Opening Franchise Cuts Risk in Recession

Date AddedJune 06, 2010 10:16:46 AM

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The Great Recession has made some would-be entrepreneurs skittish about starting a business from scratch.

For them, it may make sense to buy a business franchise. While franchises have taken a hit, PricewaterhouseCoopers(PWC) forecasts that the number of franchises will expand 2% from 883,292 last year to 901,093 in 2010.

"Franchising lets people get into business for themselves, but not by themselves," says Alisa Harrison, vice president of communications and marketing at the International Franchise Association in Washington.

Here are a few things to keep in mind when considering becoming a franchisee.

Advantages over entrepreneurship: Unlike a typical startup, a franchise comes with

automatic brand recognition, meaning the franchisee doesn't have to invest in getting

the word out. Franchisees also receive operational assistance and management

support from headquarters.

"Becoming a franchisee is a natural for someone willing to let other people make

mistakes on their behalf in advance," says Jason Earle, founder of 1-800-GOT-MOLD,

a mold-detection company best known for the mold-sniffing Labrador retrievers it

employs. Founded in 2003, the company recently secured its first franchisee and is

looking for more . (Earle, incidentally, holds a Guinness record for acquiring his

stockbroker's license at age 17.)

"We've really built something that's turn-key," Earle says. "You walk through the door,

and you get a four-legged partner who becomes your calling card."

Disadvantages compared with entrepreneurship: The difference between starting a

business and buying a franchise is analogous to the difference between building a

house and buying a condo. Much as condo owners must adhere to the rules of the

condo board, franchisees are required to operate their franchises according to a

franchisor's preexisting restrictions and procedures. Thus, the franchise model doesn't

leave much room for creativity, which may rankle entrepreneurs who are used to

making and breaking their own rules.

In the franchise model, they are required to play by the rules of the brand. "You don't

buy a McDonald's and decide you want to sell hot dogs," says Alisa Harrison, vice

president of communications and marketing at the International Franchise Association

in Washington. "You have to follow the system that has been laid out. Veterans make

awesome franchisees because they're very disciplined and are used to following a

system."

Comments

Guest @ 2011-05-23 19:00:27:

Franchising was been a big help to most of those people who are experiencing recession, by this way they have more confidence on investing and entering a new business without any risk at all.