Tuesday, July 15, 2008

Franchising Common Sense

Thinking of buying into a franchise? Please read Dissed-enfranchisedg from MyBizBroker:

"In a shaky economy, more people interested in running a business may turn to franchising, looking for a built-in roadmap to success. But here are three warnings that can be gleaned from the Cold Stone shakeout to consider before taking the plunge:

1. Is there too much expansion? Cold Stone’s rapid pace of store openings was enticing. Everyone wants to be on board with a winner. But you may not want to be invested in a brand if locations are too close together, or brand saturation among consumers sets in. Cold Stone says it closed more than 100 stores last year. One list on its Web site showed 303 stores for sale, more than 20% of the company’s total as of last December.

2. What’s the company’s policy with national coupons? While franchisees often love national advertising, they don’t always love national coupons or discounts because not every market’s economics are the same. In the case of Cold Stone, franchisees contend that a two-for-one coupon cut into profits. Cold Stone has agreed to stop distributing them.

3. Will the product survive a downturn? A $4 scoop of ice cream is fabulous business when most folks are feeling flush. It isn’t such an easy sell when people are cutting back discretionary spending. Ask yourself how you’d market any franchise during tough times as well as good times. And prod the"