Risks and rewards with franchise business

As opportunities increase with the growth of the northern Nevada community and more small business owners launch enterprises, a real question that some might be considering is whether a franchise opportunity is the way to go.

You cannot enter a store, buy a hamburger or lube your car without buying from a franchise. For those that are unfamiliar with the concept, the fundamentals start with an individual buying into a franchise opportunity. The franchisee, the individual buyer, pays an ongoing fee out of its sales, to the franchise corporation. Whatever money is left after the payment belongs to the franchisee. A franchise is not a business in a box either. The processes exist but the owner must still be involved to be successful.

There are advantages and disadvantages to owning a franchise. Franchise startups have over an 80 percent success rate after five years and there is less risk. The systems and processes are tested giving a higher chance to succeed. A strong developed brand is a tremendous advantage and marketing assistance helps in attracting new business. The franchise company training programs can bring you up to speed quickly and can include real estate and construction assistance. The purchasing power of a good franchise can’t be beat. What could be better? The disadvantage: all things come at a cost. You will be buying into the opportunity for this support.

There are over 3,000 franchises to pick from, so the question is not finding one but which one is right for you. Carl Gerhardt, a Service Corps of Retired Executives (SCORE) mentor and former chairman of Alliance Franchise Brands, said, “you should consider the track record of the franchise, how long they have been in business, is the right territory available for your market and can you reach your financial and personal goals with this particular franchise.” Answers to these questions and more will help you narrow down your search for the right franchise.

After all, the decision to pick a franchise can be overwhelming. “One of the things you should ask yourself before purchasing is: Will buying one be right for you and your family?” Carl adds. “Do you have the qualifications both with finances and personal experience to own one? And finally: Is this the right time in your life to make the shift from employee to franchisee?”

All these questions are important to your franchise happiness. You must consider that franchises have rules that the franchisees must follow. If their sign is red and blue, no matter how much you hate the combination, you cannot paint it purple. Understanding the rules of a particular franchise becomes important to you — the owner — particularly if you don’t agree with them.

From the very beginning of your search, it’s important to consider not only the finances of the franchise but the emotional bond you develop. Owning a franchise is emotional. “You are in business for yourself but not by yourself,” Carl reminds the prospective franchisee.

The support structure can make things much easier down the road not only through the franchise but also through support from SCORE volunteers. These mentors provide advice and resources you may need to help weave your way through the questions and narrow down your search for the right franchise. Best of all, SCORE mentoring is free.

Another avenue to use might be FranNet, a national network to help match you with the right franchise for sale. “FranNet only works with franchises it has thoroughly vetted/researched for each market,” Carl explains.

Remember to ask your family and yourself if buying a franchise is right for you and if this is the right time. Search for the franchise best for you and one that can meet your financial and personal needs. The business must fit with your vision. Remember, a franchise is not a business in a box, although much of the processes are vetted. If you don’t put in the time, you will not succeed. Research the franchise. Look for things like how long it has existed, what your territory is and if they are financially solvent. It is important that these questions and more are answered. Call existing franchise owners and ask them questions. Visit their facility if possible. You are not alone. The franchise can answer many of your questions but call SCORE and FranNet with your searches to narrow down the field. There may be legal concerns/issues to consider as well so find a good franchise attorney.

SCORE is sponsoring a workshop called “Franchising Do’s and Don’ts” presented by Carl Gerhardt on Tuesday, June 23. In addition to Carl, a franchise attorney will cover legal issues and a franchise owner will share her experience with the purchase and opening of a franchise in Reno. For more information go to score-reno.org.

Judy Haar has counseled hundreds of small businesses over the past eight years in northern Nevada as a mentor for SCORE.