![\"\"](\"http:\/\/www.franchisemart.in\/franchise\/wp-content\/uploads\/2012\/08\/thumb_1344340656_shutterstock_60057532-300x200.jpg\" "\\"Franchise")
Franchise Success<\/p><\/div>Franchisers got a reason to cheer as they are now seen in the top list of investments people are considering betting in. After all, the thinking goes, an entrepreneur is buying into an existing company and expanding an outlet where none exists. Surely, the money will just pour in.<\/p>\n
Of course, it isn\u2019t that simple. But it can be done if you stick yourself to a basic script. And have a bit of luck.<\/p>\n
\u201cThe nice thing about franchises is you have an entrepreneur who has a product or a service and they have proven they can be successful selling it,\u201d said Lawrence J. Cohen, president and chief executive of Cookie Associates, which owns 27 franchise stores including Great American Cookies, Pretzelmaker and TCBY outlets. \u201cThey don\u2019t guarantee success. But if you do it their way, your chances of success are far greater than if you do it on your own.\u201d<\/p>\n
Mr. Cohen also known as Doc, who sold 35 Great American Cookies stores in 1998 before building up a new collection, said it took a certain type of entrepreneur to succeed \u2014 one who was comfortable with running a business in a prescribed way.<\/p>\n
\u201cIf you\u2019re selling a Big Mac and you decide to use a plain bun because you don\u2019t like the sesame seed bun, well, it\u2019s no longer a Big Mac,\u201d he said.<\/p>\n
This would seem to fit in with the other types of nontraditional investments I have been writing about. But unlike investing in film, racehorses and restaurants, franchises, I found, tend to be an investment that is less exciting than the others.<\/p>\n
For someone who really has fervor for supervision a process, though, investing in franchises can be so lucrative that extra spark may not matter.<\/p>\n
David Barr, an accountant by training, said that in 1998, after managing the sale of Great American Cookies as chief executive, he had enough money to think about what he wanted to do next. He decided to invest some of it in two Kentucky Fried Chicken franchises and begin a second career as a director on corporate boards.<\/p>\n
\u201cI wanted a brand that was a powerful brand, not a start-up, because long term I was looking for something in which I didn\u2019t have to be at the counter every day or over the fryer,\u201d Mr. Barr said. \u201cIt\u2019s a true investment because I\u2019ve never taken a dime out and those two have now acquired 23 franchises.\u201d<\/p>\n
To maintain his investments in Kentucky Fried Chicken restaurants and, later, Taco Bell restaurants separate from his day job, he instituted a firm rule: Every restaurant had to be at least 45 minutes but no more than three hours from his home in Marietta, Ga.<\/p>\n
\u201cI\u2019m not 100 percent passive,\u201d he said, noting that he had an operating partner. \u201cAnyone who thinks that buying a franchise is like buying G.E. stock is crazy. But it\u2019s not 40 hours a week.\u201d<\/p>\n
The biggest drain for passive investors in franchises may be managing the people who are making their investment profitable day to day.<\/p>\n
\u201cA lot of people do not pay attention to the people part of the business,\u201d said Aslam Khan, who started as a dishwasher at a Church\u2019s Chicken in 1987 and now owns 165 of the restaurants and employs 6,000 people. \u201cChicken doesn\u2019t move by itself.\u201d<\/p>\n
He said he attributed his success to making sure that the people who worked for him were well taken care of.<\/p>\n
Stephen J. Caldiera, chief executive of the International Franchise Association, a trade group, said having someone to pay attention to the day-to-day operation was essential. \u201cThe people who just want to invest are smart to hire proven operators,\u201d he said. \u201cYou\u2019re only as good as the people running the business.\u201d<\/p>\n
One of the misleading numbers for people interested in investing in a franchise is the relatively low franchise fee. Mr. Caldiera said fees started as low as $5,000. Burger King\u2019s franchise fee is $50,000 \u2014 but it requires people to have a net worth of $1.5 million and liquid assets of $500,000.<\/p>\n
Finance becomes a serious obstacle in the way of investor. McDonald\u2019s has a similar $500,000 liquid asset requirement, but the company estimates that equipment and preopening costs range from $959,450 to $2,110,700. The franchise fee is a mere $45,000.<\/p>\n