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5 Franchises You Want to Invest In

NEW YORK ( MainStreet) -- So you want to own a franchise, but don't know how to start looking? While there are many reputable companies using the franchise model, some companies have not only mastered the art of franchising, but is also benefiting from strong consumer trends that suggest their companies having plenty of room to grow.

But how does a potential franchisee decipher good from great?

Paul Segreto, President and CEO of franchisEssentials, a franchise management, marketing and development consulting firm, says there are five primary areas to weigh when researching franchise investments:

Leadership
Capitalization
Demand for product or service
Unit economics/profitability
Relative initial investment

Segreto, who also hosts a weekly Internet radio show called Franchise Today, notes strong management is crucial to any company's success.

"You don't want it to be centered on one or two people," he says, and this type of structure tends to be more characteristic of young companies.

Experts agree that potential franchisees should also talk to existing franchisees to find out things like: Are they happy with the company? Are they buying additional franchises or territories? Would they would make the same investment again?

Bankers who make loans to franchisees are also a good resource to consult. Potential franchisees should ask them if they have had good experiences with the franchisees and franchisors?

In today's economy, more and more banks are looking at the franchisor's strength, Segreto says. Making sure the franchisor is creditworthy is just as important as the determining the franchisee's financial capabilities, he says.

Steve Olson, president of Franchise Update Media Group goes one step further. He says before looking at franchises, use an assessment tool to find your own strengths and weaknesses.

"What type of characteristics and strengths does the individual have? Are they going to match the business they're going to be in? It's a huge problem if you have somebody that really didn't have the skill sets or characteristics to succeed in that business," Olson says.

With an eye on the bottom line, an increasing amount of franchisors are using these tests as another influence in their recruiting tactics, Olson says. "More and more are using them, especially in today's environment, where you don't want to make a mistake on who you're bringing on," he says.

"Companies are using assessment tools before and after to measure the difference in unit performance," Olson says. In many cases, "the increase in performance at the unit level was higher when they used profiling tools as a way to recruit."

Finally, look at the company's culture. Aside from the economics of the company, do they have a following both inside the organization and with customers? Choose a company where "the franchisees, the employees, the customers are brand fans," he says.

Taking all that into consideration, here are five franchises that stand out from the pack.

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