Affordable Franchises.

IN 1990 WALTER TURNER STARTED HIS MILWAUKEE-BASED COVERALL CLEANING CONCEPTS franchise, Turner Coverall Cleaning Concepts, with a personal investment of $2,500 and one $99-a-month account on the books. Last year, 30-employee Turner Coverall Cleaning Concepts posted $1.2 million in sales servicing office buildings, medical clients, manufacturing facilities, and the sewage district of Milwaukee. Turner, owner-manager, bought the franchise after seeing an advertisement for Coverall Cleaning Concepts, meeting with a representative, and reviewing the company's Uniform Franchise Offering Circular (UFOC) with an attorney. He then completed the franchisor's 14-step training course, where he learned about the use of chemicals, machinery, and the business itself.

Already running an independent home cleaning business at the time, Turner, who wanted to break into the commercial arena--where clients now pay $125 or more each month--says he knew a mom-and-pop start-up wouldn't cut it.

"Most of the proposals from Joe Blow who owns a cleaning business go right in the trash," says Turner of the difficulties of finding new clients. "As a franchisee, you come in with a nice portfolio and a name brand behind you, which gives you a much better chance of getting your foot in the door."

Aspiring business owners have three choices: start from scratch, buy an existing business, or purchase a proven business concept known as a franchise. For some, either of the first two options might make the most sense. But for the owners of the more than 300,000 franchised small businesses, whose companies generate about $1 trillion annually, according to the International Franchise Association (IFA), in Washington, D.C., franchising is the right option.

Leon J. Oldham, chairman of IFA's Minorities in Franchising Committee, has noticed an upswing in the number of African American entrepreneurs who have discovered franchising as a viable business option. "I've seen a very positive swing in the last few years," he says, "as more African Americans take an active role in trying to find out more about franchising opportunities."

The opportunities these entrepreneurs are reaching out for include restaurants, hotels, automobile dealerships, and various service-related industries like Mail Boxes Etc., says Oldham. "Them are many franchises that don't require a great deal of upfront money to invest," he says, "though they still gain the protection of a franchised concept."

This year, as in the past decade, BLACK ENTERPRISE presents our list of franchises that offer some of the greatest opportunities for African American business owners. Our 15 Affordable Franchises list is based on a national survey of franchisors that are members of the International Franchise Association (IFA), the existing number of African American franchise units, and companies that have franchises within three price ranges: $10,000-$50,000, $50,000-$150,000, and $150,000-$350,000 (inclusive of total start-up cost and franchise fee). The survey was conducted by BE Research.

In the following pages, we'll look at franchising as a business opportunity--from the very definition of the term to what will be expected of you and what you can expect in return, and from how to choose the right opportunity to fit your lifestyle to markets that are most available and attractive to African American entrepreneurs.

FRANCHISING DEFINED

Unlike a "traditional" start-up, a franchise is based on a proven method of distributing products and services. According to Michael Seid, managing director of a West Hartford, Connecticut, franchise consulting firm and co-author of Franchising for Dummies (IDG Books Worldwide Inc., $19.99), the franchising process itself occurs when the franchisor licenses its trade name (the brand, such as Merry Maids or Burger King) and its operating methods (its system of doing business) to a person or group (the franchisee), who in turn agrees to operate according to the terms of the contract (the franchise agreement).

Through that relationship, the franchisor provides the franchisee with support, and in some cases exercises some control over the way the franchisee operates under the brand. In exchange, the franchisee typically pays the franchisor an initial fee (the franchise fee) and a continuing fee (known as a royalty), which is a percentage of gross sales. Royalty fees range from 1% to 11%, with the typical franchise falling into the 3% to 7% range.

5 Franchises: $10,000 -- $50,000

                                                      Black-
                                                      Owned
Company                                 Type          Units

Coverall Cleaning Concepts        Commercial          2,316
   500 W. Cypress Creek Rd.,      Cleaning
   Suite 580 Fort Lauderdale,
   FL 33309 * 954-351-1110
Molly Maid Inc.                   Residential           14
   3948 Ranchero Drive            Cleaning
   Ann Arbor, MI 48108
   * 800-665-5962
Liberty Tax Service               Retail Income Tax     17
   4575 Bonney Rd., Suite 1040    Preparation
   Virginia Beach, VA 23462
   * 757-493-8855
Kumon North America               Education/            40
   Glen Pointe Center East        Learning Center
   300 Frank Burr Blvd.,
   2nd Floor Teaneck, NJ
   07666 * 201-928-0444
ECW Corp.                         Computer              9
   10132 Colvin Run Rd.           Education for
   Great Falls, VA 22066          Children and
   * 703-759-2556                 Teachers

                                   Domestic
                                  Franchise
Company                             Units       Fee

Coverall Cleaning Concepts          5,739     $6,000-
   500 W. Cypress Creek Rd.,                  $32,200
   Suite 580 Fort Lauderdale,
   FL 33309 * 954-351-1110
Molly Maid Inc.                      209      $6,900
   3948 Ranchero Drive
   Ann Arbor, MI 48108
   * 800-665-5962
Liberty Tax Service                  306      $20,900
   4575 Bonney Rd., Suite 1040
   Virginia Beach, VA 23462
   * 757-493-8855
Kumon North America                  992      $1,000
   Glen Pointe Center East
   300 Frank Burr Blvd.,
   2nd Floor Teaneck, NJ
   07666 * 201-928-0444
ECW Corp.                            93       $29,900
   10132 Colvin Run Rd.
   Great Falls, VA 22066
* 703-759-255

                                                 2000
                                  Start-Up     Average
Company                            Costs     Sales/Units

Coverall Cleaning Concepts        $6,300-      31,500
   500 W. Cypress Creek Rd.,      $35,900
   Suite 580 Fort Lauderdale,
   FL 33309 * 954-351-1110
Molly Maid Inc.                   $50,000     $431,000
   3948 Ranchero Drive
   Ann Arbor, MI 48108
   * 800-665-5962
Liberty Tax Service               $33,050-    $60,000
   4575 Bonney Rd., Suite 1040    $44,100
   Virginia Beach, VA 23462
   * 757-493-8855
Kumon North America               $3,500-        N/A
   Glen Pointe Center East        $16,000
   300 Frank Burr Blvd.,
   2nd Floor Teaneck, NJ
   07666 * 201-928-0444
ECW Corp.                         $43,800     $93,640
   10132 Colvin Run Rd.
   Great Falls, VA 22066
   * 703-759-2556

Franchisees get support on various fronts, including the opportunity to be instantly associated with an established brand name. Most franchisors offer managerial training programs to franchisees prior to their opening a new outlet, and many also provide follow-up training and counseling services.

On paper, the concept sounds simple enough, but running a successful franchise is demanding, and is best approached through initial homework and research on the franchisee's part.

Not all franchise opportunities are alike: Some franchises can be run from home while others require an official location; some require employees while others can be run by the entrepreneur himself.

Don DeBolt, president of the IFA, advises new franchisees to stick with the business concept they feel most passionate about, whether it's food service, hospitality, automotive, or some other field. DeBolt says that right now the service industry franchises are growing significantly and represent a trend area where many new business-to-business franchises are emerging. Such companies provide a service as opposed to a product, and include industries such as lawn care, tax, payroll, and accounting services for other companies, elder care services geared toward serving the nation's aging population, and commercial cleaning.

Oldham adds that African American entrepreneurs are also looking at opportunities in the automobile and hotel industries--both of which involve franchising. "Ford probably leads the way in terms of the number of black dealers associated with the brand," says Oldham, "but I've also seen a number of people pooling their resources to get into the hotel business."

When H. Herbert Love bought his first Meineke franchise in Atlanta for $85,000 in 1989, he assumed that adding new locations would be the quickest route to success. By the end of that first year, he and his wife, Charlene, together with his brother Brian, had acquired three more locations.

But a lack of qualified, reliable auto technicians and management staff put a kink in their plans. Realizing they'd spread themselves too thin, the trio scaled back to one location, which last year they expanded from six service areas/auto repair bays to 10.

The downsizing proved profitable: the 11-employee company (eight hourly and three managerial) has ranked among the five highest-grossing Meineke locations (out of 900 nationwide) for the past five years. It posted nearly $1.3 million last year, and is already 6% ahead of where it was at the end of the second quarter last year. The franchise also offers a variety of under-car care services, including a full range of exhaust and muffler services, struts, brakes, and factory-scheduled maintenance. The shop services individual customers and commercial accounts.

Love, formerly a human resources manager, chose Meineke because of its one-month training program, the opportunity available in his area, brand recognition, and nationwide advertising program. "Having George Foreman as our spokesperson is a huge advantage," says Love. "When we opened the doors we were somewhat assured that we'd already have more business than if we'd had a non-franchised start-up."

5 Franchises: $50,000 -- $15,000
                                                           Black-
                                                           Owned
Company                                    Type            Units

Crown Trophy                         Full Service Trophy     5
   9 Skyline Dr.,                    & Awards Center
   Hawthorne, NY 10532
   * 800-583-8228
SIGN-A-RAMA                          Computer Sign           14
   1601 Belvedere Rd.,               Franchise
   Suite 501 S
   West Palm Beach, FL 33406
   * 800-286-8671
Ace Cash Express, Inc.               Retail Financial        15
   1231 Greenway Dr., #800           Services
   Irving, TX 75038 * 972-550-5000
MGW Group Inc.                       Cookies by              7
   1865 Summit Ave., Suite 605       Design [R] & Cookie
   Plano, TX 75074 * 972-398-9536    Bouquet [R]
Express Personnel Services           Staffing for            7
   6300 NW Expressway                Temporary and
   Oklahoma City, OK 73132           Full-Time Service
   * 405-840-5000

Domestic
                                     Franchise
Company                                Units       Fee

Crown Trophy                           95        32,000
   9 Skyline Dr.,
   Hawthorne, NY 10532
   * 800-583-8228
SIGN-A-RAMA                            450       37,500
   1601 Belvedere Rd.,
   Suite 501 S
   West Palm Beach, FL 33406
   * 800-286-8671
Ace Cash Express, Inc.                1,167      varies
   1231 Greenway Dr., #800
   Irving, TX 75038 * 972-550-5000
MGW Group Inc.                         228       $22,500
   1865 Summit Ave., Suite 605
   Plano, TX 75074 * 972-398-9536
Express Personnel Services             389       $15,500-
   6300 NW Expressway                            $18,500
   Oklahoma City, OK 73132
   * 405-840-5000

                                                    2000
                                     Start-Up       Average
Company                               Costs      Sales/Units

Crown Trophy                         $125,000         N/A
   9 Skyline Dr.,
   Hawthorne, NY 10532
   * 800-583-8228
SIGN-A-RAMA                          $106,000         N/A
   1601 Belvedere Rd.,
   Suite 501 S
   West Palm Beach, FL 33406
   * 800-286-8671
Ace Cash Express, Inc.                 up to       $246,600
   1231 Greenway Dr., #800           $150,000
   Irving, TX 75038 * 972-550-5000
MGW Group Inc.                       $80,000-         N/A
   1865 Summit Ave., Suite 605       $145,000
   Plano, TX 75074 * 972-398-9536
Express Personnel Services           $100,000-    $2,596,256
   6300 NW Expressway                $150,000
   Oklahoma City, OK 73132
   * 405-840-5000

URBAN CHIC

Look around your community, and don't ignore inner cities and downtown areas. These are markets that are emerging economically and, according to Seid, are hot right now in terms of business growth, and accessible to potential business owners in urban areas.

"The emerging markets are the most exciting jewels in the economic crown today," Seid says. "There the buying power per capita for certain items is even higher than those franchisors have found in the suburban markets. The economic stature of those markets has increased, the labor pool is phenomenal, and there are resources like tax benefits, community resource programs, and training programs at your disposal."

"To put it in perspective, the nation's emerging market of all ethnic makeups is larger than the entire retail market of Mexico," Seid continues, or approximately 7% of total retail spending in the United States. Studies have shown that approximately 25% of retail sales in the emerging markets are not provided by inner-city retailers, he says. In some markets that number reaches as high as 60%: it's about 30% in Boston, 40% in Chicago, and 60% in Harlem.

Magic Johnson is one African American who has already discovered this: his Starbucks in the Crenshaw District of Los Angeles is one of the highest grossing in the nation, and his movie theater in the same neighborhood is among the top 10 highest-grossing chains in the country.

But if an urban market like Harlem, south Dallas, or north Philadelphia doesn't rank high on your list of possible locations, then don't let a franchisor steer you there. "If it's not the market that you want," Seid says, "don't let your ethnicity drive you into it."

PICKING THE RIGHT ONE

The key to choosing the right franchise opportunity, says Seid, is selecting a franchise that you can be proud of and that you truly would like to get involved with for the long haul--not just for a year or two. "Pick something that makes you want to thump your chest and say, `It's all mine!'" Seid advises. "As a new franchisee, you're going to be working very hard and making sacrifices, so make sure you pick something that wins the support of your friends and family too."

Seid also advises franchisees to select a concept that meets their financial needs and abilities. Too many people relate the word "franchise" to "lots of money," he says, but that's not always the case. "If you need to make $100,000 to support your lifestyle and family, don't pick a franchise that at best can bring in $30,000 a year, because you won't be happy doing it."

Wendy Ford, a former systems analyst who left corporate America to start a family five years ago, was already making plaques for local churches when she realized her hobby could be a viable, full-time business.

Two years of in-depth research into both franchising and traditional business options later, Ford and her husband, Glenn, bought a Crown Trophy franchise. They set up shop in Forest Hills, New York, in January 2001 and expect $115,000 in sales this year.

For Ford, the benefits of franchising were clear: in exchange for the $25,000 franchise fee (raised from savings and credit cards) and 5% royalty arrangement, they would represent a brand name with buying power, which translates into a 5% to 10% savings off the goods the four-employee company uses to make its $2 to $250 awards for schools, churches, and sports leagues.

5 Franchises: $15,000 -- $350,000
                                                           Black-
                                                           Owned
Company                                   Type             Units

Meineke Discount Muffler Shops Inc.    Automotive
   128 South Tryon St, Suite 900       Aftermarket
   Charlotte, NC 28202
   * 704-377-8855
Cinnabon Inc.                          Bakery                3
   6 Concourse Parkway, Suite 1700
   Atlanta, GA 30328 * 770-353-3271
Jiffy Lube International Inc           Quick Lube           17
   700 Milam St.
   Houston, TX 77002 * 713-546-6447
Denny's Inc.                           Full-Service         66
   203 E Main St.                      Family Restaurant
   Spartanburg, SC 29319
   * 864-597-8938
Church's Chicken                       Quick Service        100
   980 Hammond Dr., Suite 1100         Restaurant
   Atlanta, GA 30328 * 770-350-3800

Domestic
                                       Franchise
Company                                  Units       Fee

Meineke Discount Muffler Shops Inc.       888      $25,000
   128 South Tryon St., Suite 900
   Charlotte, NC 28202
   * 704-377-8855
Cinnabon Inc.                             397      $30,000
   6 Concourse Parkway, Suite 1700
   Atlanta, GA 30328 * 770-353-3271
Jiffy Lube International Inc             2,181     $35,000
   700 Milam St.
   Houston, TX 77002 * 713-546-6447
Denny's Inc.                             1,739     $35,000
   203 E Main St.
   Spartanburg, SC 29319
   * 864-597-8938
Church's Chicken                         1,219     $5,000-
   980 Hammond Dr., Suite 1100                     $15,000
   Atlanta, GA 30328 * 770-350-3800

                                                       2000
                                       Start-Up       Average
Company                                  Costs      Sales/Units

Meineke Discount Muffler Shops Inc.    $154,056       $370,465
   128 South Tryon St., Suite 900      (4 bay) or     $439,529
   Charlotte, NC 28202                 $280,423
   * 704-377-8855                       (6 bay)
Cinnabon Inc.                          $232,500-      $407,674
   6 Concourse Parkway, Suite 1700        max         $333,500
   Atlanta, GA 30328 * 770-353-3271
Jiffy Lube International Inc           $174,000       $565,684
   700 Milam St.                                      $194,000
   Houston, TX 77002 * 713-546-6447
Denny's Inc.                           $100,000-     $1,300,000
   203 E Main St.                      $350,000
   Spartanburg, SC 29319
   * 864-597-8938
Church's Chicken                       $138,000-      $631,000
   980 Hammond Dr., Suite 1100         $310,000
   Atlanta, GA 30328 * 770-350-3800

Ford says Crown Trophy also helped with site selection, equipment purchases, and provided a two-week training course. She expects sales to double by July of 2002, and says doing her homework early has played a critical role in the company's success.

"We looked at various opportunities before choosing Crown Trophy," says Ford. "By the time we got to them, we were well prepared. We knew enough about franchising in general to make the right decision."

EARLY FINANCING

An important consideration for new franchisees is financing. According to DeBolt, many of the nation's banks have good track records in working with certain franchise systems, so the best first move may be to discuss your financing needs with the franchisors themselves. Some franchisors already have track records that you can take advantage of and possibly apply for a bank loan through the system itself.

"Banks certainly are an important first contact in terms of financing, but if a bank turns you down, look at the Small Business Administration loan programs," says DeBolt. "There's a lot of activity in there in terms of franchise lending."

To steer your franchising efforts in the right direction, consider this additional advice from experts in the field:

* Evaluate your goals, skills, and finances. Before you start reviewing UFOCs (which contain information about companies, theirs systems, and copies of their agreements), sit down and evaluate your skill sets, business goals and experience, and financial situation. Be honest with yourself about your own strengths and weaknesses in each of these three areas, then put that information to work in finding the right franchising match.

* Be realistic in your expectations. DeBolt says too many new franchisees start out with unrealistic expectations about everything from how much money they're going to make to how hard they're going to work to how the new business is going to affect their lives. One of the best ways to "get realistic," says DeBolt, is to talk one-on-one with other franchisees in the system about their own experiences.

* Call ex-franchisees too. Your referral calls shouldn't stop at current franchisees. Every franchise's UFOC includes a list of franchisees that have left the system in the past year, as well as those currently in it. Contact a few to find out why they left, whether or not they would come back, their franchise experience, and what their overall feelings are about this particular franchisor.

* Visit the company to evaluate it. DeBolt advises all new franchisees to visit the franchisor's headquarters to meet the people they will be interfacing with and to get a sense of the corporate culture. During that visit, get as much financial information as you can about the company (this information can also be obtained from the other franchisees that you speak with), and be sure to ask questions about the company's commitment to diversity, recruitment initiatives, and track record with minorities and minority communities.

* Get some legal advice. Too many small business owners wait until the last minute to get legal advice. Before signing on the dotted line, have a lawyer review the company's UFOC and included contracts. "It's a pretty thick document that should be understood," says Seid. "That should be done by an attorney who is experienced in franchising."

* Think about the bigger picture. When selecting a franchise, look for one that will not only provide employment for you but also for your surrounding community. "That's essential," says Seid, "and [it's] important to be able to give a kid a job and/or training and to have a business that can elevate people into management positions."

* Be ready for the long haul. According to DeBolt, franchising itself is not a "short attention span" success experience. It requires at least a year or two of concentrated, intense effort, during which time, he says, the business may come before your family and/or hobbies and other interests. "There really has to be a singular focus on what you're trying to build," says DeBolt, "which is a new, successful business that will hopefully take care of you for the rest of your life if run properly."

Would you rather give or take orders?

as a franchisee, part of what you're paying for is the franchisor's system and knowledge. Following the formula means following the rules, working within the system, and running your business according to an agreed-upon plan. In their book, Franchising for Dummies, Dave Thomas, founder and CEO of Wendy's International, and Michael Seid, a leading expert on franchising, advise new franchisees to ask themselves the following questions:

* Can you follow somebody else's rules, even when you think you have a better way? (If not, independent business ownership may be a better fit for you.)

* Do you think you can change the franchisor's system after you are on board? (If the answer is yes, again, independent business ownership might be a better choice.)

* Do you think that your local market is different from all others in the system and that the franchisor will modify the system just to suit your needs? (They may, say Thomas and Seid, but if you're counting on it, try an independent business instead.)

* Can you trust (with some honest skepticism) that your franchisor is working for the benefit of the entire system--even when his or her decisions do not necessarily go your way? (If so, franchising may be just the ticket.)

* Are you willing to share financial information and provide required reports each month? Are you prepared to accept coaching and advice on business practices from your franchisor's field staff? (If so, franchising may be the right choice.)

* Do you have the personal drive to be a great operator? (If so, then franchising may be for you.)

Source: Dave Thomas and Michael Seid, Franchising for Dumnies, IDG Books Worldwide Inc., Foster City California. Copyright (c) 2000.

Ten important factors to consider before buying a franchise

1. The type of experience required in the franchised business

2. A complete understanding of the business

3. The hours and personal commitment necessary to run the business

4. Who the franchiser is, what its track record has been, and the business experience of its officers and directors

5. How other franchisees m the same system are doing

6. How much it's going to cost to get into the franchise

7. How much you're going to pay for the continuing right to operate the business

8. Are there are any products or services you must buy front the franchisor and how and by whom they are supplied

9. The terms and conditions under which the franchise relationship can be terminated or renewed and how many franchisees have left the system during the past few years

10. The financial condition of the franchisor and its system

Source: The International Franchise Association, www.franchise.org