Many Americans of owning their own business. One of the most popular ways to do this is to buy a ready-made business through a franchise. A franchise is an independently owned business that operates under the umbrella and name of a chain, and which pays a percentage of its revenues (often gross revenues) to the chain. Franchise opportunities are numerous, ranging from huge fast-food chains, commercial cleaning services and tutoring centers, to lesser-known and more esoteric franchises such as truck billboard displays and medicine vending machines.

While franchises generally are an easier way to get started in your own business versus building from scratch, they are not without risks. Franchises fail like any other businesse-not only the individual franchises (35 percent within the first four years) but the franchisor itself. Also keep in mind that a franchise runs under the restrictions of a larger corporation. If pure autonomy is what you seek, consider an independent venture instead.

So before plunking down what can be a great deal of money, to say nothing of the hard work, consider these tips.

Talk with your-Certified Financial Planner professional. A franchise can involve a significant part of your investment wealth. You may need to borrow money or tap into retirement funds in order to buy a franchise. Before starting your search, talk over with your planner your goals for the franchise. How much income are you seeking from it? How much can you afford to pay for the franchise and operational fees (and how much can you afford to lose)? How are you going to pay for it? Run some "what if' forecasting. This helps you go into the process with a clear vision.

Pick the franchise that's right for you. It's typical to spend 1 2-hour days, 7 days a week, getting a franchise started and established. So it's essential to pick something you enjoy and, ideally, have expertise in. Compare several types of franchises, as well as several within a specific field. Go to franchise expositions, check the Internet and read franchise industry publications. Is there demand for the service or product? How strong is the competition? Is the franchise a fad or something long-lasting? Does the Better Business Bureau report complaints about the franchise?

Resist high-pressure tactics. Salespeople promote franchises at numerous expos seminars around the country. Don't rely solely on their verbal promises and claims as fact. Read the actual contract and support literature very carefully.

Read the UFOC. The law requires franchisors to provide prospective franchisees with a uniform franchise offeririg circular. Read it It provides vital financial information, including fees and royalties, trademarks, operating restrictions, termination, training, advertising, past litigation, the financial health of the franchisor and any bankruptcy proceedings.

Be sure the franchisor provides support. Is the training good? Do they provide follow up support? If you pay an advertising fee, does it truly provide good advertising?

Don't depend just on the name. Just because it's a well-established name, like a McDonald's or Moto Photo, doesn't guarantee success. Brand-name franchises also tend to be more expensive up front.

Talk with current and former franchise owners. Franchisors must provide the names of at least 100 current franchisees (or all their franchises if they have less than 100) and franchisees who left within the last year. Talk to at least several of them. Visit their operations. Their insights about their successes, failures, relationship with the company, challenges, revenues and profits, training, cost and delivery of supplies, total investment and so on can be invaluable.

Get a copy of the Federal Trade Commission's booklet on franchises. A Consumer Guide to Buying a Franchise is an excellent booklet that gives advice about pitfalls to watch for, questions to ask and how to select a franchise that's right for you.

Have an attorney and accountant review the contract. Before signing, have an attorney and accountant who are familiar with franchising carefully review the contract. Is the exclusive area guaranteed? Who provides the supplies, at what costs, with what restrictions? What percentage of revenues go to the franchisor? Gross or net? Can you sell to a third party without franchisor involvement or approval, or must you sell back to the franchisor? Can you pass the franchise along to a younger family member?

June -30- 1997