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Franchising gains popularity as stock market alternative

Some people who are tired of seeing their savings in the stock market dwindle with each quarterly statement are now opting for a different investing opportunity, buying a franchise.

The Web site FranchiseOpportunities.com estimates about a third of new franchise owners are people who have become disenchanted with the stock market, and are looking to franchising to get a better rate of return. Back when the stock market was showing large gains in the mid to late 1990s, only 12% to 18% of investors were coming from Wall Street.

But, like the stock market, investing in a franchise isn’t a sure thing. As with any business opportunity, it is important to do your homework.

“Just like anything else, make an informed decision,” says Howard Jordan, who owns the Merry Maids franchise in Jackson in partnership with his wife, Kim. “There are a number of publications available that rate franchises. Investigate. Talk to other franchisees. And buy a long-standing nationally recognized franchise.”

Jordan and his wife bought a franchise in Atlanta a number of years ago because it was less expensive than other franchises. But the franchisor went out of business in eight months, leaving the Jordans with losses.

Jordan, whose background is as a CPA, worked for other franchise owners before deciding to become a franchise owner himself. He said they decided to purchase a Merry Maids franchise because it was the largest franchise of its type, and they had favorable reports from other owners of Merry Maids.

Jordan said there are advantages to buying a franchise rather than opening a similar business that isn’t a franchise. You gain a level of expertise early on that is particularly helpful growing the business.

“The most important thing is the franchise network, the people who are available to talk to you and help you through the rough spots,” Jordan said. “I think going with a nationally recognized franchise is very, very important. We get some name recognition and we’re able to do things as a franchise network advertising wise that we wouldn’t be able to do as individuals.”

A nationally known franchise name draws customers to you. But Jordan says after that, how you perform is more important than what your name is. “I think customers stay with us because of the level of quality we provide,” he said.

In addition to investing money, you have to be willing to invest your time and passion. If you aren’t willing to do that, Jordan says it won’t matter if you buy a franchise or start your own business. You won’t be successful.

“It is very important to be hands on,” Jordan said.

Kerry Felix, office manager, Subway Development, Jackson, agrees.

“It is absolutely true you must be involved in the business,” Felix said. “Hands-on owners are normally more successful because they have an interest in the business. They are there every day. It’s just like any business. Whatever you put into it, you will get out of it. Your business is going to grow the more you are involved in it. The more your business grows, the more return you are going to get. As long as you are there putting time into it and involved in the marketing aspect of the business, you are going to get returns. If you buy it and let someone else run it, it won’t do as well.”

The Federal Trade Commission doesn’t allow people selling franchises to provide details of the amount of profit possible by purchasing a franchise. You can’t guarantee a certain amount of return.

“But I can give access to our franchisees,” Felix said. “You can contact them directly. All I can tell people is if they are interested enough to pursue it, seek out the restaurant owners. Most restaurant owners will tell them how they are doing.”

Subway is one of the nation’s fastest growing chains, and Mississippi is no exception. Felix says he gets a couple of leads per day, and recently interviewed four people in a week interested in opening a Subway franchise in Mississippi. He said he is in the process of working with 20 new stores now for Central Mississippi.

“I believe a lot of room for growth is available,” he said. “Subway is one of those stores you could put in the rural areas and people are going to come to them. Mississippi has a lot of rural areas. There are a lot of areas out there to be developed.”

Subway is one of the fast food chains that has been locating in convenience stores and truck stops. Felix said people like the convenience of only having to stop once for both gas and food when traveling through an area.

Krispy Kreme Doughnuts is another franchise that reports increased interest in franchises.

“There is a definite increase in the amount of interest from people in franchising,” said Aaron Richard, a customer service representative for Krispy Kreme. “I’m not sure if that is because of the stock market. I think most people tend to call in about franchising after they have tasted Krispy Kreme Doughnuts because they taste better than our competitor’s doughnuts.”

Richards said the key is success is good service.

“You want to make customers feel like they are appreciated,” he said. “You want to make them feel like a million bucks.”

Contact MBJ contributing writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

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