you should ask yourself before buying a particular franchise.

(1) "Is my personality suited to self-employment or would I feel more secure working for someone else?" (2) If self-employment fits my personality profile, what is the best way for me to get into business? (3) If I have decided on how to get into business, in which category of business or industry should I investigate? (4) Which specific franchise in that class or industry would be a good investment for me There are three distinct ways of getting into a small business:

(A) This involves creating a service- or product-oriented business and selecting a market which would require that service or product. The pitfalls of this method are many. You have to "invent the wheel" when starting an independent business. This involves all the research, development, advertising, marketing, set-up and so forth necessary to start and successfully run that business. Every mistake you make could be very costly. As such, according to the U.S. Department of Commerce, close to 90 percent of independently-started businesses ultimately fail.

(B) An existing business can be purchased either from a business broker - who nearly always represents the seller - and therefore packages his business in the most attractive way, working with a very limited inventory of business opportunities. He can only sell you what he has in his limited inventory as there are seldom multi-listings or shared networking between brokers (as compared with real estate brokers). The other choice would be scanning the opportunities section of the classifieds of metropolitan newspapers on your own. Here, your choice is limited to the businesses which are advertised - keeping in mind that there are even more existing opportunities which never appear in the newspapers.

Let's take a closer look into why businesses are put up for sale. The owners of these failed ventures have put in much time, toil and sweat into their businesses. Much to the owners' dismay they did not get the return on investment expected. Now they try to salvage what they possibly can by offering to sell the business to someone else with the illusion and hope that the buyer will be able to make the business successful. In the final analysis, most good and successful businesses sold were not available on the open market. There are, of course, some exceptions to the general

(C) The success rate for franchises is well over 85 percent, partly because of the training and ongoing support that a good franchisor will provide. In comparison to the other ways of getting into business, certainly the franchise route can statistically improve your chance of success. Usually the franchisor provides you with a start-up, turnkey operation, training, and ongoing support. This eliminates the need for you, the entrepreneur, to constantly have to redevelop the wheel and incur costly mistakes. In deed, the support of a good franchisor can, thereby, increase you chance for success, as statistics indicate.

Now that you've decided to explore the franchise route, you will want to explore the category of business or industry that's in your best interest. The first and simplest method is to take personality traits and your biases. Or secondly, you could take some personality tests or go and visit your friendly psychologist to do some psychological testing. Thirdly, the best method for exploring a potential business venture is to retain a franchise consultant who can guide you through the maze of franchise opportunities in seeking the one best suited to your needs and personality.

A franchise consultant may work along a similar path that we do at World Franchise Consultants in screening and researching a particular franchise. For example, the first area that needs to be explored is the financial characteristics of the prospective franchise business owner.

How much money is available to put into a business? How much leverage would he or she be prepared to undertake? What type of return on invested money, time and effort is realistically expected on a short-term, as well as a long-term basis?

The next most significant issue a franchise consultant would consider in your personality is an assessment of your sales ability. This would break down into your skills in marketing, networking, prospecting, and so on. Strengths in these sales techniques might lead you to consider a service or product marketed to commercial or industrial clients. Weaknesses, dislikes or limited proficiency in sales and marketing might indicate that the consumer-oriented retail environment would be a better match.

In addition, the franchise consultant would make an evaluation to determine whether you are introverted or extroverted, shy or brazen, sensitive or impervious. Furthermore, the evaluation is designed to determine if your are mechanically inclined, hands-on, and down-to-earth, or the managing, delegating type. The hands-on type might choose a business where he may motivate his staff through leadership and personal example. Whereas, the managing type of person might choose a business requiring the delegation of responsibilities to others in the running of his business.

The artisan of trade expert might lean towards a cabinet refacing type business, while the delegator interested in computer technology might want to consider a computer training school. therefore, your needs, goals, and skills will direct the franchise consultant to the type of industry best suited to you.

We see, therefore, that an analysis of your needs, goals, and skills will direct a consultant towards the type of industry best suited for you based on your unique personality.

After the franchise consultant helps you to determine the type of business or industry best suited to your personality and financial position, he will begin to direct you to a specific franchise opportunity. For example, in identifying the right franchise for you, the consultant may ask the following: Are you entrepreneur and prepared to take a higher risk to get into a groundfloor opportunity? If so, you might want to look at a young franchise company with a small number of existing franchises. If you are a more conservative individual, the franchise consultant might determine that you will feel more comfortable with a more mature, well-established franchise. Various reference materials and resources can be used by the prospective business owner to draw information regarding franchise companies. For example, you can get information about whether a company is young or well-established from the Franchise Handbook, by looking at the year the franchise started and the number of franchisees in partnership with thefranchisor.

Then the franchise consultant will suggest his own personal referrals to a specific, prospective franchise company. His extensive expertise and networking of various franchise companies in the field puts him on the leading edge of franchising. Using his knowledge and skills, he is best positioned to provide the personal referrals you need. Many consultants have been able to warn potential franchisees about unethical and unscrupulous franchises - whether publicized or unpublicized. At the same time, they will certainly know of the more reliable and credible franchise opportunities, including many which are underpublicized.

The prospective franchisee would be wise to check out some of these areas by himself. Information can be gathered from the franchisor's Uniform Franchise Offering Circular (UFOC) or Federal Trade Commission (FTC) disclosure statements. As an example, it would be wise for potential franchisees to make an investigation of two critical areas when reviewing the UFOC: (a) the number of lawsuits filed against the franchisor, if any, and their significance; and

(b) the names and telephone numbers of existing franchisees that can be contacted to obtain referrals on the franchisor.

With regard to inferior franchise companies, it is important to note that the national press has written about state crackdowns on franchisors. A recent example of this occurred when the Federal Trade Commission (FTC) filed charges and sued several franchisors. In another example, 48 notices of violations were written up by the State Attorney General at the franchise show held in Dearborn, Michigan, this year.

There is no guarantee of success in business. To get into business for yourself, you must examine many important issues, including personality, skills, and doing due diligence on the franchisor. You can certainly do this on your own. However, because this is a very complicated process, you may want to think about getting the help of a qualified franchise consultant.