Giving franchises a hand

Question: I’m interested in starting a business that provides advice and research to potential franchise buyers. Are there any franchises I could purchase that use this business model? Can I start one?

Answer: There are several existing franchise brokerages -- some independent and some franchise operations -- that advise investors and would-be business owners about franchising. Typically, these firms are founded and staffed by past or present franchisers, franchise executives, franchisees, franchise developers and other professionals in the market.

Most of the firms offer free consulting services to potential franchise buyers, said Nancy Ghanem, chief executive and founder of Franchise.com, a consulting firm based in Encinitas.

“The consulting typically consists of education, financing options, franchise loan preapproval letters, preliminary franchise settlement sheets and matching up would-be franchise owners with the franchise operations that are determined to offer the best prospects for success,” she said. Revenue for these consulting firms typically comes from franchisers who pay for qualified sales leads.

One complaint about this business model, Ghanem said, is that some brokers may be matching prospects to the franchise systems that pay best and overlooking operations that might offer investors more potential for success. To eliminate this conflict of interest, some outfits, including her service, FranFit.com, charge franchisers a flat fee for participating on their sites.

Assuming you have a background in franchising, think about working for a consulting firm before you take the financial risk of opening your own firm or buying a franchise. Other consulting firms include FranChoice Inc. and FranNet. Groups that can also help are the American Franchisee Assn. (www.franchisee.org) and the International Franchise Assn. (www.franchise.org), which offers an online course called Franchising Basics.

A clear plan is key to

draw start-up financing

Q: I’m working on an Internet application that is going to need outside investors and equity partners to help provide start-up financing. My partners and I are knowledgeable, but we are not qualified to take our project to the next business level. How can we get help recruiting the type of management talent we need?

A: Before you start thinking investors or management talent, you need to be sure you have a clear game plan that you can present successfully.

“Your timing is good,” said Peter Cowen, an investment banker and principal of Los Angeles-based Spire Equity. “There is a good deal of optimism growing for early-stage deals right now, and there are a lot of clever ideas getting rewarded in the marketplace.”

You need to develop a well-organized business plan that lays out how far along you are in the development process, what value your product will bring to the table, how long it will take you to get to market and what kind of customer assessment you have done. Take that plan to some professionals you can trust and ask them for guidance in recruiting key employees and investors, Cowen advised.

An investment banker, attorney or accountant who has experience working with start-up companies will be able to help shop your plan in the right places. If you need help getting your plan down on paper, talk to a business consultant, but again, make sure you’re hiring someone familiar with your industry and with getting start-ups off the ground. Don’t know anybody? Networking is key: Ask people who’ve done this for referrals to professionals who helped them.

“If you’ve got an exciting business opportunity with the right people gathered around it to validate it, then all kinds of people -- landlords, investment bankers and management -- will work for some portion of equity,” Cowen said. “However, start-ups have to climb a steep slope that rewards the well-prepared disproportionately and is tough on those who aren’t ready.”

E-mail questions to karen.e.klein@latimes.com or mail them to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.