Chewing Over Ideas For A Franchise

News Day:

You think you have what it takes to be an entrepreneur, but you don’t want to go it alone.

Franchising seems like the best idea, but picking the right one can be overwhelming given the hundreds of concepts and brands to choose from.To be sure, there seems to be a franchise nowadays for everything from scooping pet poop to junk removal, with new ones popping up every day.

In the past three years, nearly 900 new franchise concepts have been introduced, according to a study released by the International Franchise Association, a Washington-based trade group, and Frandata, an Arlington, Va.-based research firm.

So, how do you know what’s right for you?

Well, to some degree it’s like choosing a life partner: You’re looking for a long-term commitment, so you want to make sure it’s not an infatuation that fades after the honeymoon.

But prospective buyers too often end up buying the first franchise they see.

“They like the taste of ice cream so they go buy a Cold Stone Creamery,” explains Dan Rowe, chief executive of Fransmart, a franchise development firm based in Alexandria, Va. “You really have to do your research.”

The Internet is a great place to get started because most companies’ brochures are online. For many people, the amount they can spend will narrow the choices significantly, but they shouldn’t jump at the first low-cost investment.

You generally want to see a sales-to-investment ratio of at least 2 to 1 and optimally 3 to 1, says Rowe. So if you invest $200,000 you should realize at least $400,000 in annual sales by the end of your first year. You also want a net income or pretax net profit of at least 15 to 20 percent, he adds.

Such information can be purchased from a company like Frandata, says Rowe. And a company’s financial performance is generally outlined in a Uniform Franchise Offering Circular.