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Greener pastures

Jeff McCorry loves his new gig, but is a franchise right for you?

Dec. 13, 2011 - 04:28PM   |   Last Updated: Dec. 13, 2011 - 04:28PM  |  
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Jeff McCorry had dreams of business ownership. The question was how to get there.

When he left the military in 2007, the former Army Special Forces sergeant went to work in the lawn care industry. After a couple of years, he set up shop on his own, and not long after that, he paid $27,000 to become a Weed Man franchisee in Ocean County, N.J.

He could have kept building the business on his own, but franchising just made more sense. "They have a software system that is very intuitive. They gave me training on how to keep a budget. They helped me understand how much money to put into marketing," he says. "They had everything to take it to the next level."

A number of variables help determine whether it makes more sense to go it alone, or to hitch up to an established system.

Rule No. 1: Veterans need to take care when dealing with franchise brokers.

The Patriot Act provides veterans with ready access to capital through expedited loans from the Small Business Administration, and brokers are ready to take advantage of that fact.

Veterans "can access cash faster than any other startup entrepreneur in the United States," says Susan Schreter, financial writer and founder of the entrepreneur resource Her advice: Take it slow. Scrutinize every franchise deal on its business merits.

"People spend so much energy on getting that deal done, they don't ask themselves whether they will be able to sell it down the road, whether they are going to make money off of it," she says.

Some things to consider when you're looking at buying a franchise:

How much control?

One of the reasons many veterans say they love franchise ownership is because a clear and successful business plan is already laid out you just have to follow through to succeed. But you do relinquish some control along the way.

"Certain franchises have strict and onerous requirements as to where you buy various pieces of equipment and material associated with the business. Or your franchise can institute a nationwide requirement to upgrade equipment," Schreter says.

The difference in going solo: You can purchase at the lowest possible price and sell whatever products seem appropriate to local needs.

Business experience

The amount of business savvy one has at the start matters less in franchising because the franchise will be making many of the major decisions, and many well-established franchises have well-funded and thorough training programs to help you find your feet. But a newer franchise may not deliver anything as intensive, Schreter says.

For the solo operator without any business experience upfront, she advises looking for help in other places: "You can very quickly pick up those skills. You can work with mentors and advisers. If you don't know something, you can always find someone who knows."

Capital required

Franchises require cash upfront: a buy-in fee, often discounted for veterans, as well as equipment, inventory and other costs. Going it alone can save some dough. A tax preparer, day care provider or the owner of a small exercise club may face far fewer expenses upfront but it may take longer to see a return.

People skills

If you're not the touchy-feely type, you may find franchising is just the right answer your chance to run your business from behind the scenes, managing personnel, directing accounting and interfacing with the franchise, Schreter says.

But no two franchises are entirely alike. McCorry's Weed Man business emphasizes the need for personal communication to retain business, so if you crave interaction, just be sure to talk to the franchisor about your role as an owner.

Exit strategy

With an eye toward the future, it's smart to have an idea what your franchise will be worth when it's time to cash out.

"You don't enter a business where you shell out a lot of money to get in unless you know you are going to be well compensated for the risk you are taking. For me, that means you should be able to double your investment" by the time you sell, Schreter says.

Schreter advises talking to others in the franchise before you buy. "Find out what the used market is for that franchise. What are other people selling for?"

Going solo is no guarantee, either. "You can spend $100,000 to get a patent with no salable value. You can be surviving in business but without having the chance of ever getting your money back," Schreter says.

The same rule applies here as exists across the board when it comes to franchising versus independent ownership. Don't just think about the business model, the ownership, the opportunity think about the money.

"Once you start thinking like an investor rather than an entrepreneur, you are going to be a lot more cautious when you start throwing money at things," Schreter says.

It's all about the brand

The No. 1 reason many franchisees choose to buy in is the fact that they'll be selling a product people already know.

"The level of name recognition that we have with this would have taken me five or 10 years to build up, if I was just any guy out there with my own company," McCorry says.

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