Starting fresh with a proven winner
Call it business savvy. Call it a gamble. Call it a pathway to riches. But mostly call the idea of becoming part of a franchise worth investigating. That is the message emerging from a consultant specializing in matching would-be franchisees with the right home.
For those with management experience looking for new challenges or a new job, franchise management offers potentially lucrative and appealing outlets for talent.
Franchising was the subject of an April 17 conference staged by the nonprofit Gateway to an Entrepreneurial Tomorrow (GET) where 50 attendees learned pros and cons; whether their business future should be franchised; and tips on how to proceed if they decide to do so.
“Franchises have evolved a lot in the last 10 to 15 years,” said Enrique Rob Lunski, the president of GET, addressing the conference at Dutchess Community College .While once there was a significant cost barrier to franchising, “Now there are a lot of options. The field is wide open.”
Franchises account for more than $1.5 trillion in annual economic activity in the United States and account for about 11 percent of all US payroll and 13 percent of private sector employment. There are about 750,000 franchise businesses in the nation, said Britt Schroeter, a franchise consultant with FranChoice, which provides free help to entrepreneurs in exploring franchise options.
FranChoice gets paid by franchises, who need well-prepared applicants to invest time and money in working with their company.
“One of the smartest things you can do is to go with a proven system,” said Schroeter. “A franchise is going to round off the rough edges you have at starting to open a business. A franchise will bring to the table everything you need to be successful and you can focus on the execution.”
Advantages include name recognition, corporate support that includes training, joint purchases and advertising and a network of experienced peers who can help a newbie profit from their successes and avoid their mistakes.
For young entrepreneurs, or experienced business people making a new start, “Franchises are a great place to start because of the learning that happens,” said Schroeter. And while it might sound like a slow train to tedium, surveys show 75 percent of millionaires in America are entrepreneurs of all types, and that the majority of them earned their wealth through successful labor at ordinary endeavors. “Dull normal is where wealth is typically created,” Schroeter said.
But it is not a given. An average franchise fee is $29,000 and a person or group seeking to open a franchise outlet should have at least $40,000 to invest in the endeavor. “Not every franchise makes it,” said Schroeter. “You are putting yourself and some money at risk.”
Due diligence  includes calling up franchisee”™s who have left the franchise being considered and asking about why they moved on. A franchise has to provide the name and contact information of all who are in the system and those who left within the previous two years.
Downsides, she said, include franchise rules. “If you are a driven entrepreneur, franchising is probably not for you because you do lose some control with a franchise,” said Schroeter.
On average, she said, a franchise does not provide cash flow until its second year of operation but on average provides owners with income of $110,000 in year two and $190,000 in year three. “Those are not unrealistic expectations,” Schroeter said.
And the prospects may be even more appealing for experienced managers. While startup is complicated, she said, about 15 percent of franchises nationally allow part timers to own a franchise unit as a part time manager. Done properly, she said, this, translates to 20 hours per week in a given unit the first six months and five to ten hours per week per unit after that.
That can prove lucrative to a skilled manager. “Managing the managers (of franchise units) is the most scalable,” said Schroeter, “So it is the most appealing in some ways.”