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Tips for Potential Franchisees

SMALL BUSINESS: Trends in the Southland. Last of Four Articles

November 30, 1987|STUART SILVERSTEIN

Interested in opening a franchise? Experts offer these tips:

Know thyself. Determine, for instance, what kinds of hours you are willing to work. If you aren't ready to work seven days a week, don't buy a franchise in a shopping mall and don't buy any kind of restaurant.

Know the franchising company. The companies are required to issue disclosure documents indicating, among other things, their financial and legal histories and franchising agreements.

Talk to owners of existing franchises (even more importantly, make sure there are existing franchises) and find out how they are doing and how much help they have gotten from the parent company. Also, check out what competitors have to offer.

"Choose your partner carefully," said Edward Kushell, president of Franchise Consulting Group in Los Angeles. "There are lots of good opportunities. Don't make a decision in two days."

Be prepared to invest big money. Start-up costs typically range from $20,000 to perhaps as much as $20 million for a Hilton hotel. Even something as modest as a yogurt shop can require $150,000 to $170,000 to launch.

Beware of fads. When throngs of investors rush into a business, particularly one that doesn't have any proven staying power, it usually doesn't take long before a shakeout begins. Video shops and computer stores are cases in point.

Scrutinize your franchising agreement. See what it spells out about costs, the territory and the terms under which a franchise can be terminated or sold. To help you evaluate an opportunity, you might want to retain a lawyer or business consultant specializing in franchising.

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