Eyes On Ideas

By KAREL SOVAK

In football, teams sometimes tag their most valuable player with a franchise label. In business, entrepreneurs should never overlook the valuable advantages that come along with taking on a franchise.

In addition to buying into a proven system, complete with name recognition, marketing assistance and operational blueprints, franchising can provide a greater piece of mind for those looking to be in business for themselves.

Franchising is big business, adding $1.53 trillion to the U.S. economy according to the U.S. Commerce Department. This growing industry takes a little risk out of the startup equation through a quasi-partner relationship between the franchisor (the one selling the rights) and the franchisee (the one buying the rights).

While there are pros and cons to every new venture, franchises tend to take most of the sting out of the risk of being self-employed. Jordan and Jake Bernhagen, owners of Cartridge World, said that even though the idea wasn’t an original one on their part, originality is needed for the business they run.

“After we did all our research and the company did their investigation of us, we saw it was a good fit for the area,” Jordan said.

“It (franchising) allowed us to get into business for ourselves and do it with a company who had the expertise to support us in our success. They gave us the vendors, helped with site selection, marketing and just about everything else. The idea of being our own boss made this attractive. This finished idea concept allows you to work with a lot of hidden employees.”

While Jordan said the corporation still calls the shots on many of the operational processes, the brothers have complete autonomy on how to grow the business. He said it is those “hidden employees” who provide a variety of tips and techniques to provide for growth.

“They (Cartridge World) have a proven system which works, so there is no reason to go against that,” Jordan said. “The company just wants all their stores to be consistent and offer the same service and products no matter where a customer goes. We are all connected, and when one of us fi nds a way to do something more efficiently, we can send an e-mail along and everybody gets the information. It makes operations a lot smoother.”

Jordan said the goal is for the family-owned business to take on additional franchises within and outside of the state where the company has deemed opportunities to abound. According to Richard Mower, vice president of special projects for the Bismarck-Mandan Development Association, a number of programs are available to assist individuals, partners or groups of investors looking to become involved in a national franchise.

Mower said many franchisors require minimum investment, liquidity and net worth positions to be in place, however, that can be handled in a variety of ways.

“There are always creative ways to put the franchisee into a turn-key operation,” Mower said. “The major importance is to look at what the community can support. A recognizable name goes a long way in terms of success of a business. At the present time, there are over a dozen franchises that have expressed interest in adding a location in this market.”

The Federal Trade Commission oversees the franchising industry and requires franchisors to provide information through a document titled the Franchise Disclosure Document (FDD), which is equivalent to the Uniform Franchise Offering Circular (UMOC).

This document is the first step any potential franchisee should use to investigate the company they are looking to operate. In essence, this is the initial due diligence an entrepreneur would take on in reviewing the feasibility of the company in their area.

When it comes to entrepreneurs taking on a new business, those ideas don’t always have to be their own. Franchising offers a way for those entrepreneurs looking to align a business of their own with the needs of the community.

(Karel Sovak is an assistant professor at the University of Mary in the Gary Tharaldson School of Business. He is also co-founder of the I.D.E.A. Center.)