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Perspective owners go for chains

Franchise trends see retirement funds tapped; semi-absent owners

— More people are cashing in their retirement savings to open up a franchise business, according to consultant Frank Dunne, with more than half of clients he has placed this year tapping such funds.

Dunne, a strategic franchise advisor in the Hudson Valley for FranNet, said most people probably have a similar thought when thinking about a franchise business, but the type of offerings is much broader.

“The first thing I think people think of is McDonald’s and Dunkin Donuts and that kind of thing,” Dunne said. “Really, those types of franchises only represent 6 percent of the entire franchise pie.”

As the economy continues to recover, Dunne said he is seeing more people not only tapping their savings to open a franchise, but also being semi-absentee owners. This allows the franchise business owner to keep their 9-to-5 job while also managing their own business.

“Most of the semi-absentee opportunities tend to be retail in nature because they all have a fairly common template,” Dunne said.

FranNet, which offers franchise consulting services nationally, also says the odds for success are greater through opening a franchise rather than starting a business from scratch.

The company conducted a five-year study starting in 2006, which revealed approximately 92 percent of its franchise placements were open two years later. This compares to around 62 percent of small business ventures continuing operations after two years, according to U.S. Census Bureau studies. After five years, its franchisees saw 85 percent still in business, opposed to 50 percent of small businesses, according to FranNet.

“Franchising has long enjoyed a reputation of being successful because of its systems,” Dunne said. “You are mitigating the risk because you are following the franchisee’s system.”

New York state, though, does lag behind developing franchises compared to some other states, Dunne said. He pointed to one larger-scale franchise owner in the area that recently opened 20 Menchie’s Frozen Yogurt locations.

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