Franchising Home-Based Franchises Could Be Right for You

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Executives who leave their companies with a pile of cash may seize on the idea that the next thing they should do is become a franchisee. The idea of purchasing a business that operates according to a prescribed formula may seem like a no-brainer way to make money.

But before plunging ahead with this notion, the first thing you should ask yourself is, "Do I have the right temperament and tendencies to succeed as a franchisee?" One way to tell is by taking the accompanying test, then seeing how well you score.

Still, you might immediately and pridefully reply, "Yes! I'm qualified to become anything I want to be!"

While I don't doubt your abilities, I must issue this caveat: Being a franchisee isn't for everyone. It's not like owning a nonfranchised business or working for someone else.

Franchisees are a unique hybrid of both boss and employee. You own and run your franchised outlet, but you must follow the system and dictates of the franchiser who has presumably perfected the business.

On an ongoing basis, you pay a percentage of sales for the franchiser's expertise, support, national advertising campaigns and established reputation. In the best cases, this is a win-win situation.

Yet some people chafe at having to follow directions from "headquarters." Others excel at adhering to the system, taking direction and delegating to others. Jerry Waller, president of Pizza Hut of Idaho in Boise, is an example. A former engineer, Mr. Waller went to college with the pizza franchise's co-founder, Frank Carney, who started Pizza Hut with his brother as a way to make money while they were in school.

After a stint as an engineer for the Boeing Co. in Seattle and Wichita, Kan., Mr. Waller got in touch with his old college buddy and proposed becoming a Pizza Hut franchisee. He wanted to live in Idaho, so he secured the franchise rights to the entire state and opened his first unit in 1971 in Boise. His three corporations now operate 57 units in three states - Idaho, Washington, Oregon -- and have three more under construction.

"I like the format," he says of franchising. "That's why you pay your fee. Sometimes the head office can be a real taskmaster, but you have to do it their way. There is real strength in getting people to pull in the same direction. Our signs are the same, and the product you eat in Georgia is the same as it is in Washington."

What's Your Franchisee Aptitude?

Mr. Waller agrees that franchisees need a certain personality coupled with specific work traits and tendencies to maintain the middle balance necessary for success in franchising. Before paying your fee, you need to know: What are these traits and do I have them?

Donald Boroian, chief executive officer of Francorp Inc., a franchise-consulting firm in Olympia Fields, Ill., jokes about the two tests franchisers used to select potential franchisees in the days before regulation helped clean up dubious franchisers. There was the "check" test and the "mirror" test: Did the franchisee's check clear the bank, and if you held a mirror under his nose, did it fog up? In other words, was the candidate still breathing?

"Some franchisers didn't believe that the mirror test was so important, just as long as the check cleared," jokes Mr. Boroian.

A well-run franchise won't accept a franchisee simply because he or she can ante up the initial fee. A franchise that fails because a franchisee isn't qualified costs far more in time, money and reputation than the franchisee's payment is worth. Still, while times have changed, the days of the "check" test may not be completely gone. There will always be unscrupulous operators marketing new systems, which is why you must thoroughly research franchises before committing to owning one.

The accompanying testis based on extensive surveys of franchisers conducted by Francorp, in association with DePaul University in Chicago. One edition of this poll asked the franchisers to choose from a list of two dozen traits of their successful franchisees those they believe are most important. A total of 265 franchisers representing more than 40,000 franchised units responded to the survey.

The test measures your aptitude to be a franchisee, not your worth as a person or your overall business acumen. Before investing thousands of dollars in a franchise, it's worth finding out if your personality is suited to the business format or if you'd be better off doing something else, says Mr. Waller.

"If you want to do things differently than the franchiser, then you shouldn't be a franchisee," he says. "It's fine to want to own your own business, but there's a reason why you buy a franchise. It's a proven product that's had a lot of the risk taken out of it, so you must be willing to stand behind it, pay your fees and go with the flow."

From StartupJournal.com
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