Franchise Boom Reflects Search For Job Security

The restructuring of corporate America has been a huge boon to the franchising industry, according to a local authority on the subject.

Downsized, outsourced, retired early, and relegated to temporary status with reduced pay and zero benefits, ever greater numbers of America’s disenfranchised are turning to franchising, reports Diane H.B. Welsh.

Not surprisingly, says the founder and editor of Franchising Research, an International Journal, franchising is viewed by workers most at risk as a rational response to a chaotic and sometimes cruel job market.

Indeed, demographic studies clearly show that women, minorities and older workers are responsible for most of the growth these days in an industry that continues to expand rapidly.

Statistics from various sources show one in 12 businesses in the U.S. today is a franchise. The industry generates one trillion dollars a year in revenues and employs seven million persons. Nearly half of all retail stores are franchises. And a new outlet opens every 8 minutes.

What’s behind this growth?

Along with the satisfaction of being one’s own boss, says Welsh, who chairs the Department of Management at Eastern Washington University’s College of Business and Public Administration, comes built-in job security.

But owning a franchise isn’t for everyone. And especially it isn’t for anyone unwilling to put forth an earnest effort.

“A lot of people buy into a franchise to provide a second income, with the idea that they’ll just dabble in it on the side as time allows,” says Welsh. “But only rarely does this turn out well. Owning and operating a franchise are full-time jobs.”

On the other hand, you don’t have to be brilliant, says the professor. And you don’t have to have a background in business. But you do need good business sense.

“With a franchise, you are buying a business system and the training to make it work,” says Welsh. “At least, that’s what you should be looking to do.

“One of the main things to watch out for,” she advises, “is what kind of training you will be receiving. Whether you receive adequate training in how to operate the system of business you are buying is often the difference between success and failure.”

Welsh says studies show that the acquisition of a ready-made business through purchase of a franchise, instead of starting up from scratch, increases an owner’s chances of success. Some would dispute that.

The American Franchise Association recently warned that some franchisers prey on persons restructured out of their jobs and seeking to create their own employment. Officials said many fall victim to unethical operators who know these unfortunates are using purchase of a franchise as a way of “buying a job.”

Further, a survey by the association and Indiana University Southeast found that 40 percent of franchisees have what the association called “unsuccessful relationships” with their franchisers.

But Welsh feels comfortable with the fact that franchising can provide a ready-made business system with a proven track record, if a purchaser shops wisely. The hard part, of course, is finding the right franchiser, taking full advantage of the training offered, and following their rules.

“In a franchise, you’ve got someone with answers to your problems, along with the necessary forms, contracts, connections and sources,” says Welsh. “But you have to do it their way, follow the rules. This is not a system where you can be a freewheeling independent entrepreneur.”

The president of Welsh Bleck International Inc., who lectures and conducts workshops throughout the U.S. and abroad, said she founded her year-old international journal to fill a void. There was and still is no other publication devoted exclusively to franchising research.

The quarterly journal publishes current trends in the industry, applied academic articles, case studies. Readership is mainly consultants, analysts, franchisers, very large franchisees, attorneys and associations.

, DataTimes MEMO: Associate Editor Frank Bartel writes on retirement issues each Sunday. He can be reached with ideas for future columns at 459-5467 or fax 459-5482.

The following fields overflowed: CREDIT = Frank Bartel The Spokesman-Review