What’s The Best Franchise For You?

The right franchise can pave the way to the entrepreneurial lifestyle, without some of the hassles. Read this guide to find out what's the best fit for you.

By Eileen Zimmerman

There’s more than one way start a busi­ness. Many immi­grants find their path to entre­pre­neur­ship through a fran­chise, rather than start­ing from scratch. The word con­jures images of MacDonald’s and Jiffy Lube, but there are a wide vari­ety of fran­chised busi­nesses in the U.S. in a host of industries.

Accord­ing to the Inter­na­tional Fran­chise Asso­ci­a­tion (IFA), there are more than 85 dif­fer­ent cat­e­gories, includ­ing fast food, adver­tis­ing, con­struc­tion, dat­ing ser­vices, lawn care, real estate, hotels and copy ser­vices. In a fran­chise, a com­pany typ­i­cally dis­trib­utes its prod­ucts or ser­vices through a retail out­let or office owned by inde­pen­dent, third-party oper­a­tors known as franchisees

“You need to go into some­thing you’re pas­sion­ate about, because you’re mak­ing a big invest­ment and you will be spend­ing a lot of time there

Own­ing a fran­chise can be an eas­ier path to entre­pre­neur­ship than start­ing a new busi­ness, because you are buy­ing into a proven con­cept, and you have other fran­chisees to talk to pro­vide you with infor­ma­tion and sup­port, says Alisa Har­ri­son, a spokesper­son for the IFA. You also get train­ing and mar­ket­ing sup­port. In exchange, fran­chisees agree to pay the franchisor—the owner of the business’s trademark—royalty pay­ments, gen­er­ally about 10% of the prof­its. They may also have to con­tribute to a national fran­chis­ing fund, which is used to fund national adver­tis­ing campaigns.

What busi­ness is right for you

To find the best fran­chise for you, step back and look at the things you enjoy doing, the skills you have and what you are pas­sion­ate about. You may think you just want to make money, but the real key to suc­cess in fran­chis­ing is doing some­thing you enjoy. Think about how you like to work. Out­doors? With chil­dren? Mak­ing sales calls? With cars? Then visu­al­ize your­self as part of that oper­a­tion, sug­gests Kevin Pignone, vice pres­i­dent of Domes­tic Fran­chise Sales for Mail­boxes, Etc., which owns The UPS Store fran­chises. “You need to go into some­thing you’re pas­sion­ate about, because you’re mak­ing a big invest­ment and you will be spend­ing a lot of time there,” he says. Mail­boxes Etc. looks for fran­chise own­ers who like work­ing with peo­ple and are ori­ented toward cus­tomer ser­vice. For immi­grants, a good com­mand of Eng­lish is also essen­tial. Pignone says the com­pany pro­vides com­pre­hen­sive train­ing to help every fran­chisee suc­ceed. “We have many stores owned by immi­grants, and many are doing quite well,” he says.

Gen­er­ally, food fran­chises are the most pop­u­lar in terms of demand. Last year saw a rise in self-serve frozen-yogurt out­lets, as well as eco-friendly fran­chises like dry clean­ers, clean­ing ser­vices, and even hair salons. One exam­ple is Splish, which uses a chemical-free line of hair products.

Trends in fran­chis­ing also fol­low trends in soci­ety, and as our pop­u­la­tion ages, ser­vices that cater to seniors, such as in-home care or assisted-living facil­i­ties, are grow­ing. Busi­ness that focus on health and well­ness, like gyms and med­ical spas, are also increas­ing in pop­u­lar­ity, says Har­ri­son. Fran­chises that aren’t doing as well in this econ­omy are those that revolve around real estate or, in some cases, finance

“Often ­times [immi­grants] are excluded from pow­er­ful posi­tions in cor­po­rate Amer­ica, so they band together and help each other make it on their own.”

What­ever type of fran­chise you choose, experts say it’s crit­i­cal to hire an attor­ney with expe­ri­ence in fran­chise agree­ments to read through yours and thor­oughly explain it. Most agree­ments are very com­plex and one-sided, made to ben­e­fit the fran­chisor, not the fran­chisee, say experts. You and your attor­ney should also read the offer­ing prospec­tus, advises Don­ald Mazzella, COO of Infor­ma­tion Strate­gies, Inc., a mar­ket research com­pany that ser­vices small busi­nesses and the for­mer pub­lisher of Income Oppor­tu­ni­ties, a fran­chis­ing mag­a­zine. “That is extremely impor­tant, because it details the fail­ures the com­pany has had, as well as the suc­cess rates.” More than 85% of fran­chisees don’t read that prospec­tus, he says. (Click here for your guide to small-business financ­ing.

What buy­ing a fran­chise will cost

Buy­ing into a fran­chise can cost any­where from $20,000 to $2 mil­lion, depend­ing on the kind of fran­chise, the indus­try, and the loca­tion, says the IFA’s Har­ri­son. You must typ­i­cally pay upfront fees in exchange for a geo­graphic loca­tion. That gen­er­ally means you own the exclu­sive right to oper­ate that Sub­way or Post­Net or Fan­tas­tic Sams in a par­tic­u­lar area, although there’s no stan­dard. Some­times a com­pany will allow mul­ti­ple stores in one location.

Fees for a handy­man fran­chise that might entail own­ing a van with a logo on it and out­fit­ting it with the nec­es­sary equip­ment, could cost less than $50,000. Location-based, or fixed, fran­chises are more expen­sive. Food fran­chises tend to be the most expen­sive kinds of fran­chises, and can cost any­where from $250,000 to $2 mil­lion, says Har­ri­son. The cost depends on whether or not you have to pur­chase land and con­struct the build­ing, and what kind of equip­ment you need. About 45% of all fran­chises are food fran­chises. Ser­vice indus­try fran­chises, where you pro­vide a ser­vice like paint­ing or clean­ing build­ings, are gen­er­ally much less expen­sive than fixed franchises.

How to finance your franchise

These days bank credit is tight, and it doesn’t mat­ter if you’re a recent immi­grant or a native-born cit­i­zen. A prob­lem unique to immi­grants, how­ever, is that they may come from a coun­try that doesn’t have the same rules of busi­ness as the U.S., and they may not have a credit score. With­out that score, it will be very hard to get a loan. If you have a lot of cash saved and just need a small loan, you may be able to over­come the lack of a credit score.

Many immi­grants buy into a fran­chise by band­ing together and pool­ing their money. Fam­i­lies as well as com­mu­ni­ties will often bor­row from one another, and as they recoup their invest­ment they pay it back to the group with inter­est. “Believe me, immi­grants are very good at fund­ing fran­chises this way,” says Mazzella. “Often­times they are excluded from pow­er­ful posi­tions in cor­po­rate Amer­ica, so they band together and help each other make it on their own.”

Fran­chise ideas:
Fran­chise cashes in on Amer­i­cans’ love affair with the cell­phone
Great Clips: A recession-friendly fran­chise
Maid Brigade taps a grow­ing demand for clean­ing help
Profit from a pow­er­house brand at Hol­i­day Inn Express

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