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The franchise business is basically a licensing system which allows you to use the brand name and market the products or services of the owner within a specified geographical territory. The owner provides the formula, guidelines, reputation, marketing and resources, and you "manage the store."

Almost any product or service you can think of is available as a franchise: convenience stores, restaurants, gas stations, hotels, beauty salons, auto dealerships, carpet cleaners, housecleaning services, coffee shops, doughnut shops, fitness clubs, department stores, lawn services, etc.

It is generally an easy way for people to get into business instantly with the resources and assistance needed to succeed. The right franchise can be a dream come true, providing a successful commodity, a proven formula and a safety net. But the wrong franchise can turn out to be your worst nightmare. Research, research, research is your best friend!

Advantages:

• You own a business, dealing in a proven commodity with national brand-name products or services.
• You buy a proven concept and are provided with a formula for running it. If you like structure, a system and following established rules, then a franchise may be perfect for you.
• Franchised operations are generally said to have the lowest failure rate of all retail businesses.
• You can start your own business with limited experience and sometimes with limited resources.
• You are provided with material for local advertising and promotion, in addition to national advertising.
• You are provided with all necessary training.
• You can leverage costs through group buying of supplies, equipment, printing, insurance, etc.

• Not all franchise formulas will work well in every geographic region or specific location. You must know your local market and do your research before investing.
• Lack of control and autonomy. Most franchises exert strict compliance with their formula and do not allow individual franchisees to exercise individual initiatives or accommodations to local markets.
• Some franchisors do not necessarily have their franchisees' best interests at heart. Severe geographical restrictions, infringement into territories, severe limitations on any autonomy or local decisions, huge mark-ups on proprietary items that the franchisees are obligated to buy through the franchise, and lack of national advertising or marketing support are just some of the disputes that have arisen with some franchisors.
• Some franchises are unproven. Getting in on the ground floor of a new franchise is one of the riskiest investments you can make. Make sure the franchise you are considering has a proven track record, national name-brand recognition, a good reputation, and a strong local market.
• The popularity of the franchise, product or service may be on the decline, the stability of the corporation may be shaky, poor marketing decisions or aggressive competitors may undermine your market, and national scandals regarding one franchise may tarnish your brand's reputation.
• Some franchises are nothing more than pyramid schemes, more interested in selling franchises than their supposed product or service.

• Research the financial statements and records of the company. Make sure it is on sound financial ground before investing your money and future in its viability.
• Talk to and visit as many franchisees as possible — aim for 10. Have a list of specific questions to ask them that address all of your concerns. Ask everything you can think of — even the most inconsequential things. You need to know what you're getting yourself into and make sure it is what you want to do.
• Talk to the franchisor and check the backgrounds and experience of the Officers and Managers.
• Consult with a Franchise Attorney. A good advisor and legal consultant will save you heartache down the road.
• Take your time and be very thorough in your research.
• Compare a number of other franchises, in related and unrelated industries.
• Read all the franchise literature, the Uniform Franchise Offering Circular, and any other material you can get your hands on. Know all the terms of your agreement before you sign.
• Research franchise associations for information.
• Search on the Internet for all information available on the company, the franchise, and any ongoing disputes the franchisor may be involved in.
• Make sure you have a financial cushion. Plan for more expenses and slower profitability than advertised.
• Don't believe what people tell you. Check it out for yourself. It's your money, time and effort that are at risk.
• Don't settle for any franchise. If it's not the kind of business you would enjoy doing long-term, then it's the wrong investment.
• Don't allow yourself to be pressured into buying. Don't allow the excitement generated by the sales pitch circumvent your own investigation. Taking shortcuts on your research will only hurt you. Opportunities in franchises are plentiful and there will always be another opportunity around the corner.
• Check out Inc. magazine's Guide to Buying a Franchise and their annual list of 100 best franchise operations. Also, Entrepreneur magazine's Franchise 500 ranking and online franchise guide.

Make sure you thoroughly do your research before buying a franchise. Use the resources below to find questionnaires, templates, and anecdotes regarding franchises.

• Articles of Interest
• Resources
• Is Self-Employment for You?

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