CAREERS NOW 02-25-09

Franchising in Today's Times

DEAR JOYCE: I am in my 60s, retired and still okay financially. But I'm getting nervous about the future. A friend is urging me to buy a certain micro franchise. How do you feel about that? - R.A.

Cautiously optimistic. Between the drilling by consumers of another hole in the belt they've been tightening for the past several months, to the opening of credit access at a snail's pace by loan providers, there's good reason to check every detail of a potential investment - up and down and left and right - before signing on the dotted lines.

Due diligence has always been a must-do before parting with resources, but now even more so for the 50-and-over crowd whose years to recover from unwise investments are fewer than for a younger demographic.

PLUS SIDE. Buying a franchise is much easier than starting an income-producing business from scratch. You'll get a brand name, training, advertising and a shovel-ready business plan. And, theoretically - through the franchisor and fellow franchisees - you'll have lots of "lifelines" available when you don't know the answer to thorny business problems.

MINUS SIDE. Startup costs are not chicken feed. For part-time and smaller franchises, the buy-in range is about $20,000 to $150,000, plus royalties and licensing requirements. Profits are not guaranteed; in fact, studies show the majority of new franchising companies tank within the first 10 years.

SCOUTING BASICS. Your friend may be onto a good deal, but you'll be smarter to open your window of opportunity beyond consideration of just one franchise. A recent Associated Press article describes second-career franchises ranging from dog-walking and home care to tax preparation and youth sports photography. (Google: "Older Workers Turn to Franchises in Recession" by Dave Carpenter.)

Here's the drill: Look across the franchise horizon at all the opportunities that (1) interest you, and (2) require skills or knowledge you already have. Metaphorically speaking, now is not the time to learn to play the saxophone when you can't read a note of music. (Read several how-to franchising books. Google "franchise directory.")

After compiling a franchise interest list, use common sense to cross off those with slim chances to thrive in a recession - ditch an upscale restaurant franchise, for example, but consider a consignment shop. Rule out those franchises that cost more than you can afford. Now narrow the list to your top five prospective franchise investments and begin serious research.

RESEARCHING KEYS. You'll study contracts and all the other usual documents, of course. (Visit the American Franchisee Association at franchisee.org. And Google the Federal Trade Commission's white paper: "Buying a Franchise: A Consumer Guide."

Put your own sleuthing elbow grease to work by contacting other franchisees involved with the same franchisor business. Choosing noncompetitive locales, ask them about the triumphs and tribulations they've experienced with the mother ship. Encourage thoughtful, accurate answers by going in person during off hours. Seek input from a minimum of six franchisees.

Additionally - and this may not be easy - try to figure out a way to gauge customer reactions to a franchise in which you're serious about investing. Methods range from grabbing a clipboard and doing short exit interviews in front of a retail site to using online social media to request comments.

LAST PRE-INVESTING MOVE. Consult a lawyer who is experienced in franchise law. Locate a good one through the American Franchisee Association's Web site, your local bar association or business law listings on lawyer.com. A savvy attorney can keep you from making bad mistakes in investing both your money and time.

DON'T FORGET YOUR NETWORK. Franchising been around long enough that we all know someone who has gotten out of the business voluntarily or involuntarily. The franchise leaver is someone you want to interview for lessons learned.

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