Breaking The Mold Leaving the corporate clone behind, a new breed of franchisee proves buying a franchise doesn't have to mean selling your soul.

David Gard straightens the bow tie on his black tux and checks his shining reflection in his dress shoes. He double-checks his inventory of CDs and equipment and heads out to today's gig. The reception hall where he sets up is bedecked with crepe-paper bells, pastel streamers and a "Just Married" banner.

Gard ruminates on the perfect song to get the guests dancing. No matter how good the food is or how many tiers the wedding cake has, it's his responsibility to make this wedding reception a party. As a DJ, Gard wears many hats. Emcee. Crowd-reader. Request-taker. Line-dance teacher. Franchisee.

Franchisee? No--that couldn't be. Franchisees are middle-aged management types in dress shirts and ties behind the counter at McDonald's. They fill out endless reams of paperwork and display sale signs only--and we mean only--when the franchisor says so. Right? Wrong.

There's a common sentiment in the franchise community: If a business can succeed as a single unit, it can probably be franchised. Which means franchising has moved far beyond fast food into such diverse areas as deejaying and dog washing. The International Franchise Association (IFA) identifies 70 categories in franchising and estimates franchising will bring $1 trillion into the U.S. economy next year.

With such diversity, franchising isn't just follow-the-leader anymore. Pick an interest, decide what level of participation you want (and need) from your franchise system, and there's probably a franchise that can offer you the satisfaction of owning your own business, plus the benefits of experience, pooled resources and a well-known name.

Franchising has two separate definitions: one legal, one business. According to Washington, DC, franchise attorney Andrew A. Caffey, a franchise is recognized legally if three elements are present in a business transaction: the licensing of a trademark, substantial assistance with the business's operations, and the payment of a franchise fee.

"The business definition is, in many ways, a more important and accurate description," says Caffey. "The business definition is a continuing, almost symbiotic, relationship between a franchisor, who owns intellectual property and know-how, and a franchisee, who invests money in developing a business using that intellectual property and experience. The franchisee can use a proven program and thereby reduce risk when opening a business. In exchange, the franchisee pays the franchisor a [franchise fee and] royalty."

What's In A Name?

The success of a franchise is sometimes all in the name, or atleast what that name connotes to customers. Franchise and royaltyfees may purchase an entire business system, but customers usuallywalk in because of the name above the door. "It's atremendous advantage to open a business with a recognizabletrademark that creates almost instant foot traffic," saysCaffey.

When Beverly and Greg McNutt relocated to a small suburb outsideof Philadelphia, Beverly quickly tired of her 150-mile commute andrediscovered her dream of being an entrepreneur. According toBeverly, 38, the couple had always wanted to open their own storethat sold frozen desserts such as custard, gelati, Italian ice andthe like. "Then we saw Rita's Water Ice start tocapitalize on the Philadelphia marketplace, and as we moved furtherout into the suburbs, we felt the marketplace would support aRita's," she says. "We knew the brand was being builtand felt we could really get a jump on it. You can grow muchquicker with a franchise." Since opening their Collegeville,Pennsylvania, store in 1995, the McNutts have opened two moreRita's Water Ice locations in the area and plan to open afourth this year.

Guided by his love of computers, John Shelburne chose ComputerRenaissance based on interviews with franchisees and thesystem's national presence. "I know my limitations; Ineeded assistance in some areas. A franchise provides thatassistance," says Shelburne, 36, who owns stores in Augusta,Georgia, and Columbia, South Carolina. "I didn't want toown a mom-and-pop shop where I not only owned the business, but itowned me. I wanted an asset that I could sell at somepoint."

What A System!

But with thousands of franchises available, the strength of thesystem itself--not just the name--is often the selling point. WhenGard, a former employee at DJ franchisor Complete Music, got thechance to purchase the system's Portland, Oregon, territory, heknew he couldn't pass up the opportunity. And though manypeople don't recognize the Complete Music name nor realize thatit's a franchise, Gard says the franchise has helped legitimizethe industry.

"Maybe the name is not recognized like `Burger King,'but when you're supplied with employee-training materials,marketing materials and quality equipment, [you can getestablished] in your market almost automatically," saysGard.

Laund-UR-Mutt is a relatively new franchise, but franchiseeBernie Sturr had confidence in the system's potential. Alreadythe owner of an independent dog-grooming shop, Sturr and his wifepurchased their Boulder, Colorado, self-service dog-wash franchisefrom the previous owners. "[The advantage of the franchise] isthe system for the dog-wash itself," says Sturr, 33."[It] has specific plans for the tubs, plumbing, floors andwalls, and how everything is set up."

Control Issues

One of the biggest issues for a franchisee is control.You've invested thousands of dollars to purchase a business,yet in a sense, you still have a boss to report to--a boss whocould release you from your contract if you don't meet thefranchise standards. "The negatives in franchising are theflip sides of the positives," says Caffey. "TheNo. 1 negative is coming to grips with the controls exercisedby the franchisor. [But] there are business reasons for that, withmany advantages. [Controls have] allowed a system likeMcDonald's to achieve something of a marketing miracle by beingable to deliver a complicated product like the Big Mac, whichtastes the same anywhere in the world. They've achieved thatthrough imposing tight product and operationalspecifications."

When brothers Aaron, Michael and Simon Serruya, founders ofYogen Früz Worldwide Inc., look for franchisees, theydon't search for mirror images of their own fiercelyindependent natures, but rather for self-starting entrepreneurs whocan also follow directions. "Franchising is for the person whowants to be his or her own boss, but at the same time needs to beguided," says Aaron. "If you want to reinvent the wheel,go do that. But if you want to follow what's working, buy afranchise."

But is there any creativity in franchising? What input do youhave into the business? It depends on the type of franchise andyour definition of creative input. Franchises like Rita's WaterIce and Yogen Früz won't negotiate store layouts, productsand management specifications, but franchisees can still infusetheir personalities into their stores.

For franchisee Beverly McNutt, it's all in the service."We get many compliments on how we train our employees, andhow polite they are. Even though we're in a franchise, thefranchise is second to me. These are my stores. This is how I wantthem run. My goal is to have the best Rita's store in thechain."

Some franchises require more creativity just because of thenature of the business. "I have to come up with unique ways ofmarketing myself using the methods taught by Complete Music,"says Gard. "I have to do a Portland-style show, not aTexas-style show. That's where creative freedom comesin."

Laund-UR-Mutt franchisee Bernie Sturr is in a uniqueground-floor position: Not only does he have the freedom to makemerchandise decisions, but those decisions could even have a directimpact on the system as a whole. "We totally remodeled theretail area," says Sturr. "We brought in five lines ofall-natural dog food not carried anywhere else in the Boulder area,and started offering grooming services one day a week right off thebat. [Franchisor] Scott Southwourth has seen what we've donewith revenues in 18 months--we've tripled the business.That's given him ideas for new store layouts."

Is Franchising For You?

In the end, you have to assess the level of entrepreneurialindependence you require to be satisfied. Do you want to be yourown boss, yet lessen the risks associated with starting your ownbusiness? Do you want the benefits of a national brand name andlarge-scale advertising? Do you know your strengths but questionyour abilities on some of the finer points--dealing with suppliersor marketing, for example? Most of all, are you willing to give upsome control to gain these benefits? Once you answer thosequestions and research franchise opportunities, you'll knowwhether or not a franchise is in your future.

Full Disclosure

Don't even think about buying a franchise until checkingout--and thoroughly comprehending--that hefty disclosure document,the Uniform Franchise Offering Circular (UFOC).

This weighty document must be given to prospective franchiseeswithin 10 days after the first personal meeting, or 10 days beforeany agreement is signed or money changes hands (whichever isearlier).

The UFOC describes the company; the investment; any litigationor bankruptcy history of the franchisor; the trademark, productsand advertising program; your and the franchisor's contractualobligations; and more.

Using the UFOC's list of current and former franchisees,call a random sample of both types (don't rely on a fewcarefully selected names the franchisor gives you). Visitfranchisees at their locations and find out what a typical day islike, how much money they make and whether the franchisor providesadequate support. You can even volunteer to work at a franchise forfree for a few days to get a feel for the day-to-day life you'dlive as a franchisee.

Cash In

Financing is any start-up's biggest challenge, and it'sno different for franchisees. The good news: Some franchisors offerdirect financing to help with start-up costs. (This may be in theform of equipment, real estate or inventory financing).

Many franchisors have preferred relationships with banks andcommercial lending companies that are familiar withfranchisees' needs. If they don't, you can often findfinancing by approaching banks that have made loans to otherfranchisees in the system. Talk to other franchisees and see howthey financed their businesses.

Once you've found a lender, you'll need to provide thesame information and follow the same steps as you would with anytype of business loan.

Make The Call

The Federal Trade Commission (FTC) provides a free package ofinformation about the FTC Franchise and Business Opportunity Rule,which regulates the sale of franchise and business opportunities.Write to: Public Reference Branch, Federal Trade Commission,Washington, DC 20580; call (202) 326-8128; or visit http://www.ftc.gov.

Clueless?

You've decided buying a franchise is right for you. Now, howdo you pick the right franchise? Investigate the industries thatinterest you the most; then assess your area of interest to see ifthere's a market for that type of business.

Have franchise companies in those industries send moreinformation. But don't rely just on these materials; head tothe library or go online for magazine and newspaper articles abouteach company you're considering. Are the articles positive?Does the company seem to be well-managed and growing?

Check with the Better Business Bureau and consumer or franchiseregulators in your state to see if there are any complaints againstthe company or if it has been involved in lawsuits involving fraudor violation of Federal Trade Commission regulations. If thecompany is registered with Dun & Bradstreet, ask for a D&Breport (800-234-3867), which details the company's financialstanding, payment promptness and more. Also refer toEntrepreneur magazine's Annual Franchise500^®, the best and most comprehensive rating offranchises in the world, available at https://www.entrepreneur.com.

Lastly, if you live in one of the 14 states (California, Hawaii,Illinois, Indiana, Maryland, Michigan, Minnesota, North Dakota, NewYork, Rhode Island, South Dakota, Virginia, Washington andWisconsin) that regulate franchises, contact the state franchiseauthority to see if the company complies with registrationrequirements.

Contact Sources

Complete Music, (800) 843-3866, http://www.cmusic.com

Computer Renaissance, (706) 854-9474, comprenaug@mindspring.com

Laund-UR-Mutt, 637 S. Broadway, Ste. P, Boulder, CO80303, (303) 543-9592

Rita's Water Ice, (800) 677-RITA

Yogen Früz Worldwide Inc., fax: (905) 479-5235,http://www.yogenfruz.com