fail, others expand wildly, while large corporations buy others,” says Hill. “But one simple
way we can tell franchised businesses are rapidly growing is that the number of members
in our organization has more than doubled in
the last five years.”
“Starting a
business from scratch
is so much work. I feel
like the poster child for
homework before taking successful franchising,
the plunge. but I spent lots of time
planning for this.”
Research, research, —Michael Maritzen,
research Fetch! Pet Care
Michael Maritzen, a Costco
member in the San Francisco Bay Area
who owns two franchises that offer pet care,
agrees. He believes that a critical part of franchise research is coming to terms with why
you’re thinking about franchising in the first
place. It was only after he worked out why he
wanted to leave his six-figure salary as an
executive in the information technology
industry that he considered franchising.
“I was successful, but I had
no spare time. No life,
really,” Maritzen says.
“I was probably 50
pounds overweight
because of my lifestyle. One day I asked
myself, ‘Do I want to
do this for the rest
of my life?’ It was
then I realized that
it was time to move
on. I just had to
Advantages and drawbacks
If you’re considering opening a franchise
you have more than 80 lines of business, in
all shapes and sizes, from which to choose.
Franchise investments range from $10,000
to $1 million and more. Franchises cater to a
variety of lifestyles, too. Some, for instance,
are home based, while others operate from
portable kiosks; still others are run from traditional retail storefronts.
The Small Business Administration (SBA,
ww.sba.gov) points out that franchising is
an attractive choice for many entrepreneurs
because it eliminates the painstaking work
of starting a business from scratch. When
you buy a franchise, your new venture comes
with systems in place to help run it, including marketing, accounting, business training
and coaching on how to retain employees.
Often it comes with a recognized brand as well,
making it easier to establish the franchise in
a community.
While these benefits are huge, they also
come at a cost.
In exchange for all of this you pay a
large sum of money upfront. Oft en
you pay a percentage of your revenue back to the franchiser, and
you may also be required to
buy supplies from the franchiser as well. This may include only inventory, but it
might mean office supplies,
computers and whatever else
the franchiser specifies.
This leads to the biggest
drawback of all: Although you are
the owner, you don’t control your
business. You must follow the franchiser’s
processes and procedures without variation,
and contracts routinely run for a decade or
longer. And if you decide you want to sell, you
may not be able to do so easily. Often the new
owner will have to be approved by the franchiser before you sell.
For these reasons, business experts, franchise lawyers, accountants, franchisers and
their franchisees recommend doing lots of
IRIDIO PHOTOGRAPHY
Fend off franchising fiascos
NANCY LANARD is a
Costco member whose
Philadelphia-area law
firm, Law Offices of Nancy
L. Lanard, P.C. (www.
lanardlaw.com), has been
helping franchisers and franchi-
sees nationwide for more than 25
years. Lanard offers these vital tips to
anyone considering buying a franchise:
■ Read the entire disclosure docu-
ment you received. It describes vital
information about the investment you
will be making, such as the anticipated
initial costs, ongoing fees, your legal
obligations and important information
about the franchiser.
■ Contact current and former
franchisees and ask them what they
liked and disliked about the support and
training they received.
■ Review the franchiser’s audited
financial statements with an experienced business accountant who can
evaluate the financial strength of the
franchiser and determine whether this
business will help you accomplish your
financial goals. The accountant should
analyze whether the franchiser is financially strong enough to support the sys-
