Owning a franchise is often depicted as being in business for yourself, but not completely alone. A franchise owner works under a proven successful business structure. They also have access to proven operational and marketing strategies and the franchisor”™s institutional guidance, as well as the potential of a financing package.
But franchise ownership is not an easy shortcut to success. As with any other kind of small business, it”™s up to you to commit the finances, time and effort to meet both the franchisor”™s goals and your own. That”™s why it pays to weigh the pros and cons of franchising to make sure it”™s right for you.
According to the International Finance Association (IFA), franchised businesses are growing at a rapid pace. Some 400,000 franchised businesses now employ nearly 10 million people with a payroll of $230 billion. There”™s always a hot new franchise on the scene. Curves, for example, a network of franchised women-only fitness centers, grew nearly 38 percent in a single recent year with about 10,000 sites now worldwide.
As you research franchises, ask about the required experience, if any, as well as the expected hours and personal commitment necessary to run the business. You also should learn about the franchisor”™s background. For example, what is the company”™s track record and how are other franchisees in the system doing? The upfront cost of buying the franchise is crucial, of course, but also how much you”™ll pay for the continuing right to operate the business and what products or services you will be required to buy from the franchisor.
The “Franchising Basics” section of IFA”™s website, www.franchise.org, offers extensive information on how franchising works, online discussion forums that cater to prospective owners, and a searchable database of more than 1,200 franchise opportunities.
And, don”™t forget about your financing. If you”™re considering applying for a loan backed by the U.S. Small Business Administration, visit the SBA”™s franchise registry at www.franchiseregistry.com. This service lists names of franchise companies whose franchisees enjoy the benefits of a streamlined review process for SBA loan applications. A faster review means better, faster service, allowing you to get your franchise off the ground sooner. Even if the franchisor is not a franchise registry participant, your loan application will still be reviewed individually by the SBA or its lenders. As with any application for credit, make sure you comply with the lender”™s requirements for all financial information to be complied and submitted. Your lender, as well as the SBA, will require for submission personal financial statements and tax returns.
Ross Weale is an assistant director with SCORE. Reach him at rweale@optonline.net. SCORE is a nonprofit whose volunteers provide free counseling and training to small-business owners. Call 1-800-634-0245 or visit www.score.org.
