Many people feel a need to change their lives, particularly at middle age, and get carried away with the excitement of owning a business. But they make bad, frequently ruinous mistakes.
When searching for a business, you are in total control, and sellers shower you with attention and respect. After spending months in a fruitless job search, people buy a business to end their frustration.
Many turn to franchises.
Franchised businesses have a higher success rate than non-franchised ones. The reasons are understandable. First, you can’t obtain a franchise unless you have sufficient, documented assets to sustain your firm until it becomes solvent. Second, the franchise provides operational training and marketing planning. Their success is based upon your success, hence it serves their interests to have you succeed.
Franchisees share the collective knowledge and experience attained by all other franchisees. You are constantly presented with up-to-the minute sales analyses and emerging trends. This is of tremendous value for new franchisees entering an industry in which they have little or no experience.
However, when meeting with a franchiser, exercise caution. They thrive on people who have lost their jobs and are frustrated and desperate after months of searching for work — particularly people approaching their senior years. Franchise firms know what hot buttons to push that will motivate you to buy one. They usually dwell on such issues as security, independence and great wealth.
While most franchisers are honest, some provide bad advice. Many franchisers tell prospective owners that all they have to do is give orders and let others do the work. In most cases this is not true, particularly in a cash business. How well the franchisee follows home office advice will determine whether he/she generates substantial income or merely makes a living. Or, in some cases, fails.
Franchises are expensive and can run into several hundred thousand dollars or more. Most have a mandatory franchise fee of 6 to 8 percent of gross sales and require you to buy your supplies directly from them. Franchises in the restaurant industry do not permit any food to be served that is not part of the standard company menu. If you attempt to sell an unauthorized food item you are in violation of your contract and could face legal problems, even cancellation of your franchise.
It is important, therefore, that before venturing into an industry you are not familiar with, test it out. If you are thinking of a fast food restaurant, work in one for a month. This will give you a better idea about whether this business suits your needs.
A woman who spent many years as an accountant came to the Small Business Development Center to seek counseling about buying a major restaurant franchise. She had met with the franchise representatives and was quite impressed with the operation. Since she had no experience in the restaurant business, the SBDC counselor recommended she try it out by getting a weekend job in one for thirty days.
A month later she returned and told him the experience changed her mind. Having spent her career as an accountant, sitting at a desk, she found standing for hours to be physically demanding.
It also is a good idea to speak to owners of a similar business and get their opinions about it. It is important to tell them you are not considering a location in their area and will not be a competitor.
Once you own a business, you assume tremendous responsibility and have to be on site to manage it properly. This means committing yourself to long hours and hard work.
The franchise should enjoy national awareness and stature, which provides you with a pre-sold market. Well known restaurants like McDonalds or Dunkin’ Donuts enjoy national stature and have loyal customers.
Other franchises, in contrast, have no national awareness. In this case, you may do just as well operating under your own name and avoid franchise fees. Take the dry cleaning business, for example. While franchised dry cleaning stores exist, most are independently owned with no need to be part of a franchise system. You would be giving 6 to 8 percent of your income away for nothing.
The bottom line is that while some franchises increase your potential to be very successful, many are in industries where they offer little advantage.
An important question to ask a franchiser is what their failure rate is. How many franchisees closed down or went bankrupt the past few years? If the number is excessively high, find out why. There is a simple way this information can be obtained. All franchisers are required to give interested parties the name of franchisees in the state they are interested in. You can contact these firms and get their input. I strongly recommend you contact at least six. You will receive all kinds of views, both favorable and unfavorable, then make your own decision.
Going into business goes well beyond financial commitment - it becomes a way of life, involving long hours, hard work, dedication and frustration. Sometimes, lots of frustration. Whatever rewards you get are well earned.
Ultimately, entering a business in a field you have worked in your whole life and where you have contacts, is more likely to succeed than one where you lack these advantages. Give this serious thought. Just because a business looks exciting, there is no guarantee that it will be.
Born in Brooklyn, Martin Mosho earned his bachelor’s in business administration from Brooklyn College and began his career in ad sales for the New York Times and the New York Post. He also spent 15 years as sales director of U.S. News and World Report.
In the 1970s Mosho took the entrepreneurial plunge in dry cleaning, which cost him nearly $100,000. After some success he founded the third largest personnel placement business in New Jersey.
For the last eight years he has taught and individually mentored aspiring businesspeople at TCNJ’s Small Business Development Center. His current business venture is Romaniote Publishing Company, which he runs from his Hightstown home. His latest book, from which the preceding is excerpted, is“Jumpstart Your Business, published by Romaniote and available for $19.95 at www.winningbusinessideas.com.