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> A fresh start
> What’s the appeal?
> The risks
> The franchise option
> Taking the plunge
> Sidebar: Resources for the Budding Entrepreneur or Franchisee

People and budget are also important priorities for Julie Susman, president and CEO of Jefferson Consulting Group (www.jeffersonconsulting.com), a professional services firm based in Washington, D.C. “My company’s assets go down the elevator every night, and I never forget for one minute that my success is 100 percent dependent on the team we have,” says Susman. “Therefore, no matter how much I would like to help a company expand their government presence, if a client isn’t able or willing to fund our efforts, I can’t look my employees in the eye and tell them I have their interests foremost in my mind.”

The franchise option

Maybe the thought of starting a business — from conceptualization to opening day — is too much risk for you to accept. Maybe you feel compelled to limit the margin for error in your transition to the private sector. In that case, franchising might be a comfortable middle ground between the wild west of entrepreneurship and the cubicle culture of a traditional employment opportunity.

Most franchising in the United States takes the form of business-format franchising, where the franchiser offers an array of services and support to the franchisee, including marketing, advertising, strategic planning, training, quality control guidance, and in some cases, financing. In return for this support, the franchiser will receive initial and on-going fees and royalties from the franchised business. Royalties normally are fixed as a percentage of gross sales and payable weekly or monthly. Both parties in the transaction have a shared interest in the success of individual franchised outlets. This shared equity makes business-format franchising a popular choice, and it accounts for nearly 75 percent of all franchised outlets in the United States.

Recent studies by the International Franchise Association (www.franchise.org) found that franchised businesses account for 40 percent of all retail sales. More than eight million people are employed by franchised businesses, and these enterprises are responsible for creating 170,000 new jobs each year. Widely recognized business-format franchises include McDonalds, Marriott Hotels, RE/MAXX Real Estate Offices, and H&R Block tax preparation services. Moreover, the International Franchise Association has a program specifically designed for veterans — VetFran offers financial incentives to honorably discharged veterans and is accessible through the association’s Web site. The mutually supportive relationship between the franchiser and the franchisee helps reduce the risk associated with launching a new business. In many businesses, the competition is so intense that minor efficiency enhancements, name recognition, sophisticated local and national advertising campaigns, and marginal improvements in purchasing power from a national franchise organization can help ensure the profitability of a new business.

Garrett Chesnutt, a veteran of service in the Texas Air National Guard who now resides in Charlottesville, Va., has had a positive experience with franchise ownership. “I began the process by asking myself what (services) the community needed and studying the range of business formats presented in Entrepreneur Magazine” (www.entrepreneur.com/franchise).

Chesnutt’s research led to an affiliation with Jet-Black International driveway repair and seal coating services (www.jet-black.com). After an extensive period of due diligence that included discussions and observations with another Jet-Black franchisee, consultation with an independent business advisor, and a visit to meet the leadership team in the national headquarters, Chesnutt made the commitment and is pleased with what he describes as a “turn-key operation” that provided him with a package of training, equipment, local advertising, and follow-up training seminars — all of which have enabled him to “make money immediately.”

Taking the plunge

Although there are a number of advantages to business-format franchising, some entrepreneurs might find the format overly restrictive. Franchisers continually strive for process improvement and uniformity of operations between franchised outlets. Efficiency improvements enhance profitability, and uniformity of operations yields a consistent and reassuring presentation to customers. However, these characteristics might conflict with an entrepreneur’s penchant to innovate, experiment, and set an independent course. As a first step in moving from vision to reality, readers interested in franchise opportunities should consider investing in one of the many publications designed to guide franchise buyers through the complicated process of identifying, evaluating, and working with a franchiser. Achieving Wealth Through Franchising (Streetwise Publications, 2001) includes a detailed review of the intricacies of franchise disclosure rules and the federally mandated Uniform Franchise Offering Circular, which is similar to the prospectus provided to equity investors in mutual fund transactions. Also included is a series of checklists to guide franchise owners to opening day and specific guidance regarding fee structures, negotiation strategies, return on investment guidelines, business plan development, employee selection and training, and specific recommendations about when to seek the counsel of an experienced franchise attorney.

Finally, because large sums of money are involved in the selection and operation of a franchise, there is always the potential for abuse. Prospective franchise buyers might want to consider using the services of a franchise broker. Franchise brokers serve a role similar to real estate agents. They typically will represent a variety of franchisers and are paid a commission for matching a franchiser with a buyer. Potential buyers generally are not charged for this service. However, some franchise brokers will charge clients a flat fee to assess a buyer’s interests and match them to a suitable franchiser.

When speaking about career transitions, Harvard professor John Quelch likes to use the example of “monkey law” — where the monkey swinging through the jungle never lets go of an old vine until he has a firm grip on the new one. The principle of monkey law argues for a gradual career transition involving extensive research, networking, and maybe an interim position to learn the nuances of a field, expand your network, and develop a clearer vision of your future.

Martin Yate, author of the popular Knock ‘Em Dead series on career transitions, reminds his readers “it’s a marathon, not a sprint. People should treat their career transition like a college course and become students, learning where growth areas are, joining professional associations, networking, and studying those who are making names for themselves.”