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Launching your own franchise

Written by : Judith McGee
2010-03-15
In these tough economic times, some experienced executives have been laid off, downsized or minimized, but still have plenty to offer. They might desire to look at franchises, which offer the opportunity to make a change, run a business and create jobs.

Contractors are looking at these opportunities, too. The franchise concept isn't a new one. Wouldn't you have loved to been an early owner of a prime location for McDonald's, for instance, or any number of other franchise success stories? But as with any great opportunity, there are lots of pitfalls, misinformation and scams. Novices can get in trouble falling for the wrong story or investing with too little capital. Like any endeavor, there are plenty or challenges and risks.

Franchise industries offer opportunities with automobiles, education, food, children, health care, pets, computers and Internet, sports and recreation, veterans, women and Canadians.

There are two primary kinds of franchises - product distribution and business format.

Product distribution franchises sell products and are based on supplier-dealer relationships. These franchisors license their trademarks and logos to the franchisees but usually do not provide them with an entire system for running their business. These are often soft drink distributors, car dealers and gas stations.

Business format franchises use a franchisor's product, service and trademark and also the complete method to conduct the business itself, including marketing plans and operations. Business format are the most popular franchise type.

Kevin Blodgett decided to pursue ownership of his own franchise after being laid off from an Oregon manufacturer where he was the vice president of marketing.
“With the poor economy and job market, I decided that it was time to do my own thing. I liked the idea of a owning a franchise where you don't have to start from scratch. Typically, the franchise has already built the brand, offers support for training, marketing and operations, and is less of a risk than starting a new business on your own.

“One has to do their due diligence in researching franchising opportunities, but with the proper perspective, and of course the money to cover the franchise fees, you can become a successful business owner,” he concluded.

Searching and identifying a franchise appropriate for you can be overwhelming. Consultants like Terry Rost from The Franchise Group in Lake Oswego can help. Visit www.thefranchisegroup.com for more information.

The International Franchise Association, founded in 1960, is a membership organization of franchisors, franchisees and suppliers. Its Web site provides members and guests with a one-stop shopping experience for franchise information.

Franchise brokers look at personality, background, interests and amount of money the person can invest. The majority are using 401(k) dollars. This is done under a federal law that allows them to access their funds, tax-free and penalty-free, to purchase and operate a business when done under the strict guidelines of the IRS.

Service business investments average $60,000 to $120,000, while storefront business investments requiring inventory and build-out average $200,000 to $300,000.

Business-to-business and home services cost less to get started. Usually the return on investment is greater. Bigger investments don't necessarily equal more money.

Also, all franchises are responsible for royalty fees. These are based on a percentage of a franchise's monthly gross sales.

There are great opportunities with franchises serving the fast-growing over-65 population.

All franchises have a one-time, up-front fee in the $20,000 to $30,000 range that goes toward training, demographic studies and marketing.

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