Burgers, boxes, baking and brakes: franchise opportunities continue to multiply at a healthy rate and there's nothing artificial about it.

Franchising is a system of doing business. According to the International Franchise Association (IFA), the largest trade association representing franchising worldwide, over 65 industries have grown through franchising. Perhaps more importantly, franchising has allowed millions of would-be enterpreneurs to realize their dream of owing their own business. Today, franchise establishments employ over 8 million people and generate 170,000 new jobs into the U.S. economy. Countries from around the globe are clamoring for U.S. franchisors to establish territories in their countries, hoping this "engine of growth" can help grown their own economies.

They're out there and they want you. Franchise groups of all shapes and sizes recognize the power of the minority dollar and have begun to court the minority investor as fiercely as they battle for customers, financing and market share. An increased level of minority ownership and participation is the stated goal of several high-profile franchises.

Coming Up

It might be a jungle out there, but franchises are holding their own when it comes to growth and revenue potential for the individual owner. Mail Boxes Etc. will extend its network of outlets by over 300 units this year and by more than 350 units during 1998. Subway has opened 1000 restaurants each year for the past eight years and looks to continue that trend. Kieth Gerson, senior vice president for franchising and licensing with Mrs. Fields, anticipates adding more than 90 locations of various types over the next 12 months.

Coverall, a rising star in the commercial cleaning service niche is looking at a staggering 25 percent leap in annual revenue. The mature Dunkin' Donuts group expects same-store sales to increase at a comfortable 5% clip over the next few years.

Some of this steady expansion is fueled by minority investors. Stephen D. Warren, vice president of corporate affairs at Wendy's International, Inc., points to his organization's record in this area. "Twenty five percent growth over recent years has been targeted and focused at minority participation." He expects that Wendy's will add between 400 and 500 new stores during 1997 and that the level of minority ownership will continue to increase.

Why do franchisor want to grow with others, instead of get bigger alone? Fast expansion with minimum capital is the answer, says Mark Siebert, senior vice president of Francrop. a Chicago-based management consulting firm that specializes in franchising.

Show me the Money

Franchises are not magically immune from the bane of other types of entrepreneurial undertakings. The twin factors of financing and cash flow still spell the difference between success and failure. The approach to financing varies from group to group, but the common theme is simple. Financial arrangements are structured to reward both the franchisor and the franchisee with a return on their investments.

The initial cash investment can range from $100,000 for a Midas shop to a $75,000 ante for a McDonald's restaurant. Hanging out a Dunkin' Donuts sign requires an outlay of $200,000, while a Sears Authorized Retail Dealer Store demands a $40,000 to $60,000 cash injection. Mail Boxes, Etc. calls for $50,000 liquidity.

And that's just cash required. Usually, the franchise needs plenty more where that came from. Wendy's Stephen Warren explains a typical cash-versus-total-outlay scenario. "Some people get excited, thinking, `Oh, I can get a Wendy's for $75,000.' In fact, the minimum amount an individual has to invest from their own, personal unencumbered assets, ranges from $75,000 to $250,000. That's through our Business Facility Leasing program, wherein the franchisee can lease the land, building and equipment from Wendy's. But the total investment is still approximately $1 million."

Special minority financing is not always readily available and the overall level of financing assistance extended to prospective owners also runs the gamut. Some franchisors offer none. Other provide support extensive in scope and innovative by design. Coverall makes financing available during the "Growth Phase" of the franchising program and has a program in place to buffer the new owner's cash flow by billing on behalf of the individual units. McDonald's and Mrs. Field offer financing through third-party institutions.

A full third of Southland Corp.'s 7-11 stores already are owned by minority franchisees. In 1996, an African American-owned company became Southland's second largest 7-11 licensee when it purchased 146 stores in the southeast--a banner example of the ability of a minority-owned enterprise to generate the financing necessary to ratchet up the attainable levels of franchising acquisition. Overall, Southland has a policy that enables qualified minority applicants to finance all or part of the franchising fee.

As in any other business venture, there is no guarantee of success once the agreement is signed and financial commitments are made. But without proper cash management and adequate financing, the fledgling owner is almost certainly in for a bad experience.

Someone to Watch Over Me 

The relationship between the franchise units and the franchisor is based on a collection of shared responsibilities. In return for an investment of time, money and aspiration, the owner gets a nationally recognized brand name and the marketing expertise, purchasing clout and operational know-how of the franchise. The individual owner can expect substantial input from the franchise in those key areas. Further, IFA membership can prove resourceful. This organization represents franchisors and franchisees moving forward united--working together. Franchise systems represent true partnerships--franchising is successful only when each party works for the success of the entire system.

Established franchisors are justifiably protective of the brand names they have spent generations building. McDonald's runs "Hamburger U" in Oak Brook, Illinois, where franchise operators are put through intensive training to enable them to deliver the level of service and quality product the public has come to expect. The customer expects the product to be the same in Kalamazoo as it is in Key West and standardized operations deliver on this promise.

Blimpie's has an 80 hour training program for franchisees, which includes in-store experience as well as classroom learning. It includes lessons in operations, bookkeeping, inventory management, marketing, personnel management, product procurement, quality control and many other topics.

The relatively newer kids on the block know that quality control from unit to unit is imperative for the overall health of the franchise group. They communicate this message to the franchise holders through seminars, training programs, on site inspections and operational consultants. Mrs. Fields has a comprehensive "Local Store Marketing Program" funded through a common franchise marketing fund set at one percent of gross sales. Coverall defines start up, operating and growth phases for its units and focuses training efforts on the special needs of the units as they come into the fold and mature through these levels of operation.

As a form of business enterprise, the real strength of franchising lies in its essential nature as a hybrid neighborhood operation with the backing of nationwide economic resources. By working together with the local owner on implementing tried and tested regional and national operating strategies, the franchise succeeds at what it does best. Owners trade off the independence of operational strategy for the interdependence of macro and micro management by the franchise. Expect input and lots of it.

What You'll Need to Bring to the Table

Different franchisors expect different attributes from their franchisees. Some, like Coverall, take the flexible approach. "There are no qualifications necessary to obtaining a Coverall franchise. Coverall realizes that being an independent business owner has a great deal of appeal to most people, but poses a lot of challenges that small business owners can't handle alone. Coverall's program is designed to provide franchise owners with a turnkey approach and arm them with the skills necessary to succeed in their own commercial cleaning business."

Others, like McDonald's, emphasize a strong desire to succeed, hard work and being part of a winning team. The golden arches also call for the goal to operate a McDonald's restaurant business in small towns and in areas representative of a diverse customer base, the willingness to participate in a comprehensive training and evaluation program, and a strong and successful background with emphasis on interpersonal skills and financial management.

Mrs. Field wants experience, too, particularly management experience in food service and/or retail. "We require hands-on operators who can meet our rigid quality, service and cleanliness standards," says Keith Gerson. Money talks. "Candidates must possess the financial ability to construct new locations."

Dunkin' Donuts takes a similar approach, asking for a minimum of $200,000 in liquid assets and $400,000 total net worth, along with experience in P&L and people management. An appreciation for customer satisfaction and experience in the quick-service restaurant industry count, too. Baskin-Robbins has similar requirements, although the financial qualifications are slightly less stringent.

Star Mart franchise owners must have a products agreement to sell Texaco gasoline. In addition, they'll need $150,000 liquidity, access to property for the Star Mart location and a willingness to locate in the area where franchises are being offered.

Where You Are--Or Could Be--Also Matters

Geography often dictates a franchise company's growth objectives. Wendy's has been growing, particularly with heavy concentration in the northeast, midwest and southeast. "We're really looking in terms of expanding and increasing minority participation in these areas within the franchise system," says Stephen Warren.

Dunkin' Donuts and Baskin-Robbins also have an eye on location. "We are seeking to expand our brand's presence in many key markets and are looking for qualified franchisees to help us realize that objective," notes Doug Fisher.

"In Atlanta, one of Blimpie's most successful markets, 40-50% of our 155 locations have minority franchisees," says Lynnette McIntire.

"Government" is not a Dirty Word

Franchisors can and do help prospective owners partake of whatever government assistance that might be available.

The PLUS program at America's Favorite Chicken, parent company of Popeye's Chicken and Biscuits and Church's Fried Chicken, uses Federal Empowerment Zone legislation to give a boost to minority business owners. These zones were established in large urban areas to offer tax incentives selected inner cities. Leon Oldham, the director of AFC's minority and inner-city development/PLUS, explains. "AFC studied the Empowerment Zone legislation for three months and that is now paying off in both Black and female ownership." PLUS also works with hopefuls to secure alternative development, as well as private and public sector capital, equity partnerships, and education and training in operating restaurants.

The Minority Business Development Agency (MBDA) is the Federal Agency specifically established to encourage the growth of minority-owned businesses. Although not a funding source, the MBDA uses a combination of technical assistance, financial planning and management and marketing instruction to aid fledgling businesses.

Another governmental initiative is the National Main Street Program which has the goal of bringing national franchises to over 1200 major cities and urban centers throughout the country.

Governmental input is not necessarily available in copious portions, but it is out there. As a tool for increasing minority ownership, it can neither be overestimated nor ignored.

More, More, More

It works. The investment has been made. You're turning a tidy profit. You want to take the next natural step. Multiple unit ownership.

On the face of it, this is a trickier issue than it seems. Depending on the corporate philosophy and outlook of the franchisor, multiple unit ownership may not be an option for franchisees. Reasons for this can lie in the type of product or service being offered, the region in which the franchise operates and the territorial nature of existing franchisers.

Mrs. Fields, Midas, Subway, Coverall and Mail Boxes Etc., prefer single-unit owners. On the other hand, a key feature of Wendy's--which is not true of several other major fast food franchisors--is the opportunity for new franchise owners to acquire and operate multiple units. Dunkin Donuts and McDonald's make case-by-case assessments of multiple unit sales. Southland 7-11 gives existing franchises the options to purchase multiple units.

Whatever the policy of the particular franchise, the opportunity to own multiple units within the organization is a consideration to weigh carefully when entering into a line of business. There is enough range in ownership stipulations to enable most prospective owners to settle some-where between the seemingly extreme alternatives.

If the franchise form of business ownership was foolproof, then that's the only form of business ownership we would have. It's not and we don't. For the minority owner/investor, participating in a franchise it can be extremely gratifying. What a franchise does is apply tried and tested methods of doing business in one location to multiple sites. What the franchisee supplies is capital courage and a drive to succeed. The franchisor supplies the DNA, but you bring your own nest egg.

Variation on a Theme: Non-Franchise Business Opportunities

Eagle's Nest builds houses. Cook looking, theaters of dreams in the round. Constructed to the buyer's specifications, they are economical, efficient and can be put together in a month and a half.

They are sold to the public through representatives who pay a $5,000 house deposit, which is applied 100 percent against a future house/commercial building purchase. The representative can follow this as a second job, coordinating activities between the buyer and the builder through construction and sale. Or the representative can build on spec and sell later.

Not quite a franchise, short of a consignment operation. It's closer to Mary Kay than to McDonald's in concept and has the makings of an idea who's time has come.