Clark Howard: How To Pick Winning Franchise

ATLANTA,None — It's been a tough decade for small business owners. Since 2001, 17 percent of franchise owners have closed their doors. If you are considering a franchise, how do you pick a winner?

Gary Pipcorn was laid off about 10 months ago, and he was looking for a new opportunity. "I've done several start-ups before," Gary said, "But they've always been for somebody else, and this time I'd like to do a start-up on my own."

But how do you tell if your franchise will be a success?

One way banks decide whether to give you a loan: The Coleman Report.

The report collects information on the number of franchises that get loans, and the ones that go bust.

Of the biggest companies that sold the most franchises, here are the ones with a failure rate less than 10%:

The Super 8 motel, with a 3.7% failure rate The Days Inn, with a 6.4% failure rate Subway sandwich shop, with a 7.2% failure rate Dunkin Donuts with a 7.8% failure rate Dairy Queen, with a 8.2% failure rate

The franchise Gary wants to open didn't make the list of the biggest franchisers, because this company is growing slow and steady.

Christian Brothers Automotive only opened 57 franchises in the last decade, but its failure rate: Zero.

Clark's most important rule if you want to own a franchise: Go work there first for six months and don't tell anyone you are planning to become an owner of a franchise. Do all the grunt work. Find out what really goes on in the business, before you jump in with both feet.