Pondering a franchise business?
If you don’t have a lot of money or an idea for a product or service, but still want to run your own business, franchising is an option.
Lately I’ve heard from lots of college kids and Baby Boomers alike who have been thinking about becoming franchisees as a way to bypass, or leave behind, a 9-to-5 job working for "The Man." Some people see it as an easy alternative and a way to strike it rich.
Unfortunately, they’re living in the Land of Franchise Oz.
Many franchise owners work just as hard as entrepreneurs who start their firms from the ground up, and riches are just as hard to come by as any other business.
A franchisee can do very well, but that’s if you find the right franchise concept and follow strict policies that every great franchise company has. Even though you’ll be running the business, the concept is someone else’s and you’ve got to play by his or her rules.
Still want to check it out? Then do your homework.
Just like any venture, look out for scammers and franchisors that make big promises.
The biggest tip franchising expert Dick Rennick can share with you is to be leery of anyone who makes “any kind of income claims.” If they say you can clear $3000 a week guaranteed with nothing to back it up, run the other way.
And make sure to read the UFOC, the Uniform Franchise Offering Circular. This document contains all the financial information you’re going to want to know about a franchisor before you sign on the dotted line. In it you’ll find any legal issues against the franchisor and details on what you’ll need to invest upfront to get things off the ground.
If the franchisor doesn’t want to show you the UFOC, again, run the other way.
Just to make things even more confusing, Rennick says, under new Federal Trade Commission rules the UFOC’s name will change to FDD, or Franchise Disclosure Document, next year.
So read, reread and then reread the UFOC/FDD, but drink a lot of coffee before hand.
Joel Libava, a franchise consultant, tells would-be franchisees “the UFOC is a boring, data filled read that is a few hundred pages long.”
Man, I’m yawning just hearing that.
“Then I tell them to read it anyway,” he continues. “I suggest to them, rather strongly, to write things down on the document that they have questions on, or that they need help deciphering. I tell them to read it through once, and then put it away! My late father taught me this.”
But even beyond the all-important UFOC, soon to be FDD, he adds, the most important thing you can do is get a list of current and former franchise operators.
“Call ten to 15 current franchisees, and a few former franchisees,” he advises. “Ask them what the business really is, day to day. If the business model is not the right fit, then the information in the UFOC doesn't matter anyway."
In the coming months, I plan to write more about franchising, including everything from the latest scams to where the great opportunities can be found. I’d like input from all of you on topics you want blogged about, and also your experiences, even if they’re limited, in the franchise world.
