Would You Like a Franchise With That?

You've decided to buy a franchise. Now comes the real choice--which one? We'll help you narrow down the menu so you can have it your way.

J. Wellington Wimpy knew all along that burgers had an undeniable appeal. Better known as the burger-loving character from the Popeye cartoon, Wimpy's ardor for the dish was so well-known that a burger franchise in the United Kingdom bears his name. But even before Wimpy, hamburgers had been gaining popularity. As far back as the 13th century, nomadic Mongols came up with the concept of a meat patty. A hundred years ago, at the St. Louis World's Fair, the burger was presented to the masses-more than 18 million fair attendees. Fast forward to today: The burger has nestled its way into the hearts and stomachs of Americans and people all over the world, providing not just an indulgent meal, but also business opportunities galore.

Scores of franchises have popped up serving the beloved American cuisine. Drive down any main thoroughfare, and you'll find competitors lining the streets-never mind that they're offering essentially the same principal product. But as individual as the taste of each person craving a burger, so are the franchises-in cost, menu and size, for starters. The dizzying array of options can be a bit overwhelming for anyone looking to invest in a franchise-even for those who have narrowed their course of action to the burger route. So with the myriad of burger franchises to choose from, how do you decide on one? We've picked the brains of those intimately involved in the franchise process to hear what advice and insight they have for prospective franchisees. With all the factors to consider, even Wimpy would need some time to decide which burger to go with.

Sizing Them Up

So you've reached the point where you're ready to commit to a life of hamburgers. Now the real elimination process begins. Much like a bachelor or bachelorette surrounded by inviting prospects, you have to look beyond what may first catch your eye and dig a little deeper. Only then will you find your match for life-or in this case, at least for the duration of the contract you'll sign.

The first matter most prospective franchisees contend with is whether to go with a larger, well-known brand. Obviously, consumers will probably know of McDonald's or other well-established franchises, but does that mean those are the ones to go after by default? Not necessarily. The big guys have national and sometimes international exposure, but don't underestimate the smaller guys' power of regional dominance. Kevin Hogan, president of Houston-based Liberty Development Consulting LLC, who works with the Whattaburger franchise, says it's false to think one brand is always going to make more money than another. "It's a matter of individual location, brand awareness, marketing power and media efficiency," he says.

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Dan Rowe, president and CEO of franchise development firm Fransmart in Alexandria, Virginia, which counts the Five Guys burger franchise among its clients, recommends taking local favorites into consideration when deciding. He points out smaller operations like Culver's, which is known for its ButterBurgers. The franchise has a similar menu, design and target public to McDonald's, but has 20 percent higher annual sales averages-all while remaining under the radar for most. "It's got a local cult following," Rowe attests, adding that customers in Wisconsin, where Culver's is based, "absolutely line up in droves."

Sam Fangary definitely agrees that smaller, local franchises are where it's at. He opened a Farmer Boys burger franchise in San Bernardino, California, in 2003. He was drawn to the company, which had only been franchising since 1997 and had seven franchises open at the time. Though most of the applicants for jobs at his store didn't even know what Farmer Boys was, Fangary learned that consumers in the surrounding communities did. With three other locations within a 10- to 15-minute drive, the local popularity of Farmer Boys got Fangary's store off to a good start. Since first opening his doors, business has been great. But why did he take a chance on a relatively small franchise when he could have gone with a bigger, more established one? "I'd rather invest in a company that's growing-not a company that's already huge-so I have a chance to grow with them," says Fangary, 44. "When Farmer Boys gets as big as some of the big franchisors out there, I can have 20 stores-that's my goal." For now, he's opening his second location in Hemet, California, and hopes to take the brand to other states in the future.

Importing that success to another area where there's no name recognition could be difficult. In terms of marketing, Rowe says, "For you to buy a [California-based franchise] in Chicago, you're not going to get much marketing support. But if you bought one in Temecula, California, you're smack-dab in the middle of their media campaigns. You're going to get some value, some return on your franchise fee and your royalties." He sums up his strategy: "I'd try to jump into the waves, so to speak, and ride whatever's hot." But he and other experts agree that there are several more factors to mull over.

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This article was originally published in the January 2005 print edition of Entrepreneur with the headline: Would You Like a Franchise With That?.

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