Ready-made retail

Franchises offer blueprints for business success

The word “entrepreneur” may conjure up the image of an innovator who created a business from scratch and built it into a small-town success story or a multi-national empire. But plenty of hardworking business people have found another route to make it in the cut-throat world that sees most startups fail before they hit their five-year anniversary: franchises.

The most famous franchise is, of course, McDonald’s. The concept dates to the mid-19th century, with hotels, telegraph outlets and, later, car lots. Scores of businesses—even some you may have assumed are locally conceived—are franchises. Supercuts, Curves, Great Harvest Bread, Express Personnel, Sylvan Learning Centers—the list goes on and on. An online search for franchise opportunities nets literally hundreds of ready-to-run businesses, and right now in Butte County franchisees are being actively sought to take over Java Detour, Quizno’s and GNC Nutrition stores.

With your contract to run a franchise comes, presumably, a winning formula. Your risk goes way down. And you get to be your own boss—kind of.

The franchise world is not without its tradeoffs. With that successful business plan, snazzy startup gear and national advertising comes large sets of rules and restrictions that can range from the inane to the intolerable. According to the American Franchisee Association, some agreements even include “gag rules,” prohibiting franchisees from talking about their franchise experience. A control freak might not make the best franchise owner, and in some cases (Southwestern Dairy Queens, nationwide Mail Boxes Etc. outlets) franchisees have banded together to fight the parent company.

In a small city like Chico, a franchisee can also be the target of anti-chain sentiment, even though it’s their own money and reputation on the line. The distinction between a corporate-run business and a franchise is not always apparent to the average consumer.

A franchisor typically requires a minimum net worth (including cash that’s not borrowed), along with an initial investment for materials, training and the right to a particular trademark or business model. The franchisee is also required to pay ongoing royalty fees, and often advertising or marketing fees as well. By some definitions, the franchisee does not own the actual business, but rather the assets they’ve purchased, but the sky’s the limit on potential profit.

The News & Review has interviewed four local franchisees for whom the model has worked, and worked well. None of the people we talked to felt like second-class business owners, and if they had to do it over again, they’d still order up a franchise.

Plus we offer a look at how corporations are using personality tests to weed out job applicants, sometimes with questionable results.

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