Starting a franchise?Better have a lot of capital backing.

All,

Working with franchisees can be very time consuming. I apologize for the long time between posts.

We all know the economy is tanking and it will probably be 5-10 years before it is completely back to where it was. Tough times brings both opportunity and risk. Warren Buffet says "Be greedy when others are fearful, and fearful when others are greedy." Are you in a position to be greedy? There are plenty that are fearful.

As far as franchising, I think that being under capitalized is one of the biggest mistakes I see and hear about. When someone is looking at buying a franchise, they are told that they need at least a year of income set aside because it will take time to see a profit. I would make them have two years of income put away. Two years plus enough money to market through both the first and second years.

If you tell the person that is trying to sell you a franchise that you do have a years worth of money to fall back on, is that sitting in an account ready or would you have to sell a house or cash in a 401K? What if you suddenly you are up-side-down on your house like 50% of the people in America? What if your 401K is suddenly worth 40% less? THIS JUST HAPPENED!!!!! To lots of people.

Please don't tell me that you borrowed on the equity of your 401K to buy your business or to live on, and now that is gone.

Be very careful if you are thinking about starting a business. I would definately look at buying a failing business that has been running for awhile, but has been mismanaged or the people have to leave for personal reasons. A brand new business or brand new location - no way. Everyone is hanging on to their money tight and buying few new things.

Fran Rep