Growing occupation: being your own boss

Businesses seeking to expand in Maryland showcase opportunities for potential franchisees at Expo 2006

April 21, 2006|By STACEY HIRSH | STACEY HIRSH,SUN REPORTER

Patricia Stefun lost her warehouse job when Giant Food downsized last year and wants to make sure that history doesn't repeat itself. Her solution?

Become her own boss.

"This is my way of never having this happen to me [again]", Stefun said yesterday as she began to peruse the various franchise opportunities on display at the Maryland Franchise Expo 2006.

The expo, which included about a dozen franchises that are seeking to expand their base in Maryland, showcased some newer and lower-priced operations, as opposed to businesses like McDonald's or Subway.

For Stefun, who has been reading finance books and researching different businesses, the expo at the BWI Marriott in Linthicum was a way to get more ideas for her plan of owning her own small business.

And it's a plan that an increasing number of business people have for themselves.

Nearly 94,000 businesses had fewer than 20 workers in 2003, the most recent year that statistics were available from the agency's Office of Advocacy. That's up from about 87,500 in 1995. And the Small Business Development Center's monthly Smart Start Your Business seminar has been so booked lately that officials there say they've had to turn people away.

"I don't know whether it's because people are losing jobs or dissatisfied in their jobs," said Sonia Stockton, director of the central region for the Small Business Development Center. She added that attendance also could be up because of the SBDC's marketing efforts or simply because more entrepreneurs have ideas they want to turn into businesses.

Regardless of the reason, Stockton says, more Marylanders want to start their own business than in previous years, and a franchise is one way to do that. A franchise comes with name recognition, a business model that has proven to work, and management and employee training already in place, Stockton said.

"This is a way for people who don't have experience at running a small business, who don't have expertise in a particular area but want to start their own business," to do so, Stockton said.

But like any business, franchises cost money and require a lot of work, and profits are not guaranteed.

There are more than 750,000 franchised businesses in the U.S., employing more than 9.8 million people and generating more than $624.6 billion, according to a PriceWaterhouseCoopers study analyzing 2001 data, the most recent figures available.

In Maryland, there were more than 13,000 franchises employing about 179,000 in 2001, according to the study, which was commissioned by the International Franchise Association. More than two dozen of those franchises are headquartered in the state, including Educate Inc. with more than 1,000 Sylvan tutoring center franchises worldwide and MaggieMoo's International with 184 ice cream shops, according to the association.

Opening such a business might be just the right fit for Phil Clark, a mortgage consultant from Elkridge. The mortgage business tends to fluctuate, Clark said. A franchise would give Clark more control over his future, a prospect he finds exciting. "A franchise gives me something more stable," he said between visiting booths at the expo yesterday.

But it comes at a price. The cost of opening a franchise can vary from $25,000 to millions of dollars.

Opening a Motel 6, for instance, costs between $1.9 million and $2.3 million, according to the franchise association. But at the expo, there were opportunities with companies like Discovery Maps and Guides, a franchise that makes maps for the travel and tourism industry and requiring an investment of from $50,000 to $70,000.

For some, franchising can mean economic empowerment and a chance at the American dream. But buyer beware: There is no guarantee of success, and a franchise requires the same amount of commitment, sacrifice and sweat equity as any independent business, said Matthew Shay, president of the International Franchise Association in Washington.

And while a franchise offers the advantage of a proven business, it may not be for everyone. Franchisees have to pay their franchisers start-up fees as well as yearly royalty fees, which vary for each company but are typically about 5 percent of annual gross sales, according to the association. And there's a standard way to run each franchise, so those who are very entrepreneurial and like to run a business their own way may not find a franchise is the best fit, Shay said.

Stefun, the former Giant worker, said using an existing business model would be a prudent way for her to start a business.

"I have a warehouse background, not a business background, so it's a little scary," she said. "So many businesses fail."

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