Thinking Franchise? Start Here First

Filed in archive Entrepreneurship on October 10, 2006

Franchising is big business. Like any growing industry it can attract players that really have no proven model [read: no good reason to be selling a franchise in the first place].

That is not to say that buying a franchise is a bad idea, just make sure you know the truth before you lay out your life savings. The most successful franchises are successful because they have a proven business model, provide excellent training, and support.

I spotted a great article at Forbes titled "Ten Good Reasons Not To Buy A Franchise" and it is worth a read since it expands on the following ten points:

1. Questionable profitability.
2. High startup costs.
3. Encroachment.
4. Lack of legal recourse.
5. Limited independence.
6. Royalty payments.
7. Inflated pricing on supplies.
8. Restrictions on post-term competition.
9. Advertising fees.
10. Unfair termination.

Pay particular attention to newer franchises. How long have they been selling franchises? Ask for their prospectus and read it carefully. Call previous franchise owners and ask questions - you will be amazed how much they will tell you.

All you have to do is ask.