Franchise offers up safety net with limits
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Such tried-and-true opportunities may help outlet succeed but bring restrictions and costs. AKRON, Ohio -- Craig Hons always knew he wanted to tag along in the dry-cleaning business, but in the mid-1990s, he didn't know how. He looked at buying a store. But nothing seemed appealing. He looked at starting a store. But that seemed like too complicated and lengthy a process. So Hons, as thousands of people do each year, decided to buy a franchise. He went with Martinizing Dry Cleaning. "I decided to go with a franchise because I felt I could get up to speed faster," he said. "I think sales grow quicker as a franchise because of the name recognition." The benefits of buying a franchise are undeniable. Not only do you get a wealth of business knowledge from the franchiser and other franchisees in the chain, but there's also the technical assistance, name recognition and advertising help. The business owner doesn't have to become an expert in everything from marketing to accounting to sales. The franchise model is a safety net of sorts. It's not that simple, though. For some entrepreneurs, starting a small business might be a better idea. It all depends on your attitude and what you're willing to put up with, said Steve Hockett, president of the Minneapolis consulting firm FranChoice Inc. "You have to be willing to follow the rules and compromise your freedom," he said. "You can't change the (Big Mac) special sauce just because you're in Akron." With franchises, consistency is key. Every location must use the same logos, sell the same products and most of the time, look the same inside and outside. That consistency might rub some entrepreneurs the wrong way, especially if they decided to start a small business because they were sick of taking orders. "If all they want is to do what they want, they shouldn't get into a franchise," Hockett said. The one area where individuality can come into play is with management style. It's the franchisee's responsibility to hire employees and compensate them as he or she sees fit. Drumming up customers also will be your responsibility, just as if you had your own business. "You've really got to watch yourself when owning a franchise because it's still your business," Hons said. Still, the success rate for a franchise compared with a small business is much higher. Less than 5 percent of all franchises fail each year, while 30 percent to 35 percent of small businesses collapse in the first year, according to the Small Business Administration. Nationwide, more than 600,000 franchises are in operation, according to the Department of Labor. But there are 20 million small businesses. Franchise owners typically pay a fee upfront and give a percentage of gross sales to the franchiser for advertising, said Steve Spinelli Jr., a former franchisee and co-founder of Jiffy Lube International Inc. They also must pay to build the store, furnish it and supply it. Hons said it costs $300,000 to $400,000 to open a Martinizing Dry Cleaning. "I didn't really save any money by going through a franchise," he said. "That's not the benefit." |
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