Buyers Learn to Beware at Franchise Boot Camp

 

At prices in between, there are programs sponsored by business schools with small-business centers, or by local chapters of organizations like SCORE, which puts beginner entrepreneurs in touch with retired executives who can mentor them. The H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University in Fort Lauderdale, Fla., offers a course called Catch the Franchise Fever several times a year for $59. And the Zicklin School of Business at Baruch College in New York offers a four-session workshop approximately once a semester. A good place to start looking for workshops in your area is the U.S. Small Business Administration's events calendar.

Seasoned Advice

Look for seminars that will put you in touch with franchisees, as the one at the Huizenga School does, according to Cheryl Babcock, the professor who runs the course.

One of the most eye-opening parts of the seminar Mr. Dominguez attended was hearing the franchiser's point of view on one night while a franchisee offered his perspective on the next.

"The franchiser was telling us things are great and growing, and there's a national advertising campaign hitting the airwaves," he recalls. "The next night a franchisee was there telling how he found out after he got in that he had to pay for his own advertising, and it was costing him a fortune."

Mr. Dominguez was sufficiently interested in franchising to do about 60 hours of his own research into franchises before coming to the seminar, contacting about 25 companies and reading through five offering circulars. But from what he learned from Ms. Kezios and the other speakers -- who also included two franchise attorneys and a banker who loans money to franchisees - plus his own research, he's leaning toward opening a business from scratch or even returning to a corporate job.

"[With a franchise], you lay out a lot of money and have no guarantee of success -- they might open a store right next to yours," he says. "If I invest my money in my own business, I can always hire people with expertise I don't have, like marketing, and I don't have to pay royalties."

Lessons Learned

Others left the seminar feeling more optimistic, but more cautious, too. One of the major lessons: Big established franchises offer strong brand names, but they can also be less flexible negotiators and more restrictive parents than smaller, younger franchise systems.

"I came into the seminar thinking I was interested in a Subway or another big name," says Fred Soleto, who took the course in Los Angeles and co-owns VivaHollywood, an entertainment-news Web site for Hispanics. He was interested in a franchise as a second business, most likely as an investment that someone else would run. "Now, as an entrepreneur, I think I'd be more interested in a franchise where the ball is rolling, but it's still small enough that I can invest money, maybe buy a territory and maybe help to shape how it evolves. Or where at least there would be more flexibility in negotiating the contract."

The contract takes center stage at most workshops. Attendees spend much of their time dissecting it and learning what can go wrong if they don't pay enough attention to it. Leo Hicks walked into a USHCC workshop in Dallas believing he wanted to own a

Wing Zone chicken franchise and walked out still convinced, but with a long list of questions he wanted to ask about his contract.

"I wanted to know if I'd be able to protect my territory from other restaurants (in the franchise), how many lawsuits had been filed against the company, circumstances where the franchise could be taken away, my obligation to participate in promotions, and what my termination rights are," he says.

Listening to a woman talk about her lawsuit against her former franchiser and to a man who started and sold a competing chicken-wing chain persuaded him that "franchises are a good business," says Mr. Hicks, but they're just that: a business. "It's not a family. It's hard-nosed business. The franchiser is going to look out for his best interest and I have to look out for mine."

But after going to franchise boot camp, he's confident he knows how.

Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved

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    • Eileen P. Gunn

    Eileen P. Gunn is the founder of FamiliesGo!, a travel website for busy parents planning family vacations. She is also an independent journalist and author whose work has been published widely. In her Inc.com blog Start Me Up, Gunn shares the whys and hows of building a business as she does it.


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