To franchise or not: It all depends on the best fit
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June 6, 2010
By BOBBY WARREN
ORRVILLE -- After college, Rodd Welker went corporate, landing a job in downtown Cleveland, but it did not last long.
After careers in higher education and in the nonprofit world, he is now working with businesses and individuals in an effort to "take them the places where they want to go."
Welker recently spoke to a group about franchising at the Fourth Friday Business Matters Luncheon at Heartland Point.
About 75 percent of Americans dream of owning a business, but not many do much about it, Welker said. Interestingly, 40 percent of the people between the ages of 8 and 21 want to start their own business, Welker questioned why the dream stops as people get older and are more likely to have the opportunities and resources to make it possible.
The past couple of years has seen a decline in the number of openings of franchise businesses; however, before the slowdown franchises opened on average every eight minutes during every business day, he said.
About one in 12 businesses is a franchise, or about 800,000. These franchises account for about 11 million jobs, which have an impact on 21 million jobs, creating a total of about $880 billion in economic output, Welker said.
There are several benefits to opening a franchise, Welker said. Among them are the success rate is higher than at independent businesses, and after five years 92 percent of franchises are still in business, compared to 23 percent of independents. After 10 years, 90 percent are still in business compared to 18 percent.
However, it is still a risk because 10 percent close, Welker said.
Even though franchises can offer name recognition, mass purchasing power and initial and ongoing training, they are not for everybody, Welker said.
For those people who want to be in control and do things the way they want to do it, then a franchise might not be the right fit, he said.
Kathy Sigler is one who made the transition from a franchise owner to an independent owner. She had a TCBY store in Wooster's north end, but eventually became Kate's Treats at the corner of Beall Avenue and North Street, nearer the downtown area.
"The good thing with a franchise is all of the support," Sigler said. The franchise fee she paid to the frozen yogurt company went into advertising, signage, posters and promotion.
"When you are on your own, you pay all of that out of your pocket," Sigler said. "It costs a lot of money to be a franchise."
Sigler decided to drop the franchise as she saw sales slip and realizing she would not be able to serve the kinds of food she wanted to.
"I wanted to be on my own because I wanted to do my own thing," Sigler said. "They want you to sell what they sell, and you have to buy from them."
In the end, Sigler made a business decision because she wanted to sell food in addition to the frozen treats.
In addition to frozen yogurt, Sigler serves hand-dipped ice cream, gourmet coffees and coffee drinks, milk shakes, slushes and sandwiches.
"It was great while I owned it, but you don't have to have an ice cream cone, but you do have to eat lunch," Sigler said.
When Welker works with people interested in becoming a franchise owner, he is often asked, "What is the best franchise? Which one should I get?"
He offers them a Zen-like answer, "The best franchise is the best franchise for you."
While many franchises are restaurants, there are other opportunities, like children's services, tutoring, clothing, consignment shops, senior care, pets and health and fitness.