Write The Wrongs

Notwithstanding popular perception, buying a franchise is still a somewhat risky proposition. Of course, that's true for just about everything worth working for, but the level of risk in a franchised business is very uncertain.

Plenty of statistics floating around indicate a high percentage of franchisees are successful. For a number of reasons, however, you should discount those platitudes. Consider, for instance, how success is measured in the franchise industry. In some franchise surveys, the success of franchising is measured by comparing the total number of franchises that are open to the number of franchises that have closed during a given period. Unfortunately, owning a franchise that's "open" is quite distinct from making money while you're open.

According to Bob Purvin, a franchise attorney and the founder of the American Association of Franchises and Dealers (AAFD), AAFD's definition of a successful franchise is one that pays all its bills, as well as a wage to the franchisee if he or she works on the premises in a managerial capacity, plus at least $1 profit at the end of the year. That's certainly a more accurate baseline for the definition of success, but these results sound about as exciting as kissing your aunt. My theory is, if you're risking your own capital for a venture, you're successful when you start earning as much as you could have made in the "real" job you're forsaking.

Bring out your measuring cups-read Now You're Cooking to see what truly gauges franchise success.

This article was originally published in the January 2001 print edition of Entrepreneur with the headline: Write The Wrongs.