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Franchise Buying Guide

Get in the Game

Think owning and operating is the only way to get involved in a franchise? Well, we can think of 5 strategies you can use to play the franchising game. Read on to find the one that fits you best.
Presented by Guidant Financial
Guidant Financial specializes in helping entrepreneurs purchase new franchises using their retirement funds.

You'll find many routes to owning a small business and several intriguing paths to participating in a franchise business. It's not "one size fits all"-not even close. If you think of franchising in one dimension, you'll limit your opportunities. There are so many ways to get into franchising beyond building and operating a new pizza restaurant. Keep your ears open for opportunity, and prepare to be flexible. With the right approach to franchising, you'll quickly find yourself on the road to career satisfaction and financial success.

Here are the five most common ways you can participate in a franchise program:

Go the Classic Route. This is how most people think of franchise opportunities: You buy a new franchise, find the location and build it out yourself. It's all new, and it's all yours. You roll up your sleeves and plunge into your new business as an owner/operator.

This is the classic route because it is precisely how so many thousands of franchisees built their multiunit empires, and it describes how much of the franchise world still operates. Newer (and hotter) franchise offerings usually provide the classic route to business ownership.

"We're a young franchise program, and we're opening new markets all over the country. Most of our owners have no experience in publishing a fashion magazine," says Tyler Allen, CEO and franchisor of a new publishing venture, Industry magazine, based in Orlando, Florida. "Opening a new market and starting from scratch is currently the only way someone can own an Industry magazine franchise."

Among the advantages of this approach is the full new term of the franchise agreement, allowing you the maximum time you need over the term of the agreement to recoup your investment. You also have the opportunity to build your business from scratch. When you open the location, it's brand-new and ready for business; any mistakes made in the establishment of the business will be your own. You don't inherit anyone else's problems or hiring mistakes. You hire your entire team, and your direct involvement will make you the owner, manager, boss and unquestioned captain of the ship.

The best upside: The new concept could take off and become a smash success-and you got on the elevator at the lobby level.

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There is always a downside, of course (business imitating life?). With the classic route, the biggest possible downside is the untried location. It can make or break a retail business, and you may have a substantial sum of money riding on that outcome. Second, your team is untried, so the training and opening support had better be solid. The startup phase of the franchise at a new location will drain your cash until the operation's growing revenue begins to carry the payroll, inventory and other expenses; so plan carefully, and never go into a startup franchise undercapitalized.

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

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