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The Pitfalls of Franchising

Know the challenges — or your dream business could become a nightmare

Consider getting a loan

Many franchisees take out a loan to cover initial investment and start-up costs. You might want to try a bank where you've been a longtime customer or one that is familiar with the franchise field.

Be sure to check if the franchise you're exploring has the U.S. Small Business Administration's stamp of approval. SBA-approved franchises are ones whose disclosure agreements have been reviewed and accepted by the SBA.

See also: Using crowdfunding to start your business

Applying for a preapproved franchise loan is often easier and quicker. To find the green-lighted list, go to the Franchise Registry or to You can search by name if you have a certain franchise in mind, or by industry. Plan on a down payment of 20 to 30 percent of the loan amount.

Seek expert advice

An accountant or lawyer with experience in franchising can help you gauge the entire franchise package and tax implications.

Be willing to get your hands dirty

"Understand that the franchisor is there to support and help you, but they're not going to do the work for you. It's up to you to get up every day, show up and execute the business," Bailey says. "A lot of people think it will all be turnkey. It's not. The franchisor gives you the plan and the model, but you have to make it happen."

Kerry Hannon, AARP jobs expert, is a career transition expert and an award-winning author. Her books include What's Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond and Great Jobs for Everyone 50+: Finding Work That Keeps You Happy and Healthy … and Pays the Bills. Follow her on Twitter @kerryhannon.

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