The highly visible, larger franchise systems, such as Choice Hotels, Dunkin' Donuts, Jiffy lube, Pizza Hut, and Century 21 Real Estate are likely to be well-capitalized and have a demonstrated track record and an experienced management staff. For the most part, they can be looked at as lower-risk investments.

Since they have a greater number of franchisees, more cooperative benefits will accrue to the new franchisee. This means a powerful advertising reach, better name and brand recognition, preferential treatment from suppliers and lower operating costs through volume purchasing.

Tip
One of the biggest reasons for choosing a known name franchise is instant customers.

But before you sign on the dotted line, consider also the downside of a big-name franchise. For one, the larger, mature franchises tend to be in flat markets with many competitors. More important for new franchisees, there are often few good locations available. Then, too, participation in this lower risk opportunity usually means a very large entry cost.

On the operating side, these systems often become more authoritarian and bureaucratic as they grow. The corporation can get so enmeshed with administrative duties that it loses touch with its marketplace. Some franchisees feel lost in the shuffle while others have even the smallest decisions dictated to them by their franchisor. Some franchisees flourish with this type of control. When asked how the franchise operates, a not-unhappy casual restaurant owner replied, "We follow the franchisors' guidelines 100%. What they say, we do. They want everything to be very uniform and they tell us how much we should be using and how much we should be selling."

Several of the fast-food franchisees we talked to emphatically stated that you get instant customers and nearly instant profits as well with a big name. But George Hayden, a Wendy's franchisee, says, "It still isn't for everybody. You must have the temperament to be able to deal with large bank debt to start the business." In addition, several franchisees mentioned the heavy degree of control exerted by the franchisor. One gave as an example a case where the fast-food restaurant needed another women's bathroom but the store size stipulated only one bathroom, so the franchisor refused to allow it.

One franchisee was critical of a large fast-food purveyor who only allows people who come up through their system to buy a franchise. Typically, the prospective franchisee comes out of college with no real business experience, and goes through the ranks, working at various jobs. The interviewed franchisee summed it up like this: The system is looking for a pliable person only trained in the franchisor's way of doing business.

The Rising Stars

About 70 percent of all franchise companies have fewer than 50 locations, so you'll have a bigger choice if you opt for the newer, smaller systems. However, just as with the name franchises, you will have a variety of negatives and positives to consider first.

One big feature is that the up-and-coming franchisor tends to be in an uncrowded industry which is not overrun with competitors. Ideally, the business is one recently deemed "hot" and prime royalty fees are usually lower, and franchisors will often negotiate the terms of the transaction. The system management is usually flexible, not set in its ways, and encourages participation from the franchisees.

Tip
If you decide to be one of the first franchise operators for a new franchisor, negotiate hard. Your risk is proportionately higher and you should be compensated for this.

These benefits, however, are offset by some costs. The newer franchise poses a somewhat higher risk than the established one. For one thing, there's no demonstrated track record. The franchisors may not have worked out all the bugs in the system, and you'll have to experiment right along with them. Then, too, a small number of franchisees undoubtedly brings less advertising power - with a corresponding lack of name recognition - and usually higher wholesale prices for the franchisee.

Trap
Investigate the capitalization of a new franchise very thoroughly. If the franchisor is not well capitalized, the entire program may collapse-and you along with it.

Once you have made a choice on the size of the franchise system, you might want to be even more specific. For example, if you prefer a smaller franchise system, you can set a number of operating units to act as a guideline. You will limit your choice to systems that have, say, 20 to 100 units, or perhaps a mid-sized franchise with 150-400 units. Conversely, if you find the larger systems more appealing, then you may set limits of no less than 500 or more than 2000 units.

You will, undoubtedly, find pro's and con's with each size system. Here are some comments from franchisees of varying sized systems which may help you zero in on what size will work best for you.

From franchisees of a large regional chain, Papa John's: "When Papa John's was a lot smaller, five or six years ago, they didn't give us much support. They do now and communication is much better. The franchisor is very supportive and franchisees get memos which discuss where we are ranked in our region and other important information. With growth, things have gotten better for the franchisees."

From franchisees of another regional chain, Taco John's, who like many regional franchises or smaller franchises worry about brand strength: "The product name is only strong where there are a lot of Taco John's. Taco John's has been around 20 years, but we are still a small company. There are not enough stores or name recognition." (In spite of this worry, however, most franchisees of this system were happy.)

From a fast-food franchisee of a large system which has been going through some image re-vamping amongst decreasing sales: "We've been franchisees for 14 years with two stores. Pretty much we're on our own and any problem we have, we solve in house. We have almost no contact with the company with the exception of an inspection once a year. When we first started out, we had more help from the franchisor. Now we feel their attitude toward us is like it doesn't matter because we are not growing or contributing enough to warrant assistance."

From a franchisee who ran an independent studio business and then converted to a small franchise system, Glamour Shots: "The franchisor is very supportive and questions get answered very quickly. I can pick up the phone right now and speak with the president of the company, and if he's not there I can leave a message and I know he will call me back."

Corporate Units

Size is just one of the priorities you may have. For instance, another crucial factor for some franchisees is whether the system operates company-owned stores. The conventional wisdom is that being in the thick of daily operations makes the franchisor more aware of the franchisee needs and can spawn ideas for improvements. However, in more than just a few cases franchisees have been hurt by corporate stores that have situated themselves too close to the franchisee's location and, in effect, taken away from the franchisee's business.

Tip
When you first meet with the franchisor, ask what its policy is on company-owned stores. If company units are operated, find out if distance restrictions apply. What is the closest distance allowed to franchisee units? Are the distances strictly adhered to? Is the policy written into the franchise contract? Does the franchisor have any immediate plans to open stores in your selected area?

Besides the "cannibalism" issue, there is the oft-repeated remark that the franchisee stores are better run and more profitable than corporate stores. Although this is not the case for all franchises, in general, the sales revenues of franchisee units usually exceed those of corporate units. And for some franchisees of companies which are going through system difficulties, the reaction to company stores can be quite negative. Franchisees of two different chain restaurant systems commented: "Company-owned units should go through re-training and stop giving us franchisees a bad name," and "If someone goes into a company store that is not performing well because of lack of funds or whatever and they are not served well or didn't get good food, then they are probably not going to want to go to another (specific fast food restaurant), including mine."

Product Versus Service Franchises

When you make your priorities list, you will probably give some thought to the choice between a product and a service franchise. In essence your choice comes down to this : Service franchises are riding a crest of popularity and are now the faster selling of the two types of franchises. However, selling services is a harder sell for the franchisee.

It is considerably harder to sell an intangible service than a tangible product. Your service can't be seen, smelled, touched, or tasted. Sales efforts must concentrate on the benefits a customer receives from the service. Quite often it is difficult to evaluate the quality of a service until a service is actually performed. With a product franchise, the product itself can communicate a value to the customer, and so customers feel more secure in their buying decision, making it an easier sell for the franchisee.

Some of the challenges you must consider with a service franchisor:

• Your business location is more restricted to a particular location, since your market will probably be a very targeted one.
• The size of the operation is limited because the customers will purchase your time and performance rather than a mass-produced product.
• Service quality is difficult to standardize because we deal with variations in human performance. Developing a consistency with each customer will take a special effort.
• Sales of services will depend greatly upon past customers who will give high recommendations.

Matching Priorities To Opportunities

As we interviewed franchisees, we noted that the ones who seemed to be the most satisfied and happiest in their franchise choices were those who actively set up priorities. After a period of personal analysis and investigation, these franchisees came up with maybe five or six "must-haves" for their choice. Following are the stories of four franchisees and how they managed to match their priorities with the franchise opportunity.

Finding a Franchise With Low Start-Up Costs

Arny Grushkin, based in Westport, Connecticut, was the president of a corporate subsidiary company where the economic downturn and company consolidation led to his leaving. After an unsuccessful job search, he explored independent business opportunities and then settled on franchising.

After giving it some thought, Grushkin sat down and wrote a profile of a franchise opportunity that would interest him. These were his priorities:

• No overhead
• No salaried employees
• Operate out of his house
• Not selling each day (some continuity from customers)
• Residual income possibility
• A newer franchise with prime area available for franchising

Entrepreneurial Qualities Influence Choice
Steve Saffar was a successful automobile agency manager who did not really enjoy his work. He made a great salary, but he also worked very long hours, and he was itching to have the opportunity to produce for himself and exert a greater control over his life. Finally he looked at the opportunities in independent and franchise businesses. Choosing a franchise concept, he wrote out what he called his "guidelines" for the business. They were:

• Recession - proof business
• Repetitive in nature
• Not capital intensive
• Low overhead
• High degree of personal independence (no intensive franchisor "looking over your shoulder")

When Regional Expansion Is A Priority

When Linda Moore hit the glass ceiling and became annoyed with the widespread mismanagement at a Fortune 500 corporation, she thought this might be the time to strike out on her own. Like most former corporate employees, she considered both independent and franchise businesses.

Rejecting an independent business for a variety of reasons, she defined her ideal franchise opportunity in terms of what she wanted and what she didn't want:

• No high-tech businesses
• No food businesses
• Leaning toward a professional service
• System must be ethical and well-managed
• Opportunity to develop a business regionally not just operation of a store or two

Zeroing in on a Niche Business. After Jay McDuffie decided he wasn't going to relocate with his company, he started to look at franchising. He used these guidelines in making his choice:

• Customers come to him (no making cold calls)
• A niche business, not one in a large industry with a lot of competition
• A repeat business
• No big loan required

Other Considerations in Choosing a System. Several of the franchisees we talked to were not as formal in setting out their priorities, but they had a few overriding requirements that had to be met. Two of these stories follow.

Judy Gedman was a salesperson for software and hardware programs to businesses and left because of frustration with large corporations. She eventually chose a franchise in the sign industry, Fastsigns, because "it was creative, clean, computer oriented, and industry driven." In the choosing process Judy looked also at a retail card shop and a frozen yogurt shop. She rejected these because "your location makes or breaks you. I feel it's better to go out and market something." For Judy, the Fastsigns business afforded her better control of her fate.

A Citizens Against Crime franchisee presents crime prevention seminars to businesses, rotaries, and other organizations. The franchisees make money by selling safety items during and after the programs. Nancy Mann, one of the franchisees, says many choose the franchise because they have had personal experiences with a crime and have then become interested in the preventive aspects. According to Nancy, "Citizens Against Crime is a franchise where you can both feel good and make money. There are many teachers, ministers and social workers involved with the franchise." In this franchise, says Nancy, "You must care about people, not only about making money."

Poor Franchise Choices. As you might expect, every franchisee we talked to didn't, in hindsight, make the best choice possible. Unfortunately choices in general resulted because the individual didn't analyze and investigate the various opportunities beforehand. The following franchisee story can give you an idea of how things can go wrong if the initial homework isn't done.

A franchisee in the retail frozen yogurt business says when he bought the first store he didn't understand what "retail" meant. Now, after opening six stores, he doesn't think he's really good at it. "You need to be able to size up customers, be able to predict what your customers will like or dislike, and create a certain retail atmosphere." Another problem which he did not anticipate in the business is the seasonal factor. The business falls off dramatically in the winter, and a cold winter heightens this effect. The net result is a serious cash flow problem for the franchisee during certain times of the year. If he could do it over, the franchisee would still buy a franchise, but he would look more carefully at his capabilities and the nature of the business itself and make a different choice.

Franchising from Home

The U.S. Labor Department's Bureau of Labor Statistics recently conducted a survey of home-based businesses and estimated that there are just over 4 million self-employed, home-based workers. (The number of franchised businesses in this total were not calculated.) However, the National Association of Home Based Businesses, based in Owings Mills, MD, puts the number at closer to 50 million people. Whatever the accurate number is, it is a number, that everyone agrees, will only continue to rise.

So one of the choices you will undoubtedly make is whether to look to businesses that are home-based or those that require an office or storefront. Even with the growing popularity of home-based businesses, analyze this option very carefully. To be sure, the usual gut reaction today when considering working from the home is, "Great! No more commuting, no more traffic jams, no boss, no time clock." Working from homes seems to appeal to many people, but, like most of the other choices you'll make, this one requires careful thought. certainly, working from the home is not for everyone.

Some of the franchisees we interviewed had home-based businesses which ranged from business services (e.g., Leadership Management Inc.) to cleaning services (e.g., Jani-King) and computer learning (e.g., Computertots). Their reactions to the home-based experience were mixed.

Sandi Vettle, a Leadership Management franchisee, and Fred Banty, a Padgett Business Services franchisee, both believed that an office environment is more conducive to business. Vettle began her business in her home and then switched to an office building where she found that a professional office setting improves her productivity. "Working from the home is fine only if you are a very disciplined person," says Vettle. Fred Banty also feels that an outside office is better for business, yet he remains home-based so he can be close to his three small children. Banty believes that an outside office would help with franchise name recognition and would present a more professional image. He also thinks there would be fewer distractions and business would increase if he moved out of the home.

Meanwhile, Mary Cunningham, a Decorating Den franchisee, staunchly supports the home-based option. She doesn't feel that her productivity at home is lessened. "I am very disciplined and usually work seven days a week," says Cunningham. She adds that she likes "working from the home better than from an office. I still deal with people all the time, but I don't have to put up with all the personality problems in the office."

Tip
To better keep home and business activities separate, put up a plaque with the name of your business on the door to your office . When you or family members cross the threshold , it's for business reasons.

Trap
When you live and work in the same space it's easy to feel claustrophobic. Schedule outside meetings, lunch dates, sales calls-- activities that will get you away from the too-familiar setting on a regular basis.

Before making a decision on a home-based business, you will need to examine your personality, lifestyle, work habits, and motives. These are some of the questions you should ask yourself:

1. Am I self-motivated? Without the structure of a workplace you will need a good deal of discipline and motivation to set goals and objectives on a daily and long-term basis.
2. Do I have a reason for wanting to work from home other that just saving money? If saving money is your only motive, then you're not really choosing a home-based business. Chances are the money saved won't be enough to make you happy working at home, and you might better look at alternatives. Valid reasons for working at home include family obligations requiring flexible schedules, physical disabilities which inhibit movement, and a desire for a more independent lifestyle.
3. Am I multitalented and resourceful? Although all franchises require many skills, a home-based one will require even more juggling of duties. You'll be the one to type the letters, send the faxes, make the sales call, and handle the filing.
4. Am I comfortable working alone? If you need to have people around you all the time to be happy and effective, the home-based option isn't for you. You should feel confident working on your own.
5. Does your house have the necessary space and facilities for operation of a business? You must have a sufficient work area which is not makeshift or temporary. In addition to office furniture, you will also need equipment, such as computers, fax machines, printers, and answering machines. You might also need storage space, as well as additional electrical circuits and extra lines.
6. Will your family support your decision to operate a home-based franchise? With your family space overlapping business space, the entire family must understand that some areas will be out of bounds and that the privacy of the business area must be respected.

Trap
The biggest problem with working from home is not that you won't work enough, but that you will overwork! You'll be constantly reminded of projects to be completed and phone calls that need to be returned. It's possible to work all hours of the day, all week-long. Resist the temptation and put up a "business is closed" sign at the appropriate times.

Tip
If you opt for a home-based franchise, check with your accountant. A recent change (1998) in federal tax law will allow more people to deduct the cost of home offices from their taxes.

Selecting Your Work Hours

Remember, in the introduction where we said that the ability to work hard is a given for readers of this book? Well, it's still a given, but if the number of hours worked is a priority for you, a nonnegotiable item, you should consider some things carefully.

In general, new franchisees say they work harder and longer hours than they ever did in their previous jobs. Most also say they work considerably longer hours than they expected, 80 hours a week in some cases. And, although many franchisees said the long hours left them feeling tired and worn-out, they also felt the long hours were necessary to build their businesses.

However, we find the time commitments differ, depending upon the type of business. So when making your initial choice, you should investigate this aspect carefully. In a general way, you'll find the following true for three of the main types of franchises:

• Business service franchises. Most often you run the business the way you expect it to be run. The franchisor generally will not require adherence to a specific schedule. You will set the specific hours and days you work. This sort of franchise does give you a great deal of latitude and independence in terms of time management.
• Retail business franchises. As a business operator in a mall or strip center, you will be required to follow its regulations. This usually implies long hours, maybe from 9 or 10 in the morning to 8 or 9 at night, and generally there is a 6- or 7- day work-week. There is little or no room for deviation in operating hours, so you are locked into a rigid schedule. You are given somewhat more latitude if your retail business is in a free-standing structure. You won't have mall developers or strip center operators to answer to.
• Child-care franchises. This business normally coincides with school hours and parent's working hours. Child-care hours generally run from 6:30 a.m. to 6:30 p.m., and the centers can only close for a few national holidays. The trend seems to be toward adding extra hours for "night care" and "sick care," so it appears that hours may be getting even longer.

Franchise Opportunities to Take You Into The 21st Century

Unless you've decided to invest in a large, superstar franchise with a ready-made market, you'll probably explore various businesses looking for the ones in the "hottest" areas, the ones deemed most likely to succeed. The problem is that everyone doesn't necessarily agree on the best business to make more money more quickly. You'll have to be the ultimate judge on that.

Different eras have different areas that stack the deck in your favor. For example, in the '50s, the building of the interstate highway system was a boon for the fast food franchises. McDonald's, Kentucky Fried Chicken, Elias Big Boy, and other restaurants were excellent investments. Today's marketplace favors some different areas.

These franchise areas should experience good growth into the 21st century. The five selections which follow capitalize on demographic, social, economic and psychodynamic trends (in the U.S.A.).

1. BUSINESS SERVICES
   Corporate downsizing has been a boon to business service franchises, and the trend is very likely to continue even though businesses haven't downsized very much in the last few years. They have, however, become used to operating with a leaner staff and the resulting increased bottom line. Hundreds of services once performed in-house are now being purchased from outside businesses.
   
   Look for franchises with functions such as consulting, accounting, training programs, product design, corporate travel, legal services, data processing, computer maintenance, web-site development, voice messaging, advertising, and temporary help. Some print shop franchises are offering computer, teleconferencing, video conferencing, and meeting rooms to capitalize on this trend.

   Tip
   Think about this. A business service franchise could work very well with a team of owners-- almost like a corporate business setting. It's a way to spread the operating responsibilities and the financial obligations and re-create a familiar setting for doing business.

2. CHILD RELATED BUSINESSES
   It is estimated that about 30 million children under the age of 13 live in single-parent households where the parent is working or in households where both parents work. A good deal of the growth in child-related franchises can be attributed to this statistic. Look for franchises such as exercise gyms, pre-school sports and health programs, nanny services, day-care centers, teaching programs and computer training.
3. PRODUCTS AND SERVICES FOR THE OLDER AMERICAN
   At the other end of the demographic spectrum, we have a growing aging population. The baby boomers will all turn 50 by the year 2005. Their life expectancy climbs a little every year and these former "flower children" want to live forever. Look for franchises dealing with health care, such as in-home health care, medical products, and personnel agencies for health care workers. Travel and leisure activities for the older population are also good segments as well as computer training franchises. Courses that teach use of the Internet are especially popular with older people. Franchises that sell nutritional and beauty products are also good bets.
4. FOOD SERVICES THAT DELIVER QUALITY AND VARIETY
   In the mature marketplace of food service and restaurants, one area holds great promise for explosive growth. Given today's frantic pace and stressful lifestyles, the increase in the number of two-income families, and a general trend toward take-out food which is fresh, varied and of a high quality, the food segment called "home-meal replacement" (HMR) should be a winner. Most of the large established food systems don't serve food which fits this criteria and, certainly, the once top contender in this segment, Boston Market, has failed badly with a recent bankruptcy filing. Look for newer, smaller food franchises which are creating menus and systems specifically to cater to this discerning, time-challenged segment of the population.
5. EVERYDAY SERVICES
   The population has a disposable income but less time to spend it. All the general service companies focused on the consumer can benefit from this. Look for services such as cleaning, lawn care, decorating, car repairs while you work, laundry pick-up at work, and other time-saving services. In general, necessary products and services that can be delivered to the consumer in a fast and efficient manner will excel.

Final Words