Franchise? Be wise

Common wisdom says that franchises are a great opportunity for someone trying to start out in small business. After all, you get a known brand, someone else to do your marketing, guidelines and rules, and a helping hand. That may all be true, but what you might not get can be just as important, things such as territorial protection (to keep someone else from opening a competitive franchise across the street), help with financing, or a price break on the materials you're required to by.

I stumbled today across a site offering info about getting into the franchise business. I have no idea how good it is, and I suggest that before you even consider buying one of these courses, you look at the tons of free stuff out there in your home state's small-business center, any Small Business Administration sites you can find, even one of the myriad sites that give free business plan samples.

There are a gazillion franchises, from well-known food chains to plumbing to jewelry and sign-making and, well, you name it. Before you leap into a franchise, though, consider: Franchises fail at almost twice the rate of self-started businesses, according to one academic study (42 percent vs. 29 percent). And as the same business school professor I quoted earlier (Ed Rogoff of the Zicklin School of Business at Baruch College) points out, franchises are in the business of selling franchises. In other words, they make their money from you buying franchises from them and taking a cut of your gross revenue (not your net!), so you are in the hole before you even make a sale. They're not in the business of seeing that you necessarily do well yourself.