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Franchises Offer Shortcuts, But Not Control
By Tim Knox
Q: I will be retiring this year at age 60 and intend to fulfill my lifelong dream of owning my own business. I'm too old to start from scratch, so I'm looking at several opportunities, including fast food, auto parts, and an accounting service. What should I consider before choosing one?
Anthony R.
A: Congratulations on the retirement, Anthony, and on the new business venture. As the old adage goes, when one door closes, a drive-through window often opens (or something like that).
Given the types you are considering the first thing you should ask yourself is whether or not you want to spend your golden years cooking fries, selling mufflers, or doing taxes.
Franchising can be a great way to start a business career, but you should make sure you're not just trading one job for another. Unless you plan on being an absentee owner, which I highly discourage, you are gong to be working in the business just as an employee would, so be sure the business you choose doesn't turn your lifelong dream into a never-ending nightmare.
The primary advantage of buying into a system is that it allows you to enter business quicker with a proven system, while minimizing risk and increases the odds for success.
The primary disadvantage is that you give up considerable freedom in how the business operates. In many ways franchisees are not really their own bosses because they are required to follow the rules set down by the franchisor.
Many owners also quickly tire of asking: "Do you want fries with that?" and become absentee owners, which usually leads to the business being sold or shut down.
No matter what you're considering, you should ask yourself the following questions before making a decision:
* Do you have past experience that pertains to the type of you're thinking about buying?
* Are you prepared to work long, hard hours?
* Are you an effective manager?
* Are you willing to share your revenue with the franchisor?
* Are you willing to follow the franchisor's rules and regulations?
* And the biggie: do you have access to the necessary capital to invest in the franchise?
The big franchises like McDonald's and Midas Muffler can cost hundreds of thousands of dollars to buy into, but unless you are a total business savant, the is virtually guaranteed to succeed.
It's true that even a McDonald's closes on occasion. Roy Croc spins in its grave when it happens, but happen it does, so keep that in mind. There are thousands of lower cost franchises that you can buy into, but the lower the investment typically means the risk of success is higher.
As a rule, operations are generally more successful than independent startups because they have a proven concept, a ready market, an established customer base, and a business model that can be replicated over and over again. Less than 5% of franchises fail during the first few years as compared to an 80% failure rate of independent ventures.
Many people have done very well as franchisees and often end up with multiple operations. Adversely, many have not done so well because they bought into a system that either was not all it was purported
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