Before franchising, consider five issues

If you're thinking about using your severance package to buy a franchise, think twice.

That might not be the right option for you, warned Tom Lawrence, president of FranNet of Greater Richmond, a franchise consultant.

"That's what my business is built on -- trying to keep people from making a mistake," he said.

Before rushing to failure, lay the groundwork for success.

Figure out these five issues before taking the leap into franchising:

Know what you want. You may have a vision of what you think you want to achieve by owning a franchise, and what type of franchise to get, Lawrence said.

Maybe you even know someone who runs that type of business and it's doing great. So you're excited and want to jump in, too.

But, if you do, you may quickly realize that it's wrong for you, he said.

Perhaps in reality it demands too many hours of work, and you wanted more time with your family. Or it requires hiring lots of employees, but you don't want to supervise workers.

If you don't carefully match what you want with what the franchise business demands, you may find yourself stuck in a miserable situation, he said.

Prospective franchisees need to spend a lot of time compiling a list of wants and needs, he said. "Until that list is complete, they really do not know what they want."

Also, companies give brokers such as Lawrence a list of what type of people they're looking for to run their franchises. There may be a franchise out there that matches everything that you want it to be, Lawrence said.

Know what you are buying. Ask franchisees who are in the system what they do.

"That's when they find out what the business is all about," Lawrence said. "The best way to find that out is to call them."

You may even be allowed to shadow a franchisee for a day, watching them work in order to learn the realities of the business.

Know how much money you'll need. When you see in the franchise disclosure document how much capital you'll need to get the business up and running, take it with a grain of salt, Lawrence said.

"Talk to people who went through the process and ask if that's enough."

You may learn that you will need much more operating capital, he said.

Also, find out how long you likely will operate before cash starts flowing. "Talk to 10 to 12 people and find out how long it took them to break even," he said.

Some franchisees run out of money and lose the franchise.

Know how important it is to follow the franchise system. You may have been successful at a previous business and think you have a better way to operate.

But follow the operational steps the franchisor suggests first, Lawrence urged. That's what you pay your franchise fees and costs for -- a proven way of doing things.

"Follow the system to the letter until you are successful, then you may have the luxury of innovation," he said.

Know that you will work hard. Prospective franchisees tend to underestimate how hard it will be to start and run the business, Lawrence said.

Some franchise operators may believe they are special and can achieve success in four months rather than the suggested eight months.

"With all due respect, you're not that special," he warns them. "Everyone who has done this is special, too. It's going to be the hardest thing you've ever done."

Lawrence said that when you interview franchisees in the system, ask them to go back and recall what they had to do to be successful.

If you become successful, owning your own franchise business can reward you beyond your wildest expectations, he said.

Contact Iris Taylor at (804) 649-6349 or .