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Word to the Wise

A few things to consider before tackling franchising

This story appears in the July 2004 issue of Entrepreneur. Subscribe »

Last month, we discussed the opportunities offers educated professionals. But we would be remiss not to warn you about several key things to be aware of-factors that could spell disaster if not well-thought-out.

If you're from the or professional world, franchising can feel like a different universe. Scott Shane, professor at Case Western Reserve University in , points out a couple of differences:

  • A is both a job and an investment. Choose poorly, and your life is significantly impacted.
  • Owning a franchise doesn't mean you've got carte blanche. You still have a franchisor to report to, and you still have monthly royalties to pay.

If your strong point is education rather than experience, you should realize there are necessary to running a franchise successfully. Assess what the franchise requires and whether you have those skills.

Many ex-corporate professionals may be enticed by the idea of multiunit franchises and consider running a mini-empire more appealing than a single unit. With so much capital involved, Shane warns that extra caution is warranted. "You could end up with a lemon if you don't look carefully," he says. Unfortunately, Shane adds, a small segment of the franchising sector looks to target ex-corporate execs-this segment could be more interested in unloading multiple units than running a franchise system and supporting franchisees.

But for the professionals who've done their homework and found the right fit, their investments result in passion and profit.

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