New York Franchise Law Blog : Franchise Lawyer & Attorney Charles N. Internicola, Providing National Representation of Franchisees and Franchisors

In 2010 two trends have become abundantly clear: With the ever accelerating "shift" in the United States economy a substantial number of successful business owners and qualified individuals have and continue to consider and explore"franchising" as an avenue for growth and income stability.  That is, (1)  successful business owners are considering the prospects and benefits of "franchising their business and becoming a franchisor" and (2) certain exceptionally qualified individuals are evaluating the prospect of "buying a franchise and becoming a franchisee"  as a potential opportunity for income stability and growth.

The interesting thing about these "trends" is that they do not relate to and are not evidenced by franchise system development or franchise unit sales (in fact these "metrics" are, markedly, down with declining growth levels) but, rather, the "intensity levels" by which certain "exceptionally qualified" individuals and business owners have and continue to - for the first time - seriously consider the "franchising business model" .  Faced with economic declines and economic uncertainty comes, what I believe to be, an exceptional "filtering process" and opportunity whereby a select number of exceptional prospective franchisees and franchisors will be presented with the economic incentive to create successful franchise relationships and, quite possibly, help redefine the franchisor/ franchisee relationship.

So, for both prospective franchisors and franchisees, my advice for 2012 is to evaluate opportunities thoroughly, understand that franchising is not right for everyone (in fact it is not right for "most" business owners and individuals), and, recognize that for a select few - who get it right - with our current state of economic uncertainty also exists a substantial opportunity for growth through franchising. However this "opportunity" requires precise planning and commitment - do not rush into the purchase of a franchise or the development of a franchise system.   

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With the reality of layoffs unfortunately accelerating, "interest" in entrepreneurship is growing. Many hard working and educated individuals are asking the question: “should I replace my lost job with my own business or franchise". This is a critical question and yesterday I received an email (from an individual ordering a copy of my book "An Entrepreneurs Guide to Purchasing a Business") that emphasized the consequences of this question and the need to get the answer right. The following is the text of the email:

Thank you. I was laid off from [____] Financial Services 14 months ago. I am [__] and a senior I.T. project manager and cannot even get an interview - much less a job. I do not see any alternative to going completely broke other than to buy some sort of business. I look forward to receiving the book from you.

Regards,  R___

(Name, former employer and age removed to preserve privacy.  At present, for clients and readers of this site, you can receive a free copy of the book)

So, should purchasing a business be viewed as a solution to a layoff?

Unfortunately, the answer to this question is both "yes" and "no". “Yes” because small business and entrepreneurship, unequivocally, has been and will continue to serve as the financial life blood for millions of hard working individuals and families. “No” because entrepreneurship and small business is not right for everyone and unemployment, by itself, should not be the deciding factor. Not every small business is profitable and before you commit to buying a business or franchise, consider some the following questions:

• Do you possess sufficient savings, capital and/or loans necessary to:

(a) purchase the business;

(b) fund the initial day-to-day operations of the business - keep in mind that it may take a number of months before your business generates "profits";

(c) cover your "personal" expenses and obligations until the business starts generating "profits"

• Do you have the support of your Spouse and Family - as the owner of a small business you will be assuming a level of risk and commitment extremely different from that of an "employee". Your investment in a business will affect the financial stability of your family for many years to come.  

• Are you ready to "wear many different hats" - as the owner of a small business, different from being a specialized employee of a large corporation, you will be responsible for everything.

While entrepreneurship may be the right course of action and response to a layoff, your decision to take this step must be based on factors that go beyond your employment status and include an evaluation of your  financial resources, family support and individual skills.  For additional insight and information to assist you with this analysis, check out "So you Want to be an Entrepreneur" by Kelly Spors, "Downsized? Franchise vs. Corporate Employment" by Joel Libava, and my earlier post "From the Corporate Frying Pan into the Franchise Fire".

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