smart spending

Fascinated by franchises? 5 things to know

As an expert in PC repair and programming, Sherman decided to take a serious look at the handful of computer-support franchise concepts, often referred to as "geek franchises."

The franchise deal he decided to pursue required a hefty initial investment, upward of $80,000 and a monthly franchise fee to cover a national advertising campaign. Sherman was skeptical of the requirement to put a toll-free number on his local advertising so calls could be redirected to him if they originated in his territory in central New Jersey.

"I would have actually had to pay for and voluntarily agree to introduce a middleman into my business at the rate of 15 percent of gross revenue for the next 10 years," he says. So Sherman walked away, again.

He never regrets listening to that skeptical voice in his head. After all, in 2003, he successfully launched his own brand and company, RoyalGeeks.com, based in Matawan, N.J. RoyalGeeks focuses on remote and on-site tech support.

Sherman now employs five full-time employees and 15 contract and part-time employees. From day one, he has been profitable and has been able to invest in new business ideas and strategies because he's not paying monthly franchise fees.

"I can experiment and get it wrong because I don't have to pay out that 15 percent. It gives me more leeway," Sherman says.

"If I had signed the paperwork, I would have only been able to serve the area of central New Jersey," Sherman says. "If I had wanted to expand, I would have had to buy a second territory."

Research, and research some more

A franchise deal is about more than just the financials. The old investment adage that past performance is no indicator of future success rings true in the franchise world, too.

Signing a franchise deal means connecting your livelihood, savings and future earnings not just to a business model, but a brand. And if one thing is abundantly evident in today's marketplace, it's that brands rise and fall, especially in the retail industry, where there are hundreds of retail franchise concepts.

That's why it's critical to research and read everything you can about the company, brand, leadership experience and existing relationship with franchisees.

advertisement

Research the franchise concept by searching blogs and other feedback Web sites such as Complaints.com, where you can find out if a franchise concept has a positive reputation among consumers, according to Complaints.com Chairman Rob Monster.

"It is a leading indicator to problems that may emerge later in a franchise network," says Monster. "What we have seen is that the consumer complaints are the first indication that the franchiser may have lowered the standards for who can be a franchisee and that they are diluting the brand."

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.32%  0.06 4.26%
15 year fixed, 0 point 3.36%  0.09 3.27%
5/1 ARM 3.37%  0.10 3.27%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.74%  0.01 4.75%
50K FICO-based HELOC 4.51%  0.01 4.50%
100K FICO-based HELOC 4.24% --0.00 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86%  0.20 3.06%
48 month used car loan 2.79%  0.40 3.19%
60 month new car loan 2.94%  0.10 2.84%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.90%  0.02 0.88%
2 Year CD 1.02%  0.01 1.03%
5 Year CD 1.59%  0.01 1.60%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.01 15.70%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
advertisement
FRUGAL NEWSLETTER

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

advertisement
Partner Center
advertisement

Connect with us