My column in this week’s Tennessean looks at franchising as a path to business ownership for accidental entrepreneurs:
Franchising is a path to business ownership that many of today’s accidental entrepreneurs find appealing.
“For
those in career transition who are considering business ownership,
franchising may be a viable option, primarily because most have spent
their entire career in corporate America and are used to structure and
following processes,” says Dan Aronoff, Nashville franchise consultant
with FranNet.“Franchising
provides that structure through well-established and proven systems.
For the right person and right fit, following the franchise’s ‘recipe’
can lead to success. Why reinvent the wheel if you don’t have to.”One
of the downsides of buying a franchise, though, is that many require
that the entrepreneur put up a significant amount of funding to start
the business. However, many franchises may be eligible for Small
Business Administration loan programs, too. Here is a Web site that
offers more details.Just
like any new venture, developing a business plan is a must. It’s
essential to determine the feasibility within the local market where
you plan to open the franchise. Make sure that you temper any financial
projections with current economic conditions. Be realistic.Also,
look for franchise opportunities that create value for the customer, as
this will be the best business model for some time to come.There
are some sticky contracting issues with buying any franchise. Make sure
to work with an attorney who has experience in that arena.Monthly fees add up
One of the biggest sources of
frustration among franchisees is that, over time, they begin to
perceive that the value added provided from the franchisor or the
parent company becomes less valuable.A franchise will charge a significant monthly percentage fee (this typically ranges from 4 percent to
7 percent of sales).This
fee covers business systems, marketing support, purchasing power for
inventory, and so forth. As they gain experience in the business, many
franchisees believe that they can be at least as effective on their own
without the support of the franchisor.Another
concern expressed by franchisees is that with all sorts of rules and
standardized procedures, they tend to feel more like an employee than a
business owner. Those who try to break away from the predetermined
model can face the wrath of the franchisor. Larger franchisors have
entire staffs dedicated to franchisee compliance.The
SBA offers comprehensive information on buying a franchise at its Web
site,