Buying a franchise is not like buying a job

Reuters:

David Ambinder spent more than 25 years on Wall Street, most recently as a senior vice president of global support services for Lehman Brothers. When he got a pink slip last summer - just months before the investment bank filed for bankruptcy - he turned his attention to more humble endeavors: fixing up people's homes.

Ambinder, whose retirement package was hard hit by the economic downturn, dipped into savings and mortgaged his home to start a Union, New Jersey branch of a longstanding franchise called Mr. Handyman. The business sends skilled craftsmen to do a variety of household jobs ranging from installing toilets to cleaning gutters.

"It's very exciting to build a business; for me it's the right move," says Ambinder, who opened his doors in November after evaluating several franchise choices with a broker. "People aren't going to be moving and they are going to need their homes repaired. I feel there's a niche for it."

Ambinder declined to discuss specific costs of his business but Sara Faiwell, a spokeswoman for Mr. Handyman, said the average cost of a franchise is about $110,000 with a franchise fee of $14,900.

Among the rolls of laid off bankers, executives and blue collar workers - as well as the gainfully employed who can see the writing on the walls - are many aspiring franchisees looking to make the leap into entrepreneurship under the safety net of a tried-and-true business umbrella. They're sick of watching their 401Ks get hammered in the stock market and are looking for a structured plan that offers the promise of financial independence.

"I got my severance and retirement but that's not enough," says Jim Keck, a former plant manager for troubled automotive parts maker Delphi Corp. Keck's 35-year career with the company ended in July when Delphi closed its Kettering, Ohio facility and moved production overseas. He looked at three service franchises before choosing DUCTZ, which provides air duct cleaning and restoration services.

"They have a business model that works," says Keck.

...

Most franchise operations have a business model that works--for the right people. One of the companies I was general counsel for franchised three different business models. Those who failed fit certain patterns. People who had a background in personnel usually did poorly. They tended not to take responsibility for the outcome of the business.

Especially important for people like those in the article was the failure of those just buying a job. The most successful people were those who were passionate about the business and the goods and services being sold. You could put those people in a store where the previous owner had failed and it would be profitable within a month.

Franchising is a good way to go into business. It comes with a way of doing business and some built in recognition. But it requires more than just paying the franchise fee and opening the doors. It also requires a willingness to work hard long hours.