Testing the Waters With a New Franchise

Unlike having the ability to get many a instant life insurance quote and compare, starting a newly formed franchise for the first time doesn't have such reliability.

Assessing the risk with a new franchise is harder, too: Much of the information about a franchise usually comes from existing franchisees, and with a new one, of course, that's hard to come by. On top of that, there are more new franchisors out there than ever before. In recent years, the number boomed, partly because of the growth of franchisor-packaging firms that help companies become franchise operations. In 2007, the trend's peak year so far, the International Franchise Association added 106 new franchisors.

How can you tell if you're looking at a great ground-floor opportunity or a shaky foundation? By doing much more research than you'd ever do on an established franchise. Here is what Libava and Gordon Dupries, a San Francisco franchise consultant with FranNet, would examine closely.