For some reason, down economies are boom times for franchise activity. Would-be entrepreneurs nervous about losing their 9-to-5 jobs suddenly see franchising as the answer to all their problems. They can become their own boss, achieve job security, and make a lot of money. Well, at least in theory. They can also lose their life savings if things go south. ”I left a job I had for 20 years to do this,” Kim Heinz tells the Palm Beach Post. She opened up a BounceU inflatable indoor play arena with husband, funding the franchise with personal savings. ”In this economy, the only way we felt we could secure our future was to become our own business owners,” Heinz says. We wish her the best of luck. But here’s a sobering fact: some 71 percent of startups go out of business by year ten.
Cuppy comes clean. Industry Web site Blue MauMau has a fascinating interview with Dale Nabors, the disgraced CEO of failed franchise Cuppy’s Coffee. This is a must-read for anyone who’s ever owned or thought about owning a franchise. Be warned, though. This is bone-chilling stuff. Nabors talks about the people who lost their life savings by investing in his franchise, and admits that he too is in danger of “losing everything.” He lists the reasons why Cuppy’s imploded and the backlash he faced, including death threats, from distraught franchisees. If nothing else, you got to give Nabors credit for facing the music and answering a string of very tough questions from Blue MauMau.
Ve vant to pump you up. Gold’s Gym is hoping to create an army of muscleheads throughout Scandinavia. The U.S.-based fitness franchise says it is looking to expand into all major and mid-sized cities across Norway, Sweden and Denmark. Note to Hans and Frans: Here’s your big chance. Ok, technically they’re not Nordic. But give us a break. German, Austrian, Scandinavian, it’s all the same, isn’t it?
Do you have what it takes to start a franchise? By “have what it takes,” we don’t mean intestinal fortitude, entrepreneurial acumen, or even a can-do spirit. We simply mean money. Yes, interest in owning a franchise is soaring. But the number of people who are actually qualified to do so is quickly diminishing. Why? Because, as this article points out, it’s harder than ever for would-be franchisees to secure a business loan. Franchise startup costs can run anywhere from $10,000 to $1 million, depending on the business and location. But the persistent credit crunch means loans for that kind of startup capital are few and far between. If you want to open a new franchisee these days you need the wherewithal to bankroll it yourself.