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Getting into a franchise doesn't have to involve fast food, billions served and millions in upfront costs.
Hundreds of lower-cost franchises also are available, some of which can cost $50,000 to $100,000 to launch, often financed these days by 401(k) rollovers, according to experts.
That relative affordability plus the opportunity to use a proven business model are among the reasons franchises have been attractive to entrepreneurs in recent years, including corporate veterans who lost jobs during the recession.
Franchises differ greatly by investment level, ownership role, industry and whether they serve other businesses or consumers. An owner can operate a franchise as a lifestyle business, with time for golf, kids or grandchildren or try to grow aggressively in pursuit of a six-figure income. Franchisors, in turn, receive regular royalty payments from franchisees and often fees for advertising and marketing.
Products and services vary widely as well, although most of the more affordable franchises are business-to-business services or home-based companies.
Success, given all the variables, appears to depend heavily on finding the right fit between franchisee and franchise, experts say. Researching franchises online may be overwhelming, however, with search engines turning up millions of hits and resources like the International Franchise Association (www.franchise.org) offering information on more than 1,100 franchises.
For help in the matchmaking process, some prospective buyers turn to franchise consultants. Such consultants work for franchise-referral consulting companies that have vetted the several hundred franchisors they represent. Consultants typically offer services free to buyers, getting paid by a franchisor after a placement. Consultants and referral companies usually offer business coaching, referrals on financing options and help in interpreting franchise agreements.
Avoiding the wrong fit
Bill Fruen, a consultant with Eden Prairie-based FranChoice said he seeks to find alignment between a prospective franchisee's needs and what a franchise offers on three characteristics: economics, whether the investment level is comfortable and the return on investment attractive; ownership role, from absentee to greater or lesser involvement in operations or management; and culture.
"The most common cause of failure of a franchise is the wrong fit," Fruen said. "The candidate got themselves into a business that they're not a good fit for and it's not successful. The most frequent mistake ... is chasing that shiny object of a product or service they're excited about and forgetting about the important business characteristics."
For Mike Accurso, a Twin Cities-based franchise consultant with the Entrepreneur's Source, the search for a good franchise fit typically involves identifying what the prospective owner is passionate about and what transferable skills they possess.
"The business is the last thing we talk about," Accurso said. "How do you want to spend your time every day? We work with people to find a way to make them feel good about what they're doing."
Which can lead them to choose a franchise that's a complete departure from their corporate background. That was the case with Accurso client Bill Bentz, who in July 2010 opened a location of the Colorado-based Doc Popcorn franchise at the Mall of America. After 30 years in the automotive fleet industry, his last two corporate positions were eliminated.
"The only regret is I wish we had done it earlier," Bentz said. "I'm as far from the automotive fleet business as I could get, yet I've found a connection to it. The transition to retail wasn't a big deal because you're still dealing with people. It's the same thing, just a different product."
Working with Fruen of FranChoice, former mortgage banker Anne Bleecker Snoeyenbos opened her Hoodz franchise, which cleans commercial kitchen exhaust hoods, in July.
"The franchise model appealed to me because I like the structure and like being able to tap an already tested model," said Snoeyenbos, who had been laid off from one banking job then left another when she felt was languishing in an entry-level position. "The risks were greatly reduced compared to something totally independent. It's a measured risk."
The expert says: Mark Spriggs, associate professor and chairman of the entrepreneurship department at the University of St. Thomas' Opus College of Business, said the chance of success is "vastly greater" with a franchise than with an independent business. Roughly 80 percent of franchises survive five years in business, he said, while only 20 percent of independents are around that long.
"People will argue over the percentages, but it's two to three times more likely to succeed than the independent businesses," said Spriggs, who teaches an undergraduate class on franchises.
Spriggs said he's referred a number of acquaintances to franchise referral consultants, who typically research both franchisors and prospective franchisees to find good candidates on each side. "Their sweet spot is targeting guys with exit packages, 401(k)s, the guys leaving corporate America," he said.