Business expert shares key factors to consider before purchasing a franchise

By: Kyle B
Submitted: 2008-07-16 12:43:50
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Farmington Hills, Mich. – The variety of franchise opportunities is so rich and the choices so varied that people who start out with focused goals sometimes get distracted. They may lose their perspective and start looking at enterprises that really don’t fit their business acumen.

So says Wireless Toyz President of Finance and Development, Richard Simtob, who reminds his perspective franchisees to establish, review and renew their goals as they search, so they don’t get sidetracked and choose poorly. 

Simtob’s franchise-analyzing credibility is based on an enviable track record. He co-founded Talking Book World, a chain of retail outlets specializing in audiobook rentals, and propelled it from concept to a 45-store chain in under six years. He went on to manage expansion of the Wireless Toyz’ franchise network through the opening of 66 new stores in 2006, to nearly 200 current locations.  Simtob is taking Wireless Toyz Cellular Superstores; ranked on Inc. Magazine’s “500 List” as one of the fastest growing privately held U.S. companies, is ranked No. 169 in the “Franchise 500,” No. 98 “Fastest-Growing Franchise” and No. 1 in the “Wireless Stores” and “Electronic Retail” categories for 2008 by Entrepreneur Magazine; into national mega-chain status. Many considering the franchise route to wealth routinely seek his advice.

“When you allow yourself to get sidetracked by other people’s criteria or successes, you can spend a lot of time investigating franchise business opportunities only to discover a last-minute deal-breaker,” says Simtob, “when people hit these roadblocks, they get discouraged and feel they wasted time. This is because they didn’t set goals and objectively define the qualities they need in a franchise business. You must do this upfront and then continue to stay focused in order to ultimately make the right choice.”

Once goals are set and the Uniform Franchise Offering Circular has been received, Simtob recommends the following tests to determine whether it is a worthwhile opportunity:

    •      Investment Requirements. Examine the amount of net worth and liquidity that is required by the franchisee. There’s no sense spending more time investigating a franchise that you can’t afford. But do ask about financing possibilities if the concept truly resonates with you.

    •      Territory Limitations. Ask the franchisor if there are viable territory options available within the area you want to locate. If not, move on.

    •      Required Skill Sets. If you get past the factors listed above, ask the franchisor to give you a list of characteristics and skills he or she considers essential for a franchisee to be successful in that system. If these do not match your skills or if they are inconsistent with your goals for a business, head for the door.

    •      Uniform Franchise Offering Circular (UFOC).  Released by the Federal Trade Commission, the UFOC requires a franchisor to disclose all relevant information regarding litigation history, failure rates or transfers in the past three years.  Review and question this information so you can form an opinion about the relationship value of the franchisor.  If the track record isn’t strong enough for you, there is no reason to proceed.

    •      Fit.  Fit is one of the most important items to evaluate, according to Simtob.  Does the opportunity make sense for a person with your skills and interests?  Sometimes, a business that looks glamorous, isn’t. Sometimes an opportunity that lacks surface luster may end up being a real goldmine for you.

“If you get past this evaluation and you still like what you see, the next step is not quick, but is very important. Get on the phone and call a number of the franchisees. All current franchisees are required to be listed in the UFOC.  Spend the time it takes to get a sense of the system from their perspective. If you get mixed input, try to determine which franchisees most closely resemble YOU.  Which ones do you identify with? These feelings will give you the clues needed to determine how you will fare when and if you become a franchisee,” Simtob says.

As President of Finance and Development of Wireless Toyz, Richard Simtob is responsible for the strategic direction and management of the organization’s franchise growth, as well as its technology, financial and business systems.  Previously Chief Operating Officer, Simtob managed the expansion of the company’s franchise network through the opening of 66 new stores in 2006. His efforts were pivotal in earning Wireless Toyz recognition in the 2006 Inc. 500 list of fastest-growing privately-held U.S. companies, Entrepreneur’s 2007 “Franchise 500” and Entrepreneur’s 2007 “Fastest Growing Franchises.”

Prior to Wireless Toyz, Simtob earned acclaim as a business innovator during the 1990s when he co-founded Talking Book World Corporation, America’s largest chain of retail outlets specializing in renting audiobooks.  He built the company from a concept in 1993 to a 45-store chain that, by 1999, ranked number 164 on the Inc. 500 list of fastest-growing privately held companies.  Each year under his leadership Talking Book World was named among Entrepreneur’s top 500 franchises.

Previously he was co-founder and president of TINT KING, an automotive tint shop based in London, Ontario. Simtob oversaw the sales, production, accounting and computer systems for the venture and sold the business in 1996 when it was the number-one tint shop in southern Ontario.  He has also provided his strategic planning, management, organization, franchising and sales expertise as a business consultant for a variety of retailers and business-to-business clients.

Article source: Expert Articles