Prudent Entrepreneurs Franchise

11/01/2022
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    Kelly Jackson, left, and Davina Arceneaux stand in front of their Motto Mortgage office in Oakbrook Terrace, Illinois. (AP/Charles Rex Arbogast)
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    Motto Mortgage trained the husband-and-wife team. (AP/Charles Rex Arbogast)
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    The Federal Trade Commission says burger chain Burgerim didn’t give potential franchisees enough information about risks. (Burgerim/Facebook)
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    A man walks into a Dunkin’ Donuts franchise in Boston, Massachusetts. (AP/Charles Krupa)
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    The convenience store chain 7-Eleven has thousands of franchised stores across the United States. (AP/Paul Sakuma)
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WORLDteen | Ages 11-14 | $35.88 per year

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In 2020, Kelly Jackson and Davina Arceneaux wanted to leave their jobs and go into business for themselves. But instead of building a business from scratch, they looked at the opportunities franchising offers.

After the pandemic hit, many people with corporate jobs decided to strike out on their own. That movement has been nicknamed the “Great Resignation.” But not everyone wanted to open a brand-new business. Some of the prudent sought alternatives, including opening a franchise with an established brand. There are about 3,000 franchisor brands in the United States to choose from.

These “quasi-preneurs” (a coined term that means “sort of like an entrepreneur”) like the ability to buy into a proven brand name (Great Clips! Taco Bell!) and the tools and training that come along with it. But franchising has challenges too. There are many rules and regulations. Lengthy contracts can be difficult to end.

Jackson and Arceneaux settled on a Motto Mortgage Home Services franchise. They opened in July 2020. Their initial investment was $35,000.

“People always need new places to live and are always buying and selling houses,” Jackson says.

The husband-and-wife team had no experience with mortgages. But Motto Mortgage trained and supported them.

Franchises include big names like McDonald’s or 7-Eleven. But all types of businesses can be franchised, from pool cleaners to barbershops.

The International Franchise Association predicts that franchises in the United States will grow 2% to 792,014 this year. Still, that’s just a fraction of the 32.5 million total U.S. small businesses.

Franchise owners buy in with a fee. The amount can be anywhere from tens of thousands to hundreds of thousands of dollars. They pay a monthly royalty. In return, they get to use the brand, marketing, and other support.

Money invested in a franchise is still at risk if the business fails. But brand name recognition and franchisor support offer more of a safety net than an unknown startup.

As with any business venture, franchisees need to know what they’re getting into. (Read Proverbs 21:5 for some advice about making plans.)

Lawyer Mario Herman says potential franchisees must go over contracts carefully. They need to know about previous bankruptcies or lack of profitability.

Earlier this year, the Federal Trade Commission (FTC) sued Burgerim, a Calabasas, California, burger chain. The FTC claims that Burgerim lured 1,500 people into paying $50,000 to $70,000 in franchise fees without giving enough information about risks.

“If done properly, (a franchise is) great. But you have to be extraordinarily careful,” Herman says. “There is a lot of fraud out there.”

Why? There are many ways to be involved in the commerce that allows communities—local and global—to contribute to human thriving.