Picking the Best Franchises (And Avoiding the Worst)
There are nearly 3,000 franchise concepts out there. So which one is a winner?
Dick Gibson’s Journal story today offers one yardstick. He cites a Coleman Report study looking at the number of SBA-backed franchisee loans that went into liquidation. The measure gives an indication of the relative health of some 500 franchises.
Some loan winners:
And some loan losers:
While picking a good personal match is somewhat subjective, here are other ways to handicap a purchase. This WSJ story offers a list of franchise “high performers.” Out of curiosity, I cross-referenced this list with those considered winners in Gibson’s piece and found one overlap: Culver’s Frozen Custard.
There also are franchise boot camps that offer to teach you how to pick the best horse. And Entrepreneur magazine compiles annual lists if Top 10 franchises in multiple categories, such as the best home-based, best low-cost, and best new — based on growth, litigation and other factors.
Another approach is to use a search engine and blogs to learn about the litigation that franchise systems may be facing and what disenchanted franchisees are saying about their franchiser. This recent post about Cold Stone Creamery here is one example. FranchiseLawBlog.com lists class actions in progress. And FranchisePundit.com occasionally highlights the stories of unhappy franchisees, like this one from Subway.
What’s are other good franchise blogs? What are some of the best and worst franchise experiences you’ve heard of — and how could they have been avoided?
Photo by SqueakyMarmot @ flickr.com
Wendy, franchisees fail in exactly the same way other small businesses fail – they run out of cash. Those franchisors and franchisees who understand this basic principle will succeed. Those that don’t will be posting on the blogs you listed.
There’s an interesting article about the factors to look at BEFORE buying a franchise at the Franchise Foundations website. The Cold Stone case is mentioned, as are other franchise company mistakes under the individual factors. You can find it at http://www.franchisefoundations.com/franchisearticlesi.html#Bookmark4
The author, Mr. Franchise (google him) is a San Francisco franchise attorney, author, instructor and franchise expert. He’s the one who was the franchise expert in the Nagrampa case, where the California 9th Circuit of Appeals threw out the franchise arbitration clause.
Sorry, the correct link for the Buying a Franchise evaluation factors article is http://www.franchisefoundations.com/franchisearticlesii.html#Bookmark1
One thing the author, Mr. Franchise, points out is the attorney who traded her briefcase for an ice cream scoop in the Cold Stone case failed to research the l-e-a-s-e aspects before buying the franchise. While you or me might possibly make this kind of mistake - an attorney? Like he says, it’s almost another bad attorney joke - except she’s not laughing. Paying back a $350,000 loan balance isn’t funny.
[…] Below is the Small Business Administration’s annual compilation of performance data on thousands of franchisee loans it has guaranteed covering loans made from October 1, 2000, to September 30, 2007. Hat Tip: WSJ […]
Independent Street covers the aspirations, quirks and unique challenges and opportunity of entrepreneurship. The Journal's Gwendolyn (Wendy) Bounds, is the lead writer. After a decade at the Journal following fashion, media, retail and technology, Bounds became small-business editor and columnist in 2004. She also pens a home improvement column called "About the House." A native of North Carolina, Bounds is author of 
