Ms schroeter ive always taken fast growth with a

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MS. SCHROETER: I've always taken "fast growth" with a grain of salt. You need to make sure you select the franchise based on reality, not hype. Climbing on board a fast-moving train is great, as long as the track is solid. Rapid growth can be a sign of a healthy system-most of the time. But because a lot of others are getting into a franchise doesn't mean you need to be any less careful. Do full diligence. Do your homework. Think for yourself. WSJ: Should would-be franchisees speak with current franchisees to learn how well they're really doing? MS. SCHROETER: Yes, absolutely. You need to validate the business. Call or contact at least a dozen [franchisees]. Ask how the current economy has impacted them-and their competitors. Find out how their same-unit or territory sales were in '08 versus '07? How were they in the [first] quarter of this year compared to a year ago? The beauty of a franchise is that there's a track record. You should put together cash-flow projections and have them reviewed by random franchisees until you're confident you understand the range and the averages of the franchised system. Then, and only then, do you know how much cash you'll need. Turn to the experts -- the individuals who already own the business. They will help you if you know how to ask. WSJ: Are you seeing increased pressure by franchisers and their agents to sign up new franchisees these days? MS. SCHROETER: I don't see any added pressure. There's not a shortage of good candidates on the market right now. I'm getting lots and lots of calls. Strong franchisers survive off royalties, not franchise sales. So they pay me to bring them someone who will make them a lot of money over five, 10, 20 years. ---
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Page 3 of 3 2009 Factiva, Inc. All rights reserved. Mr. Gibson is a writer in Des Moines, Iowa. He can be reached at [email protected] License this article from Dow Jones Reprint Service Document J000000020090511e55b0001f
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  • Fall '08
  • Staff
  • Britt Schroeter, ms. schroeter

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