Catch The Wave How to harness the Internet and find a franchise that's right for you

Whenever I commit myself to researching on the Internet, therecomes a bleary-eyed moment when, after spending a good portion ofmy youth watching my processor choke down animated banner ads, Ithink, "If this is surfing, then why am I numb from the waistdown?"

Yes, I've spent days reviewing hundreds of Web sites dealingwith franchising. My quest: to use the power of the Internet toaccess four-star franchising information. After all, we know thatthe Internet has forever changed franchising and will continue todo so into the next century. But can it change a potentialfranchisee's attempt to find, buy and operate the perfectfranchise?

At first, I was amazingly unsatisfied with the results of myquest.

Like drinking water from a firehose, AOL users who search theWeb using "franchise" as the search term will be delugedwith 79,969 hits. If AltaVista is your search engine of choice, youcan expect 734,100 hits. With this level of requisite screen time,the Net quickly turns into a morass of tedious mouse clicking.

So the reality is a bit daunting. But when you really thinkabout it, the potential is overwhelming. After all, this is themorphing of two of the hottest, fastest-growing and most incrediblyhyped concepts the business world has ever witnessed--namely, theWeb and franchising. The problem is, due to the many franchisesales consultants scrambling to add clients to their home pages,the bulk of the information is so scattered and basic that I doubtmany of you will tolerate the endless search. Although I'venever counted, popular estimates show more than 5,000 franchisorshawking their wares, and you'd have to go to several Webdirectories to find just a portion of these.

I agree that expanded commerce is the best boon forentrepreneurs since the Klondike Gold Rush, but my researchindicates you're going to need a digital torpedo (or a reallygood chair) to blast your way into some good data. Frankly, I stillprefer using the printed directories, like this issue ofEntrepreneur--they make it easier to compare opportunities,and books, by their nature, cause you to pause and reflect.However, I didn't want my lower back pain to be in vain, soI've highlighted some of the more helpful spots on a Web site Icreated in conjunction with this feature. Go to http://www.ecounsel.net to find someWeb surfing highlights.

Todd D. Maddocks is a franchise attorney,Entrepreneur's "Franchise Focus" columnist, andfounder and president of http://www.ecounsel.net, anInternet-based, digital nervous system for business attorneys. Youcan reach him at TMaddocks@ecounsel.net

Love Is Not The Answer

Much of the power of the Internet stems from our love of instantgratification. We demand fresh encounters, new adventures and thesatisfaction of our quirkiest needs. We love to hunt the openrange, and the Internet thrives on this human foible.

Unfortunately, that's exactly the wrong way to becomeinvolved in franchising. While surfing the Web, I came acrossGeoffrey Stebbins, founder of World Franchise Consultants (http://www.wfcnet.com), a franchiseeconsulting firm in Southfield, Michigan. "People often buy afranchise like they're buying a can of soup off the groceryshelf, and the Internet just perpetuates that mentality," saysStebbins. He believes the most common mistake franchise buyers makeis to search for a franchise that caters to what they love (golf,for example), rather than what would further their businessinterests.

Let's also remember that the Internet is still predominatelyunregulated and really akin to the wild blue sea as it existedduring the days of the swashbucklers. At least then, pirates had tobe accomplished enough to acquire a boat; by contrast, those whoset up shop on the Internet need only claim some digital turf andspend as little as the price of a decent meal to maintain ane-storefront. Accordingly, impostors, charlatans and the unlicensedfreely roam your interconnected world.

Speaking of charlatans, I was cutting a big curl in the digitalsurf when I snagged the site of a franchise consulting firm I hadnever heard of, even though they're located in my home state ofTexas. On its front page, the firm displayed logos of the conceptsit had developed. To the unwary, the firm had numerous listings ofwhat appeared to be successful franchises. I immediately recognizedthe name of a restaurant concept that had failed some years back.Yet the cute logo still blazes on the Internet as an example ofthat consultant's experience.

I don't want to make you afraid but cautious, rather,when you're buying a franchise (or any business) on theInternet. A Web site can be the product of an ingenuous graphicartist but have nothing at all to do with your eventual success inthat business. In the worst case, buying a franchise on the Webwould be merely a result of hitting the "I would like to speakwith a consultant" button. But beware: Once you push that Webbutton, you send a signal to a highly trained sales professionalwhose MO is purely to sell franchises.

Can We Talk?

Once you get into a franchise system, the power of the Internetseems much more focused and advantageous to both franchisors andfranchisees. The Internet is unrivaled when it comes tofacilitating communications, a benefit that's alreadyinfiltrated the world of franchising.

Indeed, some of the larger franchise systems are taking fulladvantage of the extranet capabilities of the Internet. An extranetcan be loosely described as protected information that can beaccessed through the Internet by those who hold the properpassword. For example, the franchisor Mail Boxes Etc. regularlycommunicates with its franchisees via the Internet, and franchiseescan even access operations manuals by using their password. In thefuture, when the necessary bandwidth is available, it'scertainly possible that franchisees will watch training videos andfranchisor presentations on the Internet. I've worked with abudding franchisor who intends to place digital cameras in storesto assist franchisees in making crucial decisions when bidding onused merchandise. Big Brother paranoia aside, these types ofapplications may turn out to be the best utilization of theInternet for franchising.

Speaking of Big Brother, one piece of information that afranchisor must now disclose in its UFOC is whether it has theunfettered right to access a franchisee's computer system. Theidea of permitting the franchisor free rein over your hard drivecould be a little disconcerting; however, the benefits aretangible. Now, by using Internet or modem access, franchisors canautomatically download point-of-sale information, customerdatabases and completed financial reports. This not only permitsthe franchisor to perform its job of supporting the franchisedbusiness, but it also means less work for the franchisee. Accordingto Lee J. Plave, a franchise specialist and partner with Rudnick,Wolfe, Epstien & Zeidman in Washington, DC, "Franchisorfield reps can use data instead of wasting time deriving it, whichpermits human interaction at a higher level." On the otherhand, some franchisors keep a digital key to the operation of yoursoftware and can remotely lock you out of proprietary software. Sonow the digital hammer can be flung from afar.

But the Internet doesn't just give strength to thefranchisors. Not surprisingly, the Internet has greatly improvedcommunications between franchisees, providing them with a low-costway to coalesce and the unprecedented power to help each other.

One of the best features of a franchise system is the ability torely on your fellow franchisees to provide insight into your dailydilemmas. E-mail within an extranet provides a low-cost way totransmit ideas and discussions. In one situation I know of, thefranchisees in a system began a grassroots effort to forcesystemwide changes upon a franchisor. As the e-mail messages beganto flow, franchisees reiterated their concerns for the others tosee. Eventually, the franchisees began to learn that most of themagreed something had to be done, and the group of comments waseventually forwarded to the franchisor.

Under The Laws Of The State Of . . .

Regulation is another hot topic that both franchising and theInternet wrestle with. The FTC, which regulates franchising on anational basis, is now engaged in rulemaking regarding how the UFOCcould be properly transmitted to prospective franchisees via theInternet. Currently, some insiders are concerned about proving whenthe document was delivered and received via the Internet, as wellas determining whether a printed copy is necessary. If these rulesof engagement can be more clearly defined, it's easy toenvision a day when serious franchise candidates could review anoffering by conducting searches that highlight every place in thedocument where keywords such as "penalty,""noncompetition" and "termination" appear.

There is a section of the FTC Web site that plays like a grainy,black-and-white B movie (http://www.ftc.gov/bcp/franchise/xscripts.htm).This buried link to transcripts from FTC Public WorkshopConferences shows the purported dark side of certain franchiseexperiences. While you should go there to examine some of theissues facing disgruntled franchisees, please remember that thetestimony there was not given under oath, the franchisor was notnecessarily present and there was no cross examination. However, itsure is nice to have the information available.

Some states are also beginning to regulate the Internet withrespect to franchising--they're requiring franchisordisclaimers that state the Web site is not an offer of a franchise.While consistent with the regulation of other forms of franchiseadvertising, this is essentially a Band-Aid to tide regulators overuntil they're forced to face the larger issues that loomahead.

Happily Ever After

For all their qualities, good and bad, the Internet andfranchising seem destined to become even more intertwined in thefuture. In fact, the popularity of the Internet has spawned afranchise industry all its own--a plethora of companies are sellinge-commerce-inspired franchises such as Web site design, e-mailservices, videoconferencing and virtual secretarial support.

And what of the majority of franchises that, by nature, reallyhave nothing to do with technology? It's true the explosion ofe-commerce has taken many by surprise--particularly those franchisechains that were in existence before the Internet was an everydayreality. As a result, many, if not most, of the franchiseagreements of established chains make no mention whatsoever of howthe Internet distribution pipeline is to be allocated. According toSusan P. Kezios, president of the American Franchisee Association,this issue has been increasingly troublesome for franchisees.(Consider how you'd feel if you were a franchisee sellingsoftware from a retail store and your franchisor started sellingthe same goods online.) Says Plave, "If I were a prospectivefranchisee, I would look at how technology will impact thefranchised business in the next five years."

While franchising and the Internet still need to work throughmany issues relating to their marriage, many have high hopes forthe union. In the future, franchise seminars will be held invirtual classrooms and prospective franchisees will conductthree-dimensional tours of the units for sale. Customers will printyour virtual coupons. Regulators will regulate, and Web surfingwill be refined. But when somebody figures out how to e-mail me ahot pizza, that's the franchise I want.

Contact Sources

American Franchisee Association, (312) 431-1132, http://www.franchisee.org

Rudnick, Wolfe, Epstien & Ziedman, (202) 712-7249