Small Business Financing and Franchise Financing Blog

Considering a Small Business or Franchise?

Wednesday, June 3

Many of our Guidant 401k clients are either current franchisees or seriously considered purchasing a franchise during their due diligence process. Why? Because franchises offer a lot of benefits to any entrepreneur.

Earlier this week, The Wall Street Journal published an interview with experienced franchise consultant Britt Schroeter (see The Franchise Decision), which includes many insights into who franchising works best for, why it is so prolific in a down economy and what to keep in mind when considering a franchise.

As Ms. Schroeter, who has worked with Guidant in the past to obtain financing for her clients, tells the WSJ, “franchising is entrepreneurship with training wheels.” And, during these uncertain economic times, when the entrepreneurial itch comes along, many prospective new business owners take no issue with starting something with some extra safety rolled in.

We definitely think that the interview with Ms. Schroeter is a very useful resource … even for those who are considering purchasing an existing business, and not necessarily a franchise.

Some suggestions Ms. Schroeter has for prospective franchisees, which (we think) are helpful for anyone considering a business purchase:

“As for general guidelines, I advise my candidates to always shop within
their means. People assume that it takes a lot of money to make a lot. Not true.

“There are franchising opportunities with low investments that have some of the strongest [returns on investment] around,” she tells the WSJ.

“The emergency-restoration industry [that services flood, fire and other catastrophe victims] is one. Commercial cleaning also can be a very low-ticket business.”

“Consider options where you can keep your job and start a franchised business on the side. That way you have the security of your job and can move into your new business full time when it’s financially viable.”

“I’ve always taken “fast growth” with a grain of salt. You need to make sure you select the franchise based on reality, not hype. Climbing on board a fast-moving train is great, as long as the track is solid. Rapid growth can be a sign of a healthy system—most of the time.

"But because a lot of others are getting into a franchise doesn’t mean you need to be any less careful. Do full diligence. Do your homework. Think for yourself.”