April 24, 2014

Management

Choosing a New Venture

It’s important to gather as much information when starting a business.

Barbara Miracle | 5/1/2007


Patchi Chocolates' Johanne Saieh.
Photo:
Eileen Escarda

The International Connection

As Florida becomes more multicultural, international franchises are opening in the state. Johanne Saieh, born in Haiti to Lebanese parents, discovered high-end Patchi Chocolates on a vacation to Lebanon two years ago. Saieh, who has lived in Miami for two decades and also runs interior design and wholesale food businesses, opened the first U.S. Patchi in Dadeland Mall in 2005, with her sister. In deciding, she also relied heavily on Patchi's 30-year reputation in Europe and the Middle East and visits to all 11 stores in Lebanon as well as stores in Paris and London. She plans to add a second south Florida store in the next year.

Before you decide on a franchise, consider these points

Franchisor's History. Examine the executives' overall business backgrounds and their experience in running a franchise. Look at prior litigation involving the franchise and whether the franchisor or any of its executives have been in bankruptcy. Have an accountant review the franchisor's financial statements. Talk to six to 10 prior purchasers of the franchise.

Cost. Know the total investment required. In addition to an initial franchise fee, there are often other costs to rent or buy a site and purchase inventory. Some franchises also require royalties based on a percentage of the business's gross income as well as payments for advertising.

Training and Support. Assess whether the initial training and ongoing support offered by the franchisor will provide the necessary skills for running the business. Find out how many employees will be eligible for training. Compare the instruction to that of other franchisors.

Terms of the Deal. Look at restrictions on what products and services you can sell and to whom. Understand when a franchisor can terminate the franchise and when you can sell it.

Earnings Potential. Franchisors are not required to make earnings claims. If they do, they must provide written documents that substantiate claims. Examine them carefully.

The Professional Manager

Melbourne's Bill Cunningham had a career as a manager for telecom and high-tech manufacturers before deciding to be his own boss. "I looked at everything," he says, and then signed on in 2003 to become the first Florida franchisee of Connecticut-based Business Advisers International (BAI), a management consulting firm. He chose a franchise because he thought it would give him instant credibility as well as benefits such as training and ready-made business evaluation tools. Cunningham, 54, says the total cost for a Florida BAI franchise is $69,000 to $82,000.

The Investor

Margate-based Salad Creations, a 4-year-old restaurant franchise, says it costs $111,000 to $277,500 to get started. Jeff Columbia, a former municipal bond trader on Wall Street who relocated to Naples, signed on as a Salad Creations' franchisee and opened his first restaurant in Sarasota, has another planned in Naples and later, with partner Dean Visaggio, will work with additional investors to open 25 to 50 restaurants over the next six years. As part of his due diligence, he sat in a Salad Creations in south Florida from 11 a.m. to 2 p.m. and watched the people come through the line. "I just trusted what I saw."

Franchises: What You Need to Know

The U.S. Federal Trade Commission requires that franchises provide disclosure documents, often called offering circulars, to potential franchisees and allow at least 10 days for review. Take the time to read all documents thoroughly, talk to at least a half-dozen current and former franchisees and visit locations of the franchise before investing.

Learn More About It

Florida Bar flabar.org
(850) 561-5834
The Florida Bar offers a free consumer publication, "Buying a Franchise," which is available on its website.

Federal Trade Commission
ftc.gov
(877) 382-4357
The FTC has a number of publications on buying a franchise, including the "Consumer Guide to Buying a Franchise" and "Your Legal Rights: Guide to the FTC Franchise Rule."

Florida Department of Agriculture and Consumer Services
www.doacs.state.fl.us
(800) 435-7352 (HELP-FLA)
Florida does not regulate the sale of franchises. Business opportunities, which in some cases may be franchises, must file disclosure statements, however. Call to see if a business is registered as a business opportunity.

Tags: Florida Small Business, Business Services

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