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Franchises Under the Magnifying Glass

How to choose the right company and get resources to run your own business

En español | Juanita Vigil, 51, wanted to be her own boss — but without all the risks associated with starting her own business. So she and her husband bought a Jiffy Lube franchise.

She's not alone. The number of Hispanic-owned businesses in the United States is projected to reach 4.3 million in 2016, a 40 percent increase. And in these spotty economic times, franchising is a business model that is increasingly making more sense.


Greg Clarke

With a franchise, you have a template to launch and run your business, ongoing technical support and (often) a recognizable brand.

Still, as Vigil quickly learned, after opening the door to your own Jiffy Lube, Subway or other brick-and-mortar or service establishment, you'll have plenty of work ahead.

Besides your passion and money, you will also need a suitable lifestyle and relevant experience. No franchise formula fits everyone. Rather, you need to fit the formula.

Even then, it's a delicate dance.

You'll need the right people, location and lifestyle.

You have to choose wisely, considering the type of business, fees required, expected rate of return, location and more.

"You need all the right elements," Juanita says. For her, staff was key. "Once you have the right people, the rest is easy." She had 12 years of experience owning an online travel company and was ready to try something new. Her husband, Celauro, 64, loved fixing cars, and her brother, Salvador Canales, 38, worked at Jiffy Lube for years. And, like many Latino entrepreneurs, the Vigils value an enterprise that can also function as a family business: Celauro oversees the operation; their daughter, Eunice, 23, handles the finances; Salvador manages the store day to day; and Juanita does the administrative work.

To learn the basics, Juanita took a free seven-day chamber of commerce course. Latinos can also seek assistance from the International Franchise Association's MinorityFran program, which offers access to education and opportunities to explore offerings of companies actively looking to recruit minorities. And some franchises — like Burger King, Domino's Pizza and Liberty Tax Service — offer minority programs, which can include everything from recruitment to education to special financing offers.

Rob Bond, who is a franchising specialist, hesitates to label some franchises more Latino-friendly than others. "Franchises are almost impossible to compare," says Bond, who compiles the annual "Top 26 Franchises for Hispanics" for Poder360, a business publication covering the U.S. Hispanic and Latin American markets. Poder360 considers costs of entry, products or services that are especially recession-proof and proven systems that provide excellent ongoing support. Among the 2010 list of companies are restaurants and hotels, cleaning services, tax preparation and learning centers.

But Latino-friendly doesn't necessarily mean age-friendly.

Most franchise buyers are in their 30s and 40s. "Someone 55-plus is probably going to have a difficult time with the year-to-year fluctuations in income," says Bond. "For those people who are betting the ranch, they'd better do something they're very comfortable with and have expertise in. Otherwise they could end up destitute."

Match the business with your expertise or passion.

The only reason Manuel Fernandez didn't end up destitute is that he didn't have the stomach for acquiring additional debt. After less than three years, he sold his Minuteman Press franchise in 2007 at a loss.

Given his experience in financial management, Fernandez believes that he may have fared better if he had had stronger connections with the local print industry and expertise in marketing in that area. He now works as a project manager for a tech firm in Tampa.

Choosing a business within their expertise has made franchising a success for Blanca and Teodoro Quirino, 50 and 51, of Texas. In 2007 they bought a MaidPro instead of, say, Great Clips. Blanca, who worked as a hotel housekeeper for 15 years, knew what a high-quality cleaning service entails. Hair, not so much. "The first year, I was working about 10 hours a day," says Blanca, who didn't spend that time vacuuming but rather scheduling and hiring.

"Now, I work five or six hours a day. I want to retire before 70." She plans to buy two more MaidPro franchises and hand the businesses off to each of their three children.

Seek a company that offers a strong support system.

Ramiro Cruz, who is 55 and lives in Missouri, considered efficiencies when he chose his new franchise. He had been a project manager in information systems for 30 years, until he was laid off for a second time in 2008. A widower with a grown son, he realized he didn't need as much money to live on as he used to, he says. He mulled over handyman, pizza and IT companies. In the end, he chose CertaPro Painters because the company had a strong support system, and he could maintain a lean operation with subcontractors.

"I've given myself a five-year plan to get the business to a certain level, and then I'll see where it's at," he says. "If it makes sense, I'll sell. If not, I'll look at expansion. Ultimately, I'd like to have a business that runs itself." Or almost runs itself.

That's just what most franchise owners hope for.

Continue With 5 Factors to Consider in Choosing a Franchise >>

5 Factors to Consider in Choosing a Franchise

En español

  1. Name recognition. Not all the more than 2,500 franchises in North America are household names. With some exceptions, the more well known the franchise, the more likely you'll have a ready-made customer base.

  2. Initial training. Most franchises offer comprehensive training to give you mastery over all aspects of the operation, including sales, management and the technical skills needed to run the business.

  3. Ongoing support. To find out if the corporate office is accessible and easy to work with, ask a current franchisee for the inside story.

  4. Return of investment. You'll be paying an upfront fee that can range from $5,000 to (much more likely) five or six figures. The conventional wisdom is that your franchise's annual pretax income should range from 30 to 50 percent of your total investment. Projected income is included in the Franchise Disclosure Document (see Red Flag #5).

  5. Flexibility. You're buying a formula — and the corporate office and your fellow franchisees expect you to follow it. Say you want to close your fast food place at 10 p.m., but the rules say you must stay open until 2 a.m. Some franchises allow some wiggle room; others don't.

Continue With 5 Steps to Get Started >>

5 Steps to Get Started

En español

  1. Do your research. There's no shortage of franchising information out there, which is fitting given there's so much to learn, from nuances in your contract — which are virtually always non-negotiable — to the myriad fees a franchisee pays the corporate office. Go to Franchising Resources

  2. Consider using a franchise broker. Unlike franchise consultants, franchise brokers representing numerous companies are paid by the franchisor and offer their services for free to the prospective buyers, similar to the way headhunters and executive recruitment firms work. Professionals with experience in the industry, brokers can provide guidance, although many franchise buyers do successfully go it alone.

  3. Contact the franchise. Franchise websites will have contact information for prospective franchisors; usually you'll send an e-mail or fill out a brief form, and wait to hear back from someone. If, after talking to the franchisor, it's clear that you and the franchise may have a future together, you'll move on to the next step: the application process.

  4. Fill out an application. These forms get pretty personal, understandably. You'll have to disclose your assets, submit to a background check and authorize a credit check.

  5. Hire a franchise attorney. Before you sign any contracts, consult a franchise attorney. Although you may wind up paying as little as a few hundred dollars, if there's a lot of negotiating involved you'll pay considerably more. But using an attorney can save you from a financial crisis down the road, so it's worth the money.

Continue With 5 Red Flags to Watch For >>

5 Red Flags to Watch For

En español

  1. You don't receive a Franchise Disclosure Document. Legally, you must receive an FDD detailing everything need to know at least 14 days before you sign a contract or pay the fees.

  2. The FDD doesn't fill you with confidence. Beware of franchises that have declared bankruptcy in the past, have experienced high turnover among franchise owners or have been sued a lot.

  3. You feel pressured. A franchisor who seems too eager for you to sign the papers may be desperate and involved in a losing proposition.

  4. The franchisor lacks experience. If a company began offering franchises a year after opening for business, let it experiment on someone else. It takes at least three years for businesses to prove themselves successful enough to be cloned.

  5. Other franchisees aren't enthusiastic. If current franchisees suggest you to run away as fast you can, thank them. And be wary if the corporate office suggests whom you should talk to; it may be steering you away from unhappy franchise owners.

Continue With Franchising Resources >>

Franchising Resources

En español

Getting Started and Accessing Capital

  •, run by the National Minority Franchising Initiative, offers an annual list of 50 top franchises for minorities, based the percentage of franchises that are minority-owned, the number of minorities in corporate headquarters, and other criteria; a searchable database of more than 500 franchises considered committed to recruiting minorities; articles about minority franchising; and listings of seminars held around the country.

  • U.S. Small Business Administration aims a number of programs at minorities who are starting businesses, although not necessarily franchises. The SBA's Historically Underutilized Business Zones (HUBZone) Program works with companies in traditionally ignored rural and urban areas. The SBA's website also has links to programs around the country that can help women and minorities finance their businesses.

  • Minority Business Development Agency, a U.S. Commerce Department unit, exists solely to grow and maintain minority businesses. With centers around the country, it can help individuals with everything from financing to finding contracts and new markets.

Identifying and Learning About Franchises

  • helps Hispanic entrepreneurs connect directly to franchises looking to recruit Latinos. Its searchable database allows you to look for franchises by specific category or the amount of money you have to invest.

  • International Franchise Association with its Diversity Institute, has made a big push in recent years to recruit Latino franchise owners. It has an extensive database of franchise opportunities, educational materials and information on franchising seminars, expos and conventions.

  • is an educational website with databases of franchise information, a schedule of franchising events and online articles from their print magazine, Multi-Unit Franchisee Magazine, and other publications.

Getting Guidance

  • SCORE, a national business counseling organization, offers free mentorship programs to current and aspiring entrepreneurs.

  • provides information on franchises and acts as a consultancy, with free services for franchise buyers.

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