Upscale cupcake bakeries are the latest franchise opportunity to move from being hot to not.

I have a longtime bias in favor of entrepreneurs and often call them the “secret weapon of our prosperity” in America. They’re the ones who really create jobs in our country.

The lure of franchising is powerful during a down economy. Who wouldn’t want to be their own boss and call the shots?

But before you get involved in a franchise, you should first work in the industry that you’re considering entering. Sweep the floor or empty the trash cans if you must. Just get in there and learn the ropes—and don’t tell your boss that you’ll be an eventual competitor!

Franchise ownership can be a dicey proposition, with some chains having great success rates and others having abysmal failure rates. Banks will often consult with an industry publication called the Coleman Report to determine if they’ll lend to you as an aspiring franchisee.

Between 2000 and 2009, there were ten franchises that had a zero percent failure rate, according to the Coleman Report: Comfort Inn, Comfort Suites, Christian Brothers Automotive, Sleep Inn, Motel 6, Kiddie Academy, Taco Bell, Baymont Inn & Suites, Chicken Express, and Red Roof Inn.

On the flip side, ten franchises had some of the highest failure rates during the same period: Wings n Things (82 percent), Noble Roman’s Pizza (76 percent), Super Suppers (69 percent), Golf Etc. (59 percent), New York NY Fresh Deli (57 percent), Velocity Sports Performance (53 percent), My Gym (51 percent), Image Sun (50 percent), Steak Escape (50 percent), and Wireless Toyz (47 percent).

So now The Wall Street Journal  reports that gourmet cupcake operations are starting to falter for the first time in a decade. It just goes to show that you've got to be careful out there! Make sure the insta-business you're eyeing isn't going to make you insta-poor.

Image of Clark Howard About the author: Clark Howard

Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. View More Articles

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