(FORTUNE Small Business) – Quick, which product would you choose to build a business around: a square bagel or a round hot dog? For George A. Naddaff, the answer is obvious--which is why he's now touting the virtues of the Roundog, a circular wiener he's hoping to market. Versatile? By Naddaff's estimate, the frankfurter can be dressed in over a dozen delectable guises, simply by pumping its middle with such sumptuous fillers as boiled ham or pineapple chunks. Nausea-inducing? "My wife doesn't like fried. When she hears 'Roundog,' she wants to vomit," the 71-year-old admits. Then again, who'd have thunk a simple rotisserie-chicken restaurant could send feathers flying all over Wall Street?

That company, Boston Chicken Inc. (its stores were renamed Boston Market), set a record for an IPO's single-day gain back in November 1993, when it went public. It also established Naddaff's reputation as the man with the Midas hunch. After all, it was Naddaff who in 1987 set foot in the one existing Boston Chicken outlet and decided to buy it. He spent five years enlisting franchisees before selling controlling interest in the 43-unit chain to a group of former Blockbuster Entertainment Corp. executives in 1992. (Six years later, having expanded too rapidly, Boston Chicken filed for bankruptcy.) Now, "I probably look at 100 business concepts a year," says Naddaff, who serves as chairman and CEO of Business Expansion Capital Corp., in Newtonville, Mass. There, in offices above a bank, a five-member team helps him ferret out the kinds of business ideas he's after--namely, those he pegs as having enormous franchising potential.

Says Naddaff, who also serves as chairman and acting CEO of Ranch*1 Inc., a 60-unit fast-food chain based in New York City: "When I talk to somebody with an idea, I'm looking for a hook. What is different about this? Is it unique enough for me to put my time into it?" Herewith, some other observations about business ideas--good and otherwise--from a self-anointed "deal junkie."

What's the worst source of ideas?

Listening to what comes in over the phone. I went on TV and gave out my number. Fifty-seven calls came in, the craziest crap you ever saw. Still, I never tell an entrepreneur that his idea is bad.

But how often do you feel the overwhelming temptation to do so?

There are times. There was a guy who came in here with an idea of how to do weight reduction: You wrap a person in cloth like a mummy, put his feet in a pan, and fluids come out of the person's body. He wanted to franchise this thing. I looked at him and said, 'Suppose somebody had a heart attack?' I mean, that's a crazy idea. Even I didn't do that one.

What about ideas that look solid but turn out differently?

Five years ago I raised money for Silver Diner Inc., which was then a restaurant chain with three units, based in Rockville, Md. It was a great, great concept with great, great food. The problem was that the buildings were costing $1.7 million to put up. I was on the board, and I kept trying to convince the founder to go for a smaller version. But this was a kid with high energy and incredible drive, and he would not listen to his board--he overpowered his board. Tough guy. I was into small is beautiful. But we agreed to disagree. I actually resigned.

What else can sour an otherwise sweet idea?

Venture capitalists are unique human beings with very, very big egos. I was not part of management, but I was a board member and investor in a chain of frame stores called Corners. When I invested, in 1998, there were 11 stores, all great-looking and profitable and very, very upscale. But the venture capital people grew it too fast, and it ended up in bankruptcy. In my humble opinion, a little bit of slower growth would not have hurt.

Certainly you've had your very own bad business ideas, haven't you?

Around 1994, just after I did Boston Chicken, I had a business called Coffee by George, a drive-through bakery concept that I'd rather forget. I ended up with one of them in Smithfield, R.I., where there are more birds than people. You learn.

In that case, what did you learn?

Maybe it's my age, but I don't play in the arena of raw, raw startups anymore. The kind where a guy has a business plan and a fantasy. I never saw a business plan I didn't fall in love with. So if somebody wants to see me, my first question is always the same: Is there one of them already operating? It's also got to be profitable. And I want to make sure the entrepreneur is running it.

Why is that so important?

I love the blood and sweat and drive and persistence of entrepreneurs. They make things happen when most other people don't. Eventually, if they hang around long enough, they'll choke the thing they gave birth to. But you need them to be part of the launch. You need their passionate belief.

What about your own passion for ideas? How do you maintain it?

As they get older, a lot of people lose their ability to dream. But I think one of my assets in life is that I'm able to dream. I've got four or five new concepts sitting on my desk that are truly exciting. I'm looking at something called Marcie & Me, an enrichment environment for moms who want to spend an hour with their kids and don't want to leave them at day care. There's the Low Fat-No Fat Gourmet Cafe and Juice Bar, which is a concept we're working on. I was at a meeting where an Israeli kid came up to me afterward and said, 'I've got to talk to you.' I told him, 'I'm Lebanese, do you still want to talk?' He told me he has 10 chocolate stores in Israel, and all of them are doing well. He's a lovely guy; he's got the energy and the power, and he's got the chocolate that he says is better than Godiva. I'm going to be working on that project.

Have you detected any pattern about where the best ideas originate?

I know if I'm visiting a city and I see a line outside of some place, I'll try to get in. I like lines; Boston Chicken was a line. So I say entrepreneurs should always follow lines because they will usually lead to something fascinating--unless, of course, they happen to get into a soup line. FSB Online Have a franchising question you can't answer? Get free advice by writing to answermen@fsb.com.