Franchises offer varied opportunities to entrepreneurs

April 30, 2012
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Would-be entrepreneurs gathered Thursday to find out what it takes to go into business for themselves during a “meet the franchisors” forum at Western Michigan University’s Grand Rapids campus.

Louisville, Ky.-based FranNet hosted the event.

The meeting included face-time with a half-dozen franchisors who spoke beforehand, investment advisers, accountants and other business development resources.

Founded in 1987 by Howard Bassuk, who later sold his North American interests to FranNet associates Steven A. Rosen and Jack Armstrong, the for-profit FranNet provides education and support to people who’ve mulled going into business for themselves through franchised business ownership, said Bridgitte Betzer, a franchise placement specialist, who likens FranNet to an entrepreneurial matchmaker for those who are not quite sure what would be the best fit for them as a franchisee.

“We help them by assessing their strengths, values and motives and interests, and matching them with franchise opportunities we feel would be a good fit for them based on the business model we created,” said Betzer. “We carefully select and screen the financial strengths and experience of the franchisor and talk with the franchisee.”

FranNet earns its money by the national franchisors seeking candidates; franchisees do not pay FranNet, said Betzer.

There is no single answer to what makes a good fit with a franchise business, said Betzer. A person’s risk aversion does come into play when determining which, if any, of the 3,000-plus franchise concepts FranNet has available is right for them, with 80 growth industries including senior care, health and wellness, and business consulting, said Betzer.

Betzer said some potential franchisees feel they’re ready to join the ranks of the self-employed because they are ready to leave corporate America behind and fulfill a dream of becoming their own boss and mine a financial future based on their own volition.

“Risk tolerance helps give us an idea of what kind of franchise is the best match for them so they can have more flexibility and build a franchise system,” said Betzer. “Somebody who wants less of a risk may be a better match with a more established franchise that’s been around a number of years (and) that has a systematic process in place.”

Dunkin’ Donuts is an example of an established franchise. Founded in 1950, the international donut, baked goods and coffee retailer plans to expand its market share in Michigan and seven other states (West Virginia, Ohio, Illinois, Alabama, Georgia, North Carolina and Tennessee) by expanding over the next 20 years from its current 7,500 locations nationwide to 15,000. The franchise presently has 59 locations in Michigan and only one in the Grand Rapids demographic market area.

“There isn’t a county in Michigan we wouldn't be able to find a location for if we had a franchisee’s commitment to development,” said Grant Benson, vice president of development for Dunkin’ Brands Inc.

Dunkin’ particularly is interested in those who may already operate local businesses, such as other restaurants, retail outlets or convenience stores and gas stations, all of which may be a good fit to operate a Dunkin’ Donuts.

Part of Dunkin’s draw to franchisees is its pliable real estate formats, which include free-standing restaurants, end caps, in-line sites, gas and convenience stores, travel plazas and universities, as well as other retail environments, said Benson.

“We go to areas outside of larger metropolitan areas where someone in those areas is committing to one or two stores,” said Benson. “In a more rural community, we understand someone may not have restaurant experience, but may have had an opportunity to build a business, to manage a staff, to operate effectively and profitably, and that’s really important to us in regard to the development commitment they may be taking on.”

Benson said he considers any business that sells coffee, baked goods and snacks as competitors, but specifically mentioned McDonald’s and Starbucks.

He said the reason potential franchisees might sign a contract with Dunkin’ Donuts is because it has carved out a 98 percent brand recognition, has a multi-million dollar advertising fund and offers ongoing operational support.

“And some of those chains don’t offer a franchise,” said Benson. “Starbucks doesn’t. McDonald’s, in many places, is sold out in the U.S. One of the neatest reasons to choose us is we have a unique offering that allows someone to tie in with a brand with 55 years (of history) — we’re not a start-up, and they have the opportunity to go into new areas and be representative of that brand with no other Dunkin' in many cases within 100 miles.”

Benson declined to say what the estimated cost was to open a Dunkin’ store, but said “we match the capital investment of a store with the earning potential of the area to make sure the franchisees are able to earn the returns they would expect.”

Betzer said start-up costs with a franchise through FranNet can “be as little as $65,000 in total investment.” Almost half of individuals placed into franchises by FranNet utilize their 401(k)s or IRAs in order to form a C corporation, which is taxed separately from its owners, establish a new 401(k) in their company or buy stock in their company as another investment.

“Obviously, Grand Rapids is one of the larger cities in Michigan, and when you look at the growth opportunities, we tend to identify larger cities in the state,” said Betzer. “There’s a lot of great franchise opportunities from a variety of industries, new and established, that we don’t have in Grand Rapids. The idea is to provide greater options in business for our consumers and bring franchising to the area.”

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