Online resources are plentiful, including the Federal Trade Commission’s consumer guide to buying a franchise and some warnings by the American Franchisee Association. It’s also essential to consult experts and entrepreneurs who are knowledgeable about franchising.
Here are some basic precautions to keep in mind:
1. INVEST IN WHAT YOU KNOW: Try to pick a business where you have some kind of familiarity or related skills. It could be dangerous to go into an industry you know nothing about. Opening a small pizza takeout franchise may seem like a good idea, but if you’ve never worked in a pizza joint or the restaurant industry you could be in for a rude awakening.
2. REMEMBER THE RECESSION: The fast food business tends to prosper in recessions, and so does shoe repair. But will your franchise? Even if a business category has a history of faring well in economic slumps, make sure you have enough to sustain yourself under some of the bleaker scenarios.
“People need to be extra-cautious in deciding whether current economic conditions are favorable for starting a new franchise business and in forecasting their costs and profitability,” said Craig Tregillus, franchise rule coordinator for the federal Bureau of Consumer Protection. “Because nobody knows what’s going to happen.”
3. CHECK THE FRANCHISORS’ CREDENTIALS…
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