Proceed With Caution
Not sure about that franchise opportunity? Our Start-Up Legal Expert offers a few pointers on how to weed out the bad and the good.
Q: I'm investigating a franchise called Coverall. I want to know if this is a good company. Or would it be better to start on my own? I don't have any experience, and I have to keep my job until I can get my business started. What should I do?
A: In evaluating a franchise, there are lots of issues to consider. One of the advantages of purchasing a franchise is that all the systems for running the business are already in place. In other words, the franchisor has a start-up inventory and equipment list, usually does national marketing for you (for a fee), has a recordkeeping system for you to use, usually provides some training for you and any employees you may have, and sometimes even assists you in finding individual local contracts.
However, there's a price to pay for this expertise both in terms of the initial franchise fee and monthly royalty and advertising fees, so it will probably cost you more than starting from scratch.
You can check out some general information about Coverall in the Franchise Opportunities Handbook available at your local library. You can get general evaluation sheets out of the Franchise Bible, also available at the library.
I would suggest obtaining a list of other franchisees, at least 10, from the franchisor and talking to them about their experience. Would they do it again? How does the franchisor treat them and assist them? Above all, don't give Coverall any money until you've made up your mind. They must provide you with an UFOC 10 days prior to signing. The UFOC provides valuable information about the franchise.
After talking to other franchisees, I would run the numbers and see if you can afford the franchise. Based on your best assumptions, can you make enough each month to meet all your business and personal expenses after paying the royalty and advertising fees? Don't forget that your local Small Business Development Center (at a nearby college or university) can assist you with the decision at no charge. Why not make an appointment with them right away?
Carlotta Roberts has a J.D. degree from Atlanta Law School. Having worked in the areas of business organization, contracts and employer/employee relations, she's been a consultant to small-business owners since 1981. She worked as a staff attorney concentrating in employment law issues before joining the Small Business Development Center national network in 1986. Currently area director for the Kennesaw State University Small Business Development Center near Atlanta, she has developed two nationally recognized programs: The Cobb Micro Enterprise Council, which won the Vision 2000 award for small-business development in 1999, and the Franchise Institute, developed to provide assistance to franchisees.
The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.