Research Options Before Franchising
July 31, 2011
Business Tips Article
ASU-SBDC Assistant Director
SAN ANGELO, Texas — At the Small Business Development Center, we see several clients wanting to start a business but not sure where to begin.
For some of these folks, a franchise may be the answer. Franchising is a way to go into business for yourself but not by yourself.
A franchise can reduce some of the unknowns when starting a business, however it does limit the amount of independence you have as a business owner. In the June issue of Entrepreneur, the top 101 home-based franchises are listed from the Entrepreneur’s 2011 Franchise 500.
Here are a few of the franchises mentioned in the article. Commercial cleaning services franchises such as Vanguard Cleaning Systems, Stratus Building Solutions, Bonus Building Care and CleanNet USA Inc. Other franchises listed include Fast-teks On-site Computer Services, The Utility Company and Computer Troubleshooters that offer computer and technology services.
There are also franchises for pet sitting services, home management and staging services, along with home-care services. According to the article, almost all of the franchises listed can be started for less than $50,000.
An example of a successful larger franchisee is Avery Walker from College Station. Walker moved from Austin to open Volvo Rents, a franchise that rents and sells heavy equipment to construction companies and other businesses. Walker’s business hit $1.1 million in revenues in 2008 her first year and $4 million last year. Walker said, “I definitely work more than I did in a corporate job, but I have more control over our financial decisions.”
It is important to understand the basics of franchising. There are two basic types of franchises, product distribution and business format. Product distribution franchises simply sell the franchise’s products. Business format franchises are the most common and include assistance with the complete business model including marketing and operation manuals.
If you decide a franchise is the right approach for your business idea, you have to do your homework. Research the franchise and the business model. If possible, talk with others who purchased the franchise to learn more about how the franchise works, and how much support you receive from the franchise company. It will be absolutely necessary for you to determine the business’s potential sales, expenses and profits, just like any other business model.
Not all franchises work in every market. Ask the franchise company to help you with a feasibility study in your market. Many franchises will have a company representative in the area to help you.
Look for a franchise company that offers training and possibly a mentor program. The benefit of a franchise is the support and training you would not have available if you go it alone.
If you are considering a franchise, research your options. Keep in mind the upfront costs for a franchise do not include a guarantee of success. A good resource for prospective franchising is the International Franchise Association. There are also state regulatory agencies and several online resources for franchise companies and franchisees.
This article was written by Cindy Hartin, CEBS Fellow, Business Development Specialist and Certified Business Adviser II, of Angelo SBDC. Contact her atCynthia.firstname.lastname@example.org or 325-942-2098.