Franchise ownership requires some shopping around


January 20, 1992|By Joyce Lain Kennedy | Joyce Lain Kennedy,1992, Sun Features Inc.

Dear Joyce: I'm in my late 50s, work in the Northeast, and am newly unemployed after 30 years with the same company. I got the word two days after returning from Florida, where I had just purchased a second home. What are my chances for re-employment? Would I be better advised to look into a franchise? -- P.P.

Dear P.P.: What happened to you is a vote to consider small business opportunities -- especially with the structure offered by franchises. A flood of complaints from furious franchisees over the past decade or so have washed over the industry, but in many instances the unhappy campers didn't do their homework before plunging in. Franchisees are becoming more sophisticated and many displaced employees, particularly mature managers who are going to have an uphill battle to get back into the work market, are taking a deep look at franchising opportunities.

John Walsh, a 20-year veteran of the New York City police department, moved to San Antonio, Texas, after he fell from a fire escape. He now operates an Everything Yogurt franchise.

Larry Moats, who formerly played for the San Francisco 49ers, now owns Carex, a car-cleaning franchise in Winston-Salem, N.C.

Although it makes sense that the risk in becoming a franchise operator is less than in becoming an independent entrepreneur, the Federal Trade Commission says no accurate data exist to prove the assertion. Only a few states have strong laws that protect you if you buy a lemon. And litigation is expensive when you've invested everything you own in a franchise.

Shop. Start with member firms of the International Franchise Association (Suite 900, 1350 New York Ave. N.W., Washington, D.C., 20005; (202) 628-8000).

The IFA sponsors the "world's fair of franchising," the International Franchise Expo, which, for the first time, will be held in North America this spring. The expo is set for the Convention Center in Washington, April 10-12. For expo information call (800) 393-1333.

Research a prospective franchise. Find out about the company's litigation history and details of any bankruptcy or reorganization actions. Determine all the costs -- initial investment, royalties you must pay and the degree of financing help the franchising company offers. Determine your rights and obligations according the contract, including restrictions on business activities if you leave the franchise.

Know exactly what you are getting for your money, other than the trademarks and endorsement. Check out existing franchises, not merely ideas.

A ton of how-to-buy-a-franchise books are on the market; read a few. The Federal Trade Commission has two telephone numbers you can use for assistance. The Franchise Rule Information Hotline, (202) 326-3220, provides data on how to investigate a franchising firm corporation and lets you consult with a government franchise attorney. The Franchise Complaint Line, (202) 326-3128, is operated by the FTC's marketing practices division and accepts grievances.

A number of franchise directories are published, including one by the International Franchise Association. Pilot Books (103 Cooper St., Babylon, N.Y., 11702) issues an annual Directory of Franchising Organizations for $6.95, including postage. At libraries, look for Gale Research's "Worldwide Franchise Directory."

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