It may surprise you to learn that you don't need to be a computer geek to run a tech franchise. You also need not have a wad of cash in the bank to become involved in a sports apparel franchising business either. Fast food franchises can cost a bit of money to start but obtaining financing is much easier and the risk of failure is also much lower.
While a small business startup results in failure 50-80% of the time, new franchises only fail 5% of the time. Before signing on the dotted line, you'll be able to read detailed manuals outlining your responsibilities. The only question is what kind of franchise do you want?
Tech ones can be educational, creative or can provide troubleshooting services. In the educational tech franchise opportunity, your staff will teach consumers about software programs like Microsoft Word or Photoshop, typically through workshops or instructional courses.
The creative franchise business helps customers create websites, set up email systems or develop e-commerce solutions for their businesses. Troubleshooting franchises fix hardware or software problems.
Food, either restaurant or fast food, is another type of franchise you might want to consider. In the Franchise 500, 7/10 of the top franchises are fast food franchises such as Subway, McDonalds, Pizza Hut and KFC. Restaurant chains also run very well independently, although they cost a considerable amount to start up.
Some new franchises can cost from $80,000 to $2.3 million. While the responsibilities are plentiful, this type of franchising business can churn a decent profit. Many prefer fast food and restaurant franchises because they have trusted reputations and brand names that have existed for decades.
As with anything, there are downsides to buying a franchise. If you want to operate a store to show off your managerial skills or your creative flair for decorating, then a franchising will not be for you. Your building, location, uniforms, advertising pitches, products and services will all be dictated by the corporation.
They have a proven system that distinguishes their name-brand from the competition, so it's essential that you adhere to it. Secondly, if you plan on becoming richer
than your wildest dreams then the franchising business is not for you.
The profit margin for fast food franchises or retail franchises is fairly low, considering all the expenses and fees, although you can certainly make a decent living from your investment. Lastly, if you're not sure what kind of commitment you want, then you should probably try something else. Most franchise owners plan to run their business for at least 20 years.
Tuesday, January 6, 2009
Buying A Business Franchise. What To Consider
Franchises are very popular at the moment and more and more people are choosing to buy one as opposed to starting out by setting up their own business.
By purchasing a franchise you are effectively taking advantage of the success of an already established business. As the 'franchisee', you are buying a licence to use the name, products, services, and management support systems of the "franchiser" company. This licence normally covers a particular geographical area and runs for a limited time. The downside to a franchise is that you will never actually legally own the business.
As a franchisee, the way you pay for the franchise may be through an initial fee, ongoing management fees, a share of your turnover, or a combination of these depending on how you have set up the franchise.
A franchise business can take different legal forms - most are sole traders, partnerships or limited companies. Whatever the structure, the franchisee's freedom to manage the business is limited by the terms of the franchise agreement.
For more information about buying a franchise please visit the British Franchise Association website.
Is it worth investing in a Business Franchise?
The simple answer is yes. However, it is important that you follow some careful steps before buying into a Business Franchise.
The good news is that there is information to suggest that the Franchise Business sector is still growing rapidly. During 2007 the Nat West Bank carried out a survey into the UK franchise market which revealed the astonishing financial growth of this sector. The approximate annual turnover of the business franchise sector is in excess of £10.8 billion. What is more interesting to note is that the vast majority of Business franchisees are in profit - a total of 93% to be exact! In 1991 the total number of profitable franchisees was 70% and in 2004 it was 88%. Therefore, this business sector is growing and there is a reason for it.
Why is it growing?
The simple reason is that a Business Franchise is usually tested first before it goes to market. If it works in one area, then there is a very strong chance that it will grow in others. As an example, take a moment to think about popular franchises such as Dominoes or McDonalds. They are literally everywhere, proving the fact that if there is demand in one area of the country, there will be similar demand elsewhere. The reason for this is because generally we are all the same, as people that is and we tend to follow trends. If 100 people like eating Dominoes pizza, then eventually there will be 100,000 that do! It's simple science but it is worth thinking about when buying a franchise. The only downside to this philosophy is that the more demand there is, the higher the cost of the franchise.
Getting in at the right time.
The most effective way to turn your initial franchise investment into a successful profit is to buy in at the right time. That is, to buy into a franchise in a 'key' area and at a time when the franchise is generally unknown to the masses. The benefit of this method is that is a franchise is new and not very well known, the vendor cannot demand a high price for their franchise. The downside to this method is that you, as the franchisee, take the risk that the business as a whole may not grow into a hugely successful business.
Carry out lots of research before you commit.
The first piece of advice, and probably the most important, is not to part with your cash until you are absolutely sure you will see a return on your investment (ROI). Do not, and I repeat, do not part with your cash simply because you are eager to 'own' a business. Owning a business may appear to be exciting and a way of impressing your circle of friends, but in reality it is hard work and often difficult to get off the ground. That is why you must carry out plenty of research first before you commit to anything.
You need to also be aware that running a franchise can sometimes be frustrating. As a franchise owner you are doing exactly that - owning a franchise. You do not 'own' the entire business but instead you own the rights to use the brand and operating structure and resources. For some, this can be frustrating. As a franchise owner there will be plenty of rules and guidelines to follow, which is why you must make certain this is for you before you commit.
If you buy the franchise, and then a later date decide that it is not for you, then the franchiser could include a clause in the contract that states you must sell the franchise back to them for 'X' pounds. After this has happened, what do you think the franchise operator does? Yes that's right, he sells it to someone else for a handsome profit! So the first thing to do is to make sure you are 100% certain that you will feel comfortable with owning and running a franchise.
The next thing you need to ask yourself is what skills do you have. Remember in the first lesson, 'The Business Idea', we asked ourselves 3 important questions:
1. What am I good at?
2. What do I enjoy doing?
3. What are my experiences?
Before you invest in a franchise or choose one you should ask yourself these important questions again. The answer to these questions will help you to determine which is the best franchise for you. For example, if you like working alone and don't generally enjoy meeting people, then a franchise that involves serving customers is probably not for you. This type of business, where you are engaging face to face with your customers, can be difficult so think carefully about what type of business would best suit you.
Raising the finance to buy your franchise.
Before you decide on what franchise to invest in, you need to first decide how much capital you have to play with. This may sound strange, finding the money before the business, but there is a reason for it. Imagine attending a business franchise seminar or exhibition. You spend all day going round the stalls and stands and set your heart on one particular franchise which costs £20,000 to purchase. You go away and start to see if you can raise this kind of capital, only to realise that there's not a cat in hells chance of you finding this quantity of money. On the other hand, imagine going to one of these exhibitions knowing exactly how much money you have to play with. Now you are ready to choose the right franchise that is within your budget, something that is very important.
Some banks will lend you the money to buy the franchise depending on the economic climate, your previous track record, your financial standing and of course your business plan. Whilst it is possible to get a good business loan rate, there are better ways to raise the money. The first method is to borrow from friends or family. The reason why this is usually a better way is:
1. The risk is significantly reduced. You will not have to put forward your
property as security.
2. They are more likely to accept a longer repayment term and lower repayments.
3. They will not expect a large return for lending you the money.
Whilst all of the above are positive aspects, if you fail to make back any payments that are owed you then you are likely to lose close friends and family and sometimes things can even end up in court.
So, probably the best way to raise the finance is through friends and family, but make sure you proceed with caution!
By purchasing a franchise you are effectively taking advantage of the success of an already established business. As the 'franchisee', you are buying a licence to use the name, products, services, and management support systems of the "franchiser" company. This licence normally covers a particular geographical area and runs for a limited time. The downside to a franchise is that you will never actually legally own the business.
As a franchisee, the way you pay for the franchise may be through an initial fee, ongoing management fees, a share of your turnover, or a combination of these depending on how you have set up the franchise.
A franchise business can take different legal forms - most are sole traders, partnerships or limited companies. Whatever the structure, the franchisee's freedom to manage the business is limited by the terms of the franchise agreement.
For more information about buying a franchise please visit the British Franchise Association website.
Is it worth investing in a Business Franchise?
The simple answer is yes. However, it is important that you follow some careful steps before buying into a Business Franchise.
The good news is that there is information to suggest that the Franchise Business sector is still growing rapidly. During 2007 the Nat West Bank carried out a survey into the UK franchise market which revealed the astonishing financial growth of this sector. The approximate annual turnover of the business franchise sector is in excess of £10.8 billion. What is more interesting to note is that the vast majority of Business franchisees are in profit - a total of 93% to be exact! In 1991 the total number of profitable franchisees was 70% and in 2004 it was 88%. Therefore, this business sector is growing and there is a reason for it.
Why is it growing?
The simple reason is that a Business Franchise is usually tested first before it goes to market. If it works in one area, then there is a very strong chance that it will grow in others. As an example, take a moment to think about popular franchises such as Dominoes or McDonalds. They are literally everywhere, proving the fact that if there is demand in one area of the country, there will be similar demand elsewhere. The reason for this is because generally we are all the same, as people that is and we tend to follow trends. If 100 people like eating Dominoes pizza, then eventually there will be 100,000 that do! It's simple science but it is worth thinking about when buying a franchise. The only downside to this philosophy is that the more demand there is, the higher the cost of the franchise.
Getting in at the right time.
The most effective way to turn your initial franchise investment into a successful profit is to buy in at the right time. That is, to buy into a franchise in a 'key' area and at a time when the franchise is generally unknown to the masses. The benefit of this method is that is a franchise is new and not very well known, the vendor cannot demand a high price for their franchise. The downside to this method is that you, as the franchisee, take the risk that the business as a whole may not grow into a hugely successful business.
Carry out lots of research before you commit.
The first piece of advice, and probably the most important, is not to part with your cash until you are absolutely sure you will see a return on your investment (ROI). Do not, and I repeat, do not part with your cash simply because you are eager to 'own' a business. Owning a business may appear to be exciting and a way of impressing your circle of friends, but in reality it is hard work and often difficult to get off the ground. That is why you must carry out plenty of research first before you commit to anything.
You need to also be aware that running a franchise can sometimes be frustrating. As a franchise owner you are doing exactly that - owning a franchise. You do not 'own' the entire business but instead you own the rights to use the brand and operating structure and resources. For some, this can be frustrating. As a franchise owner there will be plenty of rules and guidelines to follow, which is why you must make certain this is for you before you commit.
If you buy the franchise, and then a later date decide that it is not for you, then the franchiser could include a clause in the contract that states you must sell the franchise back to them for 'X' pounds. After this has happened, what do you think the franchise operator does? Yes that's right, he sells it to someone else for a handsome profit! So the first thing to do is to make sure you are 100% certain that you will feel comfortable with owning and running a franchise.
The next thing you need to ask yourself is what skills do you have. Remember in the first lesson, 'The Business Idea', we asked ourselves 3 important questions:
1. What am I good at?
2. What do I enjoy doing?
3. What are my experiences?
Before you invest in a franchise or choose one you should ask yourself these important questions again. The answer to these questions will help you to determine which is the best franchise for you. For example, if you like working alone and don't generally enjoy meeting people, then a franchise that involves serving customers is probably not for you. This type of business, where you are engaging face to face with your customers, can be difficult so think carefully about what type of business would best suit you.
Raising the finance to buy your franchise.
Before you decide on what franchise to invest in, you need to first decide how much capital you have to play with. This may sound strange, finding the money before the business, but there is a reason for it. Imagine attending a business franchise seminar or exhibition. You spend all day going round the stalls and stands and set your heart on one particular franchise which costs £20,000 to purchase. You go away and start to see if you can raise this kind of capital, only to realise that there's not a cat in hells chance of you finding this quantity of money. On the other hand, imagine going to one of these exhibitions knowing exactly how much money you have to play with. Now you are ready to choose the right franchise that is within your budget, something that is very important.
Some banks will lend you the money to buy the franchise depending on the economic climate, your previous track record, your financial standing and of course your business plan. Whilst it is possible to get a good business loan rate, there are better ways to raise the money. The first method is to borrow from friends or family. The reason why this is usually a better way is:
1. The risk is significantly reduced. You will not have to put forward your
property as security.
2. They are more likely to accept a longer repayment term and lower repayments.
3. They will not expect a large return for lending you the money.
Whilst all of the above are positive aspects, if you fail to make back any payments that are owed you then you are likely to lose close friends and family and sometimes things can even end up in court.
So, probably the best way to raise the finance is through friends and family, but make sure you proceed with caution!
How To Jump Start Your Business.
All you have to do is to get out and do some work. Most entrepreneurs start out without a clue; a hundred thousand questions and clueless ness. A knock on your head can just be the thing that might push you to jump-start your business. Here are some quick tips that can jump start your business:
Sell First, Advertise later: Most entrepreneurs still follow the herd, don’t they? They look to advertise. I have nothing against advertising; it works for me sometimes. But to get that jump-start and to see cash flowing in relentlessly, it is safest, cheapest and most effective to hard-knock doors and get your business.
Later, you can move on for advertising in your local B2B/B2C directory and the local search engines. Advertising in the right place through the right medium also attracts the right kind of customers.
Have a customized web page and email id: Having a free email id does not leave a good impression on your visiting card is not even close to being professional. Since most of the communication and business happens over the internet, having a webpage of your company that describes what your business is all about and having a customized email will pay you in leaps and bounds.
Go creative: Think of new ways to get business. Corporate Tie-ups, strategic joint ventures, events and exhibitions are just the tip of the iceberg. What are you thinking about? Make the right clients contact you by tapping the correct market potential. Do not limit yourself to advertising in the local newspaper or in the local directories.
Advertising on radios and on the internet through banner ads and Google ad words is fast catching up.
Build channels – one example of a channel can be a fully automated with expert content, search engine marketing driven and sales oriented e-commerce site; develop a sales force and train them well – channel number 2; tie-ups and joint-ventures can be channel 3; and so on.
Let your customers do the talking: Dedicate a portion of your website to reviews given by satisfied customers about the service you have provided to them. Give out references to new clients about your extremely satisfied customers. This actually builds your image and your customers do the marketing for you. So treat your customer with undivided attention and care.
Networking: Networking is the key to build on any business. Join online communities, forums and featured group that are in the same line of business as yours – linked in is a good start. You could consider joining others like Ryze too. Exchanging of views may throw up new ideas that you would wan to experiment in your business.
Sell First, Advertise later: Most entrepreneurs still follow the herd, don’t they? They look to advertise. I have nothing against advertising; it works for me sometimes. But to get that jump-start and to see cash flowing in relentlessly, it is safest, cheapest and most effective to hard-knock doors and get your business.
Later, you can move on for advertising in your local B2B/B2C directory and the local search engines. Advertising in the right place through the right medium also attracts the right kind of customers.
Have a customized web page and email id: Having a free email id does not leave a good impression on your visiting card is not even close to being professional. Since most of the communication and business happens over the internet, having a webpage of your company that describes what your business is all about and having a customized email will pay you in leaps and bounds.
Go creative: Think of new ways to get business. Corporate Tie-ups, strategic joint ventures, events and exhibitions are just the tip of the iceberg. What are you thinking about? Make the right clients contact you by tapping the correct market potential. Do not limit yourself to advertising in the local newspaper or in the local directories.
Advertising on radios and on the internet through banner ads and Google ad words is fast catching up.
Build channels – one example of a channel can be a fully automated with expert content, search engine marketing driven and sales oriented e-commerce site; develop a sales force and train them well – channel number 2; tie-ups and joint-ventures can be channel 3; and so on.
Let your customers do the talking: Dedicate a portion of your website to reviews given by satisfied customers about the service you have provided to them. Give out references to new clients about your extremely satisfied customers. This actually builds your image and your customers do the marketing for you. So treat your customer with undivided attention and care.
Networking: Networking is the key to build on any business. Join online communities, forums and featured group that are in the same line of business as yours – linked in is a good start. You could consider joining others like Ryze too. Exchanging of views may throw up new ideas that you would wan to experiment in your business.
Friday, January 2, 2009
8 Common Mistakes Made By Prospective Franchisees
Over InvestmentOver investing can destroy a project or business completely. Before investing any time or money into your franchise, create a basic budget plan to keep yourself on track. If you do not want to purchase software, there are plenty of websites, like Mint.com, that offer free budgeting tools.
Not Having a Business Plan
You never really know what is around the corner when you are starting your own business. Even so, having a basic business plan can help you a lot in the end. Where are you hoping to open your store? How many employees are you planning to hire? How much time, money, and patience are you willing to sacrifice? These are all questions you should be asking yourself when you develop your business plan.
Not Understanding the Franchise Agreement
The agreement you sign with a franchisor – the Franchise Disclosure Document (FDD) – contains massive amounts of information, but as a franchisee, you must understand everything it contains. When you sign the document you are making a legal agreement with the franchisor, so do not be afraid to seek out help from a legal expert.
Not Contacting Other Franchisees
When you are researching a potential franchise to invest in, you should always contact at least a few different franchisees. They can serve as good resources as they will likely give you blunt and honest answers.
Picking a Location far from Home
Although it may seem like a small sacrifice at first, having a long commute to the location of your store can wear you thin after awhile. There may be times when you get home only to have to turn around and go back to the office. Remember that you have to consider your own time – not to mention high gas prices.
Not Taking Training Seriously
When you attend training, you will want to make sure that you are well prepared and pay plenty of attention. In the training classes, the franchisor will explain how to be successful at owning your franchise. If you are too tired or miss a day then it can hurt your chances of being successful.
Forgetting to Balance Time
Committing yourself to starting your own franchised business usually means new opportunities, exciting change, and long hours. If you have family or friends that you are used to seeing often, know that time with them will be cut shorter when you are just getting business started. Try planning to meet with your loved ones at scheduled times so that you can see them on a regular basis.Expecting Everything to be Easy
With all the talk of a looming economic recession, you need to realize that getting your business up and running will be a struggle. Prepare for tough times financially and emotionally. Remember that opening any business requires a lot of hard work, but the benefits of being your own boss can definitely make up for it.
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