Learn Franchise Pros and Cons
During the past several decades, franchising has become not only a uniquely American institution, but also one of the leading doorways into small business ownership in America. Every year, thousands of individuals choose to get into business ownership via the franchise route.
But is going the franchise route really a better choice that starting your own business? That’s something you’ll need to answer for yourself. But it’s worth the time and effort to find out. To make the right choice for your own situation between starting a business and buying a franchise, as well as which franchise to buy, requires careful research. It’s a big investment on your part, and you must investigate before you put up the money.
According to the International Finance Association (IFA), franchised businesses are growing at a rapid pace. Some 400,000 franchised businesses now employ 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.
If your appetite for risk is low, a franchise may be your best choice. A franchise lowers the risk because someone else has already pioneered the concept, tested the ideas and found out what works and what doesn’t. If you want to do all of those things with your own idea, then start a business yourself. If not, choose a franchise.
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.
You’ll also need to know about options for financing your investment. The U.S. Small business Administration (SBA) can help. If you are considering a franchise purchase and you may want an SBA-backed loan, check the SBA-sponsored Franchise Registry. If the franchise is enrolled in this program, you could receive expedited loan processing through the SBA. Visit www.franchiseregistry.com.
The International Franchise Association (IFA) offers information on how franchising works and has a searchable database of over 800 franchise opportunities. Visit www.franchise.org.
To learn more about starting and growing a small business, contact SCORE "Counselors to America's Small Business." SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners. Call 1-800/634-0245 for the SCORE chapter nearest you, or find a counselor online at www.score.org.