Franchises have become as ubiquitous as a certain company’s golden arches. But if you’re a budding businessperson, how do you get involved with one, or importantly, the right one?
Fortunately, a MetroWest company exists that can help answer that and many other questions pertaining to franchises. It’s called FranNet of New England, a Waltham-based consulting firm that provides free guidance, information and support to individuals who are interested in purchasing a franchised business.
A franchise itself - the parent company is located in Louisville, Ky. - FranNet of New England is owned by Mike Martuza, who, before signing on with the company two years ago, ran his own franchise. After working a year in the company’s New Jersey office, he purchased the New England territory in February. The parent company was launched in 1987.
Martuza recently discussed FranNet of New England with Daily News staff writer Bob Tremblay. Information from the company’s Web site is also used.
QUESTION: Why was the business started?
ANSWER: The business exists to educate people about franchising and to help prevent them from making mistakes. That mistake might be buying a franchise that is a poor fit for their skills, goals, etc., or the mistake of buying a business when the person does not have the attributes required to run a business.
Ultimately, we help a person find a business that is a good fit for their present situation and where they want get to in the future.
Q: What did you do before becoming involved with FranNet?
A: I spent 12 years as an executive in the high-tech industry, creating and managing new revenue opportunities. I was displaced during the Nasdaq crash of 2000 and spent four years as the master franchisee in New York for ActionCoach, a business and executive coaching firm. I spent about three years founding and running a dotcom company before FranNet.
Q: What does the company do?
A: We provide a no-cost service to people who are interested in exploring franchise opportunities. We take people through an extensive evaluation so that we understand as much about their present situation as possible.
We then match those people with franchises where the attributes and characteristics they possess are common in the top 20-25 percent of franchisees.
Finally, we help coach them through the evaluation process so they may determine for themselves if they are a good fit for the franchise.
An interesting note: about 75-80 percent of the people we work with decide, within a month, that owning a business is not the right option at that time and they go back to the corporate world. We view that as a positive result in that we have helped them not make a mistake.
Q: Why use a FranNet consultant?
A: For most people, starting a business is a once in a lifetime event. It is essential to utilize available resources effectively and "get it right" the first time.
FranNet uses an established process that helps match a person’s talents and goals with the right franchise, which ensures a much higher success rate. We act as your strategic adviser throughout the process to be certain you are making a selection based on facts and not speculation.
Our goal is to educate our clients about the many different businesses without having to go it alone. Our services are free so there is no need to make the decision alone.
Q: Why should prospective entrepreneurs come to you?
A: I can provide a perspective that most others cannot. One, I have been displaced from the corporate world and had to find the next thing to do (as is happening to so many people today).
Two, I have run/operated two franchise businesses so I understand what the franchising world is like. Three, I have started and run a business from scratch and understand the positives and negatives in relation to the franchise model.
Q: If the service is free, how does the company make money?
A: If the person I am working with selects to go with one of the franchise concepts I have shown, I get a commission from the franchise company. We are a lot like executive recruiters for franchise companies.
Q: What kind of franchises do you represent?
A: We represent a wide range of franchises as diverse as the individuals who want to pursue business ownership. Franchising has many possibilities and is not just about retail stores or french fries. Potential franchise owners are sometimes surprised to learn that franchises are available in such unexpected industries as management consulting, tutoring, senior care and pet care.
In fact, there are several service-based and business-to-business franchises that are extremely successful. FranNet has pre-screened all represented companies and built relationships with only the best franchisors so you can select from the best opportunities.
Q: How do prospective entrepreneurs pay for a franchise?
A: Many financing options are available today such as cash, loans, IRAs, 401(k)s, CDs, stocks and using equity. The cash needed to finance a franchise purchase varies depending on the type of liquid capital, the individual and the franchise being purchased.
You will typically need $40,000-$60,000 ready to invest with the ability to finance the rest. To receive financing it is best to have a credit score of 700 or better.
Franchises are available at many investments levels. We will recommend franchises based on your investment level and recommend sources for financing.
Q: What are some of the benefits of franchise ownership?
A: There are a number of aspects to the franchising method that appeal to prospective business owners such as:
Easy access to an established product.
A proven method of operating a business.
Training, support and advertising.
Reduced risk of opening a business.
In fact, statistics from the U.S. Small Business Administration and the U.S. Department of Commerce show a significantly lower failure rate for franchised businesses than for other business startups. The franchisee purchases not only a trademark, but also the experience and expertise of the franchisor’s organization.
However, a franchise does not ensure easy success. If you are not prepared for the total commitment of time, energy and financial resources that any business requires, you should stop and reconsider your decision to enter the franchise business.
Q: What factors should a prospective entrepreneur consider when selecting a franchise?
A: Like any other investment, purchasing a franchise is a risk. When selecting a franchise, you should carefully consider a number of factors, such as the demand for the products or services, likely competition, the franchisor’s background and the level of support you will receive.
Demand
Is there a demand for the franchisor’s products or services in your community? Is the demand seasonal?
For example, lawn and garden care or swimming pool maintenance may be profitable only in the spring or summer. Is there likely to be a continuing demand for the products or services in the future? Is the demand likely to be temporary, such as selling a fad food item? Does the product or service generate repeat business?
Competition
What is the level of competition, nationally and in your community? How many franchise- and company-owned outlets does the franchisor have in your area? How many competing companies sell the same or similar products or services?
Are these competing companies well established, with wide name recognition in your community? Do they offer the same goods and services at the same or lower price?
Franchisor’s experience
Many franchisors operate well-established companies with years of experience both in selling goods or services and in managing a franchise system. Some franchisors started by operating their own business.
There is no guarantee, however, that a successful entrepreneur can successfully manage a franchise system. Carefully consider how long the franchisor has managed a franchise system.
Do you feel comfortable with the franchisor’s expertise? If franchisors have little experience in managing a chain of franchises, their promises of guidance, training and other support may be unreliable.
Growth
A growing franchise system increases the franchisor’s name recognition and may enable you to attract customers. Growth alone does not ensure successful franchisees; a company that grows too quickly may not be able to support its franchisees with all the promised support services.
Make sure the franchisor has sufficient financial assets and staff to support the franchisees.
Q: Are there additional sources of information?
A: Before you invest in a franchise system, you should investigate the franchisor thoroughly. In addition to reading the company’s disclosure document and speaking with current and former franchisees, you should speak with the following:
Accountant. An accountant can help you understand the company’s financial statements and assess any earnings projections and the assumptions upon which they are based.
Lawyer. Franchise contracts are usually long and complex. A lawyer will help you understand your obligations under the contract, so you will not be surprised later. Choose a lawyer who is experienced in franchise matters.
Banks and other financial institutions. These organizations may provide an unbiased view of the franchise opportunity you are considering. Your banker should be able to get a Dun and Bradstreet report or similar reports on the franchisor.
FRANNET OF NEW ENGLAND
President and owner: Mike Martuza
Address 1050 Winter St., Suite 1000, Waltham
Employees: 1
Web site: www.frannet.com/mmartuza
