15 franchises you can run from home

Black Enterprise, Sept, 1998 by Gerda D. Gallop

You don't have to leave the house to become an entrepreneur. You just need to grab one of these great franchise opportunities.

IF YOUR DESK CAN BE FOUND IN YOUR DEN rather than an office building, you're not alone. In 1994, 37 million people worked at home, and more than 60 million will by the end of this year, according to IDC/Link Resources, a New York research firm. Moreover, 8,000 home-based businesses are started every day.

The work-at-home trend--spurred largely by technology, corporate downsizing, the hassles of commuting, the desire to spend more time with family and the transition to a service-oriented economy--has taken off in the franchising world, which has an estimated 10,000-plus home-based franchisees.

Take Jonathan and Beverly Chandler of Memphis, Tennessee. They knew more than a little about accounting before starting their Padgett Business Services franchise nearly two years ago. Before moving to Memphis to care for Jonathan's elderly parents, they had run an accounting business out of their home in Alabama for eight years. Because the move was sudden, they didn't have time to build their business back up nor the marketing expertise to research a new market, so they decided to open a franchise.

To finance the $35,000 start-up costs for the Padgett franchise, they obtained a loan from an independent banker after conventional banks turned them down--even though they had good credit--because they had quit their jobs. The business has been profitable ever since.

This year, BLACK ENTERPRISE has provided a comprehensive list of franchise companies that offer some of the best home-based opportunities for African American business owners. Our 15 Franchises You Can Run From Home list is based on a national survey of franchisors conducted by BE research. In making our selections, we considered such criteria as the number of black-owned units, franchise fees, start-up costs, average sales per unit and support services.

According to the International Franchise Association in Washington, D.C., there are about 600,000 franchised small businesses across the country, which account for $1 trillion in sales, totaling about half of all U.S. retail sales.

Frandata Corp., a franchise research firm based in Washington, D.C., reports that about 10% of all franchises can be run from home. According to FranCorp, a franchise consulting firm in Olympia Fields, Illinois, home-based franchises earned an average of $50,000 a year in 1992, with 20% reporting sales over $70,000. Residential and commercial cleaning firms account for about one-quarter of all home-based franchises. Other lucrative franchises run from home include home restoration and home inspection services, computer training and consulting, tax services, payroll services, tutoring and pest control.

"Business-to-business services are very hot, as well as residential cleaning and other services that people don't have the time to do anymore," explains Don DeBolt, president of the International Franchise Association. "Franchising has given people the flexibility of choices [to work at home, for example] and so many different options of businesses to start--some involving modest costs, and others costing hundreds of thousands of dollars."

When you buy a franchise, essentially you pay the franchisor for the right to use its trademark, name, products and business format in exchange for an initial fee and ongoing royalties.

Most home-based franchise start-ups cost between a few thousand dollars and $50,000 (including equipment, marketing support and sales information), compared to non-home-based franchise start-ups, which generally cost more than $50,000 in total investments. Home-based franchise fees are typically $5,000 and up; monthly royalty fees are 5%-15% of revenues; and advertising fees, which are sometimes charged, cost 3%-8% of revenues.

In addition to relatively low start-up costs, overhead expenses are lower because home-based franchisees don't have to pay rent for office, for example. Many home-based franchisees also can write off some business expenses at tax time.

Many franchisees--home-based or otherwise--are also attracted to the fact that they are buying a business concept with proven success and name recognition. Several studies have shown that franchise operations stay in business longer than other start-up businesses. For example, a 1991 survey by Arthur Andersen & Co. found that only 3% of franchises had disappeared five years later, while a Small Business Administration study reported that 62.2% of all new businesses dissolve within the first six years of operation.

Name recognition, along with low investment start-up costs, is what attracted Wayne Ward of Gardena, California, to O.P.E.N. Cleaning Systems three years ago.

After 18 years of working in commercial banking, Ward used his personal savings and a $4,800 loan from the franchisor to meet the start-up costs of about $10,000, including equipment and franchise fees.

Today, he has two full-time employees who provide commercial cleaning services, and 20 corporate clients, including a women's health center and an appliance company. Last year his revenues were approximately $65,000, and this year his monthly income target is $10,000.