THE BLOG

The Calculated Entrepreneur

07/28/2014 05:13 pm ET | Updated Sep 27, 2014

Every day I meet people who dream about starting their own business, but wonder if they have what it takes. Some have been in corporate jobs for years and have great skills but not a great idea for a business. Or they may not be a big risk taker. But they still have the desire to do their own thing.

That's the benefit of franchising. I like to think of franchisees as being calculated entrepreneurs. That's because franchises are owned by business people who want to buy an idea and system that is already tested and proven. Here are some franchise basics.

Franchising 101
• Exactly what is a franchise? It's a licensing system by which the owner (franchisor) of a product or service licenses others to market and supply its product or service (franchisees) within a defined territory following the guidelines established by the franchisor.

• What does it cost? Since you are "licensing" someone else's idea and process, the cost of owning a franchise includes a one-time fee to get you started and an ongoing royalty (either fixed monthly cost or a percentage of sales). These range depending on the type of franchise.

• What do you get for the money? The royalty pays the salary of the people in the corporate office who are working for you. It's common for a franchisor to provide initial and ongoing training, purchasing power, marketing programs, tested operating systems, and possibly national accounts. In addition, you basically receive a business in the box - website, protected trademark, professionally written and designed marketing materials and e-mail campaigns.

• How much does it cost? The total cost for a franchise that can produce the type of salary needed to live in DC metro area starts at $50K. Costs increase if you need to rent space, hire employees, and buy equipment or products.

• Who makes a good franchisee? Someone who has work experience, start-up capital, is "coachable" and willing to follow rules and guidelines set by the franchisor.

With franchises in over 90 industries, there are franchise opportunities that fit many skills sets and interests. Consider working with a franchise specialist to narrow the list. These consultants have valuable insights and experiences that are normally free for potential franchisees. They will walk you through the steps and ensure you end up with a business that most closely fits your needs, goals, skills, and means and also provides the type of return on investment that you are looking for.

Franchising can be a great way to move from employee to entrepreneur--in a well calculated manner.

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