Business-in-a-box: The basics 

By Adam Stone – Special to Military Times 

When Air Force Col. Dan Cvelbar left the service in 2003 and took up residence in Murrieta, Calif., after 24 years in uniform, the civilian world did not welcome him with open arms. 

“I looked around for six or seven months trying to think of what I wanted to do next,” said Cvelbar, 51, former director of the satellite program at Los Angeles Air Force Base. 

Unable to break into a hurting work force, Cvelbar went solo — sort of. As owner of a HouseMaster home inspection franchise, he is his own boss, but with all the backing of a big corporation. It’s called franchising. 

The concept 

When you sign a franchise agreement, you’re buying the right to sell trademarked goods or services under a recognized name. The parent company — known as the franchisor — typically supplies advertising support and operating methods and usually receives a portion of the profits made by each business owner. Individual business owners are known as franchisees. 

The costs 

Franchisors generally charge an upfront fee — known as the franchise fee — which gives franchisees the right to operate under the parent company’s name. But there may be more initial costs depending on the franchise. 

Take Bruegger’s bagel bakeries as an example: While the franchise fee is only $30,000, the company estimates a total upfront investment of $391,600 to $578,600 with real estate and equipment. Likewise, you can buy a Jenny Craig weight loss franchise for $25,000, but the company says you should expect to spend $164,600 to $440,500 to open your center. 

Additional upfront costs may include buying or leasing a commercial property; renovations to make a property suitable for business; and equipment and supplies, which may be had at a discount through the franchisor. Many franchise companies also offer financing to help new owners get started. 

What you get 

Here’s what the Federal Trade Commission says new franchisees can generally expect to receive when signing a franchise agreement: 

• Name recognition: The clout of doing business as a recognized brand. 

• Help finding a location: A franchisor may help you find a site and negotiate a lease. 

• Training: Hands-on or classroom instruction for you and your employees. 

• A system: At many companies, detailed manuals set forth required procedures. 

• Buying power: A parent company may buy collectively on behalf of all franchisees. 

• Materials: Logos, branded goods, signage, etc., may come ready-made. 

• Management support: A franchisor will help you learn the ropes of retail management, customer service and marketing. 

• Advertising: Shared marketing and advertising efforts among franchisees. 

As Cvelbar vetted possible franchises, he said he was impressed by HouseMaster’s openness. 

“They were very good at answering all my questions,” he said. “They offered names of people in the company for me to call who had franchises, and they didn’t hide anybody. I talked to people who were new to the process, who were struggling a little — not just to the successes who had been there for a long time.” 

Cvelbar’s best advice: As in all things, success in franchising comes through hard work. Your franchisor is a reliable teammate, but the surest way to win the game is to play as if you are out there all alone. 

“You need to make sure you are ready to get started and run hard,” he said. “Nothing is easy in terms of making a living. You’ve got to go at it full bore just like you did in the military. You are still the one responsible for building that business, and you’ve got to be committed.” 

Inside tips 

Buying into a franchise is by no means a sure thing, said Lonnie Helgerson, chairman of the International Franchise Association’s VetFran program and CEO of Ident-A-Kid and eMed-ID franchise systems. Even a good name can lose its luster in the marketplace, and a franchisee who isn’t ready to put in the time and effort isn’t going to make it. Helgerson’s best advice for prospective franchisees: 

• Set money aside. “You are not buying yourself a job. You are buying something that you will have to build before it turns into income.” That means having three to six months’ income set aside to carry you through the ramp-up. 

• Be realistic. “You don’t generate $100,000 in income by buying into a $20,000 franchise.” And even a high-dollar franchise may take time to turn a profit. “It is going to be a long-term commitment. It takes time.” 

• Look for a franchise with staying power. “You want to get into something that has got some legs to it, not just a fad, because fads come and go.” 

• Find your passion. Before you think about the money, or the territory or the support that might be available, picture doing this 40, 60 or 80 hours a week. “You want to get into something that you are really going to enjoy doing.” 

Weigh the benefits 

Why a franchise may or may not be right for you: 

• Pros 

Name recognition means instant credibility. 

Training from those who know the business. 

Co-op advertising brings down marketing costs. 

• Cons 

Less control than you’d have as a sole proprietor. 

Ongoing fees such as royalties and advertising fees. 

Rigid rules on how and where you buy supplies. 

Source: Federal Trade Commission