“The horse is here to stay, but the automobile is only a novelty — a fad.” That was the reasoning presented to attorney Horace Rackham whose law firm, in 1903, drew up the incorporation papers for Henry Ford’s automobile company. Rackham was approached to become an investor, and he asked for his banker’s opinion.

While the horse is still around, the automobile gained the lion’s share of the transportation market which the horse once held. Luckily, for Rackman, sometime later, he sought a second opinion and changed his mind. Rackham’s five thousand dollar investment, held in stock until he finally sold it, garnered twelve and one-half million dollars.

That story simply illustrates that educated, wise, well-meaning people sometimes have great trouble discerning between a novelty and sound investment. Bitcoin is another phenomenon that has many people on the fence. Is it real? Will it last?

That may be a concern for people exploring franchise opportunities. Friends, relatives and loved ones, often unasked, offer their advice concerning franchise investments. This is especially common if they are not, themselves, familiar with the franchise. They may assume because they don’t know the brand or product that the investment is high risk. They hear tales about big start-up efforts that fail. New stock offerings that start high and finish low. People mean well and are happy to share their concerns.

Caution is OK

Doing your homework matters. First, it is good to verify whether a business is really “new.” Some new franchises are formed by longtime, successful businesses that are now expanding on a national level. You may benefit from the knowledge these seasoned business owners already possess. If a franchise really is a “new idea” you will need to weigh the risk (usually a lower investment cost) against the fact that you can expect to put more effort and money into marketing and promotion than a well-established brand or known industry would require.

Exploring franchise opportunities is what I do. If you are wondering how to conduct a thorough franchise investigation, prior to making an investment, contact me, the Franchise Fitter, dpleuss @franchoice.com. Let my complimentary services and years of experience guide you through your due diligence.