Franchises: Great Opportunities, but Do Research First

Article excerpt

If you're looking to start a new business in a slowing economy, one option you might want to consider is running a franchise. But before you turn your nose up at the idea, consider that franchises don't have to mean selling fast food or oil changes.

Small business owners have found plenty of pluses in running a franchise. It means working with an established name rather than starting a company or retail outlet entirely from scratch. And the marketing of your merchandise or services is likely to be handled through the franchisor, many of whom also supply training and financing.

Most people think of companies like McDonald's or Jiffy Lube when they think about franchises.

But businesses such as home contracting and consulting can also be franchises, and so can tutoring kids in reading and math -- there are thousands of franchise business opportunities in the United States.

Because running a franchise usually means investing thousands of dollars and often requires a 5- or 10-year contract, a would-be franchisee should do extensive research and soul-searching before making any commitments. The Internet and how-to books are excellent places to begin.

The Federal Trade Commission's A Consumer Guide to Buying a Franchise can be a starting point. It provides a quick overview of questions you need to ask yourself and a franchisor before you sign anything. The guide is available online at www.ftc.gov/bcp/conline/ pubs/invest/buyfran.htm or by calling 1 877 FTC-HELP.

The International Franchise Association, a trade group, operates www.franchise.org, which has information and publications for sale. It also has information on opportunities, as do a number of franchise consultants on the Internet.

But note that some of these sites are looking to sign you up as a customer, and some might only be listing companies that pay to get a plug.

If you're considering something that calls itself a franchising opportunity, but it's not from a company that's well-known or easy to research, you should proceed cautiously and be sure it's not part of a scam. …

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