Franchise Picks

By: John Hoose - Founder, LaVida Massage

 

While it may seem counterintuitive, for many motivated entrepreneurs, a recessionary cycle is actually a very opportune time to start a business. While there are always financial and logistical obstacles to be considered, the silver lining in the dark economic cloud is increasingly affordable rental rates and landlords who are highly motivated to make a deal. While making any significant investment is a big decision and should never be entered into lightly, becoming a franchisee is an increasingly popular option for many aspiring entrepreneurs. For new franchisees who are able to secure financing, a small business can be the ideal way to launch a new career or fulfill a lifelong dream.

Franchise opportunities today are diverse and plentiful. The emergence of increasingly flexible and powerful online tools has helped make franchise options more accessible than ever before. While a franchisee's business, educational background and financial capacity will always play a role in determining what industry is right for them, and the evolving landscape of the marketplace will always play a role in the decision-making process, for the most part, deciding what franchise opportunity is right for you is simply a matter of asking the right questions.

For anyone considering entering into a franchise agreement and giving serious consideration as to what kind of franchise is right for them, here are a few key questions to consider:

Is the market saturated?
Competition and saturation are critically important market- and industry-specific elements to consider when evaluating your franchise options. Even the most promising business opportunity may seem less appealing in practice than it does on paper if your road to success is impeded by a saturated marketplace or a long list of local or regional competitors.

Do you have something special to offer?
For many prospective franchisees, the value of the potential opportunity is intimately related to not just the quality, but also the unique character of the goods or services they provide. What can seem like an exciting challenge to some may feel boring and pedestrian to someone else. It is critically important that you, the entrepreneur, are motivated and excited about your business.

What kind of employees will you need?
The size of your workforce and the requirements in terms of training, support and turnover is another important consideration. While some industries require skilled labor, others, such as restaurants and hospitality, have a skillset that can be taught and/or acquired via hands-on training. Finding the "sweet spot" between the high-end labor costs required of specialized industries with highly-skilled and trained employees, and the high-turnover headaches that can plague franchisees whose employees see their job as temporary or as a stepping-stone in their career is key.

Does it carry receivables?
As the current credit crunch illustrates all too clearly, it can be difficult to secure adequate and affordable bank financing to carry your receivables. Prospective franchisees need to be cautious about entering into industries that require extending credit from the business owner to the consumer. For many, a more popular option is to enter into a cash-and-carry or pay-as-you-go business model that does not carry receivables; reducing or eliminating the need to rely on expensive lines of credit.

What are the inventory requirements?
Inventory requirements can vary greatly, and can have a defining impact on the ultimate success of a new business. Prospective franchisees should be aware of the attendant costs, concerns and obligations of businesses that require a substantial inventory, including spoilage, theft, shelving, handling, delivery and other carrying costs. Additionally, the greater initial investment required for inventory-based business models, and the ability of the owner to generally reach profitable status quicker in a service-industry or low-inventory industry makes these popular options for many new franchisees.

Is this a business model with a proven record of success?
Prioritize business models that have proven staying power. Identifying an industry and an operational model that has proven it can work - and will continue to work - should be a prerequisite for any thoughtful entrepreneur. It is always helpful to be part of a social or economic trend; a rising tide lifts all boats, and entering into an industry that is on the rise in terms of popularity or prominence can make an enormous difference to your bottom line.

Does the franchisor provide a strong support system?
A strong support system is one of the single most important elements to consider when choosing the right franchise for you. A good franchisor can offer what is virtually a turnkey solution. Quality franchisors provide material, financial and logistical support and expertise for new franchisees in everything from lease negotiation, site selection assistance and buildout specifications, to advertising and marketing support and comprehensive in-house and on-site training. The best go above and beyond just email and phone support to offer personalized training, and some even provide sophisticated franchise management tools such as high-quality web-based management platforms that are remotely accessible and user-friendly.

John Hoose is founder of Commerce Township, Mich.-based LaVida Massage, a unique health and wellness massage center. LaVida has centers throughout the United States, with franchise opportunities in all 50 states and in Canada