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How To Choose the Perfect Franchise Business

Fisher: I don't think well-known and low-cost are mutually exclusive. Most people don't have $1 million to invest. Many of them have been funded through 410(k) investments . If you look at the IFA members we have, many are home-based or mobile and have gigantic networks of business. If it's $100,000 or $200,000, the amount needed to make the same return on your money is different than you if you invest $1 million. The return is faster.

What are the key factors of a good franchise?

Fisher: In a good business , strong trademarks is certainly up there; reasonable unit economics -- we call it reasonable return on investment; one that has teachable skills with well-defined training systems and operating procedures; one that has a unique concept that is differentiated from competitors; and one that has seasoned management with both experience in franchising and in the underlying business that's being franchised. Look for a company with a track record of growth.

What are some common misconceptions about franchising?

Fisher: I think people don't recognize that it's a restricted relationship. You're often limited in geography and a particular channel distribution. You have to operate within standards and follow systems. You have to pay initial and ongoing fees to the franchisor. Often you have required purchases of things by the franchisor and you're limited in what kind of advertising you can do. Also, there are terms. The franchise agreement is not forever; you have rights to renew it.

What should new franchisees have prepared besides financials?

Fisher: I think you should know timing for when you're prepared to make an investment. You should have a process and procedure for looking at these investments. Identify a professional accountant to help you prepare well-thought-out projections of what your business will do and of course a franchise attorney -- not the person who wrote your will -- who is experienced in these kinds of matters. It's probably the most expensive investment that a person will make. A good place to start is the IFA's website .

I always say to folks, don't fall in love with the yogurt. Make a business analysis. Even brands you never heard of might be an ideal opportunity for you. It's not that easy to pick them. We have so many people calling about yogurt today. There are yogurt stores on every corner, so you really have to make a competitive decision.

-- Written by Laurie Kulikowski in New York.

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