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The Honolulu Advertiser
Posted on: Monday, March 19, 2007

Franchise a big idea for small business

By Glenn Swain and Erin Ryan
Arizona Woman

Joann Smith, left, and Beth King bought a Two Men and a Truck franchise in Phoenix as a more secure way of going into business than going it alone. Franchises have a 90 percent success rate.

N. SCOTT TRIMBLE | Arizona Republic

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WEIGH RISKS IN DECISION TO FRANCHISE

Pros

  • You can grow rapidly using a franchisee's capital.

  • You can develop management through the franchisee instead of hiring and training employees.

  • A franchise provides people who have a financial stake in the business, which improves loyalty and focus.

  • 90 percent of franchises succeed.

    Cons

  • Legal and consultant costs can be high.

  • It demands a different mind-set. Franchisees are business partners, not employees.

  • There is a risk of liability.

  • The process robs you of time from your core business.

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    INTERESTED?

    Want to take a peek at other companies that have franchised?

    www.Franchisegator.com is a franchise and small-business resource to search for franchises, opportunities and franchise business for-sale listings and in-depth info on buying franchises and businesses for sale.

    www.Franchise.org, the official Web site of the International Franchise Association, has a list of more than 1,000 franchise opportunities as well as information on franchise programs and services, education, government relations and news and events.

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    In September 2003, Katharine Halpin sat eating breakfast with a business associate at a Phoenix restaurant.

    For 10 years, the Phoenix-based coach and leadership strategist for CEOs and corporations had hired personal contractors to keep up with high demand. In return, she found herself training her competitors and diluting her brand.

    After she put down her fork and finished venting, her friend referred her to a franchise consultant. Halpin's first two-hour meeting with the consultant resulted in three options: grow company-owned stores with others managing employees, license her product to others or franchise.

    "I was a very successful solo-preneur with a few part-time employees," Halpin said. "I wasn't big enough to hire full-time employees to be leadership strategists. If I licensed, I would lose quality control."

    Halpin, 48, came out of the meeting with complete clarity she needed to franchise.

    "Franchising was the only way I could build a bigger brand and maintain quality control over the services provided," she said. "I had been burned a few times with my independent contractors when I had not stayed involved. It was an easy decision once I got to that point."

    She formed the Halpin Cos. Inc. for the sole purpose of selling her nontraditional intellectual property franchise. To date, she has sold seven franchises in three states at $25,000 a pop.

    The traditional model of franchising has been turned upside-down, with no limit on what can or should be franchised. Once a field dominated by the fast-food and cleaning-service industries, businesses offer franchises in everything from cruise planning and children's parties to fresh-fruit bouquets and IT services. In 2005, more than 300 new franchise concepts opened their doors in the United States alone.

    One reason for the growth: Franchise businesses are successful. According to the association, 90 percent of franchises succeed, while 90 percent of regular startups do not.

    Joann Smith and Beth King spent more than six months researching various franchises to purchase. They interviewed at corporate headquarters, drafted comprehensive business plans, proved their financial stability and underwent background checks before they took control of a Two Men and a Truck franchise in the Phoenix area three years ago. They purchased a second franchise last year.

    "We thought it was the safer way to go. We both left safe, long-term jobs and didn't have the luxury of taking too much risk," said Smith, 52. "They support you with marketing, branding, training and software. You feel a little more confident. They held my hand through the financials."

    However, buying a franchise can be just as financially daunting as starting to franchise your business, with total startup costs for Two Men and a Truck between $100,000 and $400,000. But a 2006 survey from the franchise association found that more than 20 percent of all franchisers offer direct financial assistance through a formal financing program.