Franchises

For many people, buying and operating a franchise is the easiest way to become a small business owner. But choosing a franchise out of the hundreds of possibilities shouldn’t be a snap decision – it requires careful consideration of a variety of business and personal factors.

4 Check the franchise’s financial obligations, such as fees and ongoing royalties. 4 Find out if you have to purchase inventory from the company. 4 Study the company rules. 4 Ask yourself, “Can I have fun with this business?” 4 Make sure you don’t mind being a boss. 4 Pick up a copy of “Franchising for Dummies.” 4 Visit the International Franchise Association’s Web site at www.franchise.org for an online course on franchising basics.

When Kathleen and Michael Stice were looking for a franchise, they wanted one with a business plan that made sense to them. And, Kathleen Stice said, “we were looking for something that fit our lifestyle.”

The Aurora, Colo., couple found their franchise after boarding their dog at a nearby Camp Bow Wow canine day care center. The franchise was owned by one of Kathleen’s former co-workers, and after looking into the company, they decided it had the kind of track record they were looking for. So, last November, they opened their own Camp Bow Wow near Denver International Airport.

Owning a franchise appeals to many prospective entrepreneurs because it doesn’t involve the same risks as starting a company from scratch. Someone else has already come up with the concept and tried it out, and except for a very young, very small franchisor, it’s a known quantity to which a banker is more likely to lend.

Marketing is often easier with a franchise, particularly one with widespread name recognition. The franchisor usually supplies marketing materials and helps with cooperative advertising.

But running a franchise can be more complicated than it might seem at first. Each franchisor has its own requirements for franchisees. There are financial obligations, including the initial franchise fee and ongoing royalties. You may have to purchase inventory from the franchisor and operate the business under the franchisor’s rules.

These are all factors to be considered in a selection process.

Perhaps the most important question to ask yourself is, “What do I want to do?”

You need to look for a business you’re interested in, that you can have some fun with. If you hate yard work, then a gardening franchise is not for you.

You also need to consider whether you want a business that will require you to have employees – if you hate being a boss, find something you can do solo or with a partner. And do you want a franchise that can be home-based, or are you willing to take on the overhead of renting or buying commercial space?

Patrice and Joe Mudd, who own four MaggieMoos Ice Cream and Treatery stores in Orange County, Calif., settled on that franchise because Patrice decided she wanted to own an ice cream store, and MaggieMoos was the ice cream she liked best.

But, Joe Mudd said, the decision was helped along by the fact that MaggieMoos was more responsive than other ice cream franchise companies when Patrice began making inquiries. “It was the friendliness and enthusiasm of the company” that convinced her, he said.

Patrice Mudd did her research on ice cream companies online. The Internet is also an excellent place to start learning about franchising in general, something you should do before you start looking into specific franchising opportunities. The International Franchise Association’s Web site, www.franchise.org, has a free online course called Franchising Basics that is easily accessible from the trade group’s home page.

The IFA’s site also includes a link to the Federal Trade Commission’s “Consumer Guide to Buying a Franchise.” You can also access the guide at the FTC’s site, www.ftc.gov/bcp/ menu-fran.htm, where there are other online brochures including “Could ‘Biz Opp’ Offers Be Out For Your Coffers?,” which warns prospective entrepreneurs against falling for potential scams.

Books on franchising such as “Franchising for Dummies” can also be a good introduction.

There are also excellent resources throughout your town or neighborhood – franchise owners. The people who own local fast-food, lawn care or business services companies can tell you the pluses and minuses of owning a franchise.

The Web is a good place to find out what kind of franchises are available. The IFA site, for example, allows you to search through its directory of franchises. The site doesn’t include all the possibilities, however. An Internet search engine can help you find others.

As you narrow your search and start requesting information from franchise companies, you must read all the materials you receive carefully. Amy Bannon, a spokeswoman for the International Franchise Association, recommended would-be franchisees pay particularly close attention to the Uniform Franchise Offering Circular, the disclosure document franchisors are required to give potential franchisees.

She noted that a franchise company must furnish a list of current and former franchisees that you can contact. Former franchisees can be particularly helpful, Bannon said.

“Ask them, ‘How did you find it? Why did you leave?’” she said.

Building Small Business is a weekly column on the topic by the Associated Press.