Franchise Buying Guide

All the Rage

Tech & eBay
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

Tech It Out

Tech consulting underwent phenomenal growth in 2004 and will continue to sizzle in 2005 as we become increasingly dependent on technology and as it becomes more advanced to meet our every need. The demand is stronger than ever for tech-consulting franchises that offer expertise and solutions. In the United States and Canada, unit growth among Franchise 500® tech-consulting franchises increased 47.3 percent from 2003 to 2004.

Lonnie Helgerson, co-founder with Phil Helgerson of Expetec, an Aberdeen, South Dakota-based tech-consulting firm, has seen a 293 percent increase in growth over the past year. Helgerson credits much of this growth to the fact that small and midsize businesses are increasingly reaching out to companies like his for answers to their technological problems. "We keep our ear to the rail, and we're able to see the new things coming up quicker and [can deliver] through our system faster than somebody could if they had employed an IT worker," says Helgerson.

He has also seen an increase in business as the internet becomes an increasingly common way to do business. Using the net has opened the doors to a whole new layer of technological problems. While some might see the multitude of spyware and viruses flooding cyberspace as a bad thing, it creates a definite need for consultants who can provide solutions to such serious security issues. Says Helgerson, "Any business that's going to compete today needs to be on the net to do business."

Those who are intimidated by entering such a fast-paced industry can find opportunities in franchises like New Horizons Computer Learning Centers, which offers assistance in computer training, and Cartridge World, which has made a business out of toner replacement and sales. Toner replacement may not sound like the most exciting business in the world, but it's definitely a growing franchise category in our listing.

eBay Mania

The excitement and popularity of eBay shook the world, and we're still feeling the tremors. Piggybacking on the success of the world's first online marketplace are eBay drop-off stores. Across the nation, franchisees are setting up shop at an impressive rate to collect and sell items belonging to those who don't have the time or know-how to do it themselves. Considering that about 90 percent of eBay participants are buyers, there's definitely enough room for more sellers. Three franchises have made their way onto our listing, boasting growth from zero to 33 units combined since they began franchising in 2003.

ISold It opened its doors for business in December 2003 and has been going strong ever since. What's the company's secret? Ken Sully, president and CEO, says, "The key to this whole thing is the customer experience at the store level."

The promise of profits will have franchises scrambling to get creative so they can claim their share of this new but very promising market. And even though the future of these drop-off stores is contingent on eBay's continued success, this is no cause for concern. With 51.7 million active users, eBay is "such a big marketplace," says Sully. "And it's just going to get bigger and bigger."

TREND CAREFULLY

The word's out. All around you, people are talking about the next big thing. Whether it's a miracle weight-loss solution like low-carb diets or a trend within another, like Pilates, customers come flocking. But along with the hype comes the possibility that consumers' desires will change with the tide. So how do you plan an entrance-and exit-strategy when purchasing a franchise that's a big hit today but could become old news tomorrow? Buying a trendy franchise takes more precision than you might think.

Michael H. Seid, managing director of Michael H. Seid & Associates, a West Hartford, Connecticut-based management consulting firm specializing in the franchise industry, offers these tips:

  • Act fast, yet proceed with caution. Normal trends tend to have a five-year life span, so it's important to get in early. At the same time, commit to a shorter term when the investment is not so secure.
  • Put the franchisor to the test. Says Seid, "When you're getting into a franchise system that needs to be nimble, make certain those people have experience in [overseeing] change."
  • Know what you're getting into. Ask the franchisor questions like, "If the trend changes, what is the next product you plan to add?" "If they don't have an answer or aren't talking about research and development," says Seid, "you still might be able to buy into the trend, but not with that franchisor."
  • Don't invest more than you can afford to lose. Bank your money, and look at other invesments.
  • Don't fall in love with a trend. Trends are fickle. Adored one day, they can become one-hit wonders the next. "Buy on business sense," advises Seid, "not on emotions."

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: All the Rage.

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