Franchise Reviews

With so many Americans losing their jobs due to companies either closing or down sizing more people than ever are looking to start their own business. One of the first ideas that come to mind is why not start a franchise in your home town. Before you even start to look for financing I suggest you do your homework and look into all of the available franchises and decide which one would be best for you and what the start up costs would be,every franchise is different so before you go look for the money check to see what you will need.

First, now you have chosen the franchise you are interested in you must check to see what the exact fees you will need to open your business. You want to see if their will be advertising fees that the franchiser charges you many people don’t realize that this occurs. Also and very important you must look into royalty fees. These vary from franchise to franchise.

Second, Does the franchiser you have chosen provide any financing. Most franchisers don’t provide any, but you will be surprised that a few do, such as Subway. Southland Corporation 7-Eleven will help you with inventory, accounts receivable and payroll. You may want to look into these franchises if they interest you.

Third, if you are fortunate enough to have great credit you may want to go the bank. Remember that banks today are very tight with the money they lend. Some banks may give you a second loan on your house. Before you do such a think think hard.

Fourth doing your homework is very important when you think franchise. You may want to check out the Small Business Administration’s franchise registry. The SBA can rduce the risk to banks for certain franchises. You may also want to check if the franchise you have chosen has some affiliation with some loan program. Also if you are a woman there are many programs today loaning money to women who want to start their own businesses.

Fifth, as hard as it may be to ask see if there any family member who would like to be your partner or lend you money. If you don’t ask you will never know.

Sixth, you may want to one of the may want to go to one of the many franchise brokers out there. They are familiar with companies and venture capitalists that may want to get involved with you.

Seventh, choose a franchise that is more affordable they run the gambit of start up cost. Perhaps it may suit your budget better to look at a newer less established franchise. If you want to make a whole lot of money from the start it will cost you more money. Many franchises have began as start ups and done very well.

Lastly, and I only suggest this after much thought and advice from your financial adviser. You may want to look at your retirement account or IRA. Just remember this can be very risky and done only after a lot of thought.

If you were the kind of kid that was always thinking of better business ideas like how to run a more financially viable lemonade stand, you’ve probably got a streak of entrepreneurship in you. Starting your own business has probably been something you’ve considered over the years. Perhaps the time to begin is now. But have you thought of franchising? Starting your own business requires a lot of financial risk. Getting into the business market as a franchisee might be a good way to begin.

There are a few reasons why becoming a franchisee might be a better option than starting your own company from scratch. First, the two most obvious reasons are the established brand and customer base and the marketing support. In most cases, a franchise has already made a name for itself and created loyal customers. The minute you open your doors you have access to those customers. The franchisor most likely has a national marketing plan already in place, which you have access to.

These are two obvious reasons. But there are a few you might not have thought of, like training, for example. Most likely if you start your own business, you are learning as you go. With a franchise, you have access to professionals who can train you and your employees in the most effective business methods. Another benefit you might not have considered is research and development. Most franchisors have a department focuses on the research and development of new products, so you can focus on running the business.

Though the benefits of owning a franchise are many, it still requires hard work and effort on the part of the franchisee. Success is never a free ride. In order for your business to succeed, you will need all of your hard work and business savvy.

If you are considering starting your own business, you have undoubtedly considered the prospect of franchise ownership. There are many undeniable benefits to hitching your wagon to a proven winner, but there are no guarantees and everything comes at a cost. So how do you decide if franchise ownership is right for you, and what are the realities of franchising?

Financial Considerations

Starting a business is never cheap. The costs of equipment, labor, advertising, building and property all add up very quickly. It can be overwhelming for even the most savvy businessman with the most solid business plan. When you take on a franchise you also take on additional costs that can be a real drain on your budding business’s earnings.

Franchisor’s provide a solid service, providing you with a proven business strategy and a network of support, but they do so at an associated cost. You will be expected to cough up a franchise fee as part of buying into the franchising organization. Beyond this additional initial cost, there are long term financial commitments to your franchisor, as well. A percentage of your monthly earnings over the life of your business will have to be paid back into the franchising organization. Royalties for use of the franchisors trademark, and ongoing fees (such as those for marketing) can be a significant drain on your returns, especial in the tumultuous initial period of developing your new business.

Lack of Autonomy

When you buy a franchise, you surrender a significant degree of control over your business. As a franchisee you do not have the final word in how your business is run, but rather are constrained by your obligations to the franchisor. You are playing their game and must abide by their rules. While it is true that franchisors want their franchisees to succeed, and thus gear their guidelines toward the overall success of the business, the lack of autonomy provided by franchising can prove frustrating and at times detrimental. If one of the appeals of business ownership is the ability to do things your way and in your own time, then franchise ownership is probably not for you. As a franchisee, you will always be ultimately accountable to an authority greater than yourself.

Inflexibility

Franchise ownership also offers a very limited degree of flexibility in the day-to-day operations of your business. When you contract with a franchisor, you agree to run your business according to their game plan. There is often little or no room for variation as to the procedures regarding products and services. The franchisor is motivated to provide a uniform front across the entire range of their franchising territory and expect you to follow their specific guidelines to ensure brand uniformity.

To further this uniformity, franchisors often require franchisees to obtain supplies for pre-approved sources. This means that you may end up having to pass up the most cost effective or convenient supplier to go with one approved by the franchisor. Such loss of flexibility can be an added financial burden on your business. With all of the obvious and alluring benefits of franchise ownership, it is imperative to keep a realistic view of franchising when deciding what type of business would most suite your individual needs. It is important to know exactly what you are giving up for the franchising security net. Whether as a franchise or as an independent business, there are never any guarantees of success, but the constraints of franchise ownership are certain.

If you want to own your own business, you have several options. First, you could start your business from scratch. Second, you could buy an existing business. Finally, you could buy a small business franchise.

What is a Franchise?

When you buy a franchise, you buy one or more of the following:

• A trademark
• A brand name
• A service or product

The simplest form of franchising is buying a product name or trade name. More complex franchises, business format franchising, can include services such as marketing plans, training and assistance in finding a location.

Franchise Basics

Before buying a franchise you will need to:

• Determine whether you have the right set of skills and background for a given type of franchise
• Compare different types of franchises within an industry
• Determine how much you can invest

As you go through the research process and get closer to buying a franchise, one of the key documents that you will have to examine is the UFOC, or the Uniform Franchise Offering Circular. Federal and state laws require that a franchisor send you a copy of the UFOC before signing a contract or before any money exchanges hands. The UFOC will contain business and background information regarding the franchise, audited sets of financial statements and copies of forms and contracts that you will have to sign if you decide to buy. This is an essential document that will point out the strengths and weaknesses of the franchise.

Make sure that you have an attorney to assist you in the buying process. An attorney, particularly one that specializes in franchise law, can help you wade through the legalese in any agreements that you will have to sign. Of particular interest are:

• Sales quotas that may be required
• Tax implications of purchasing the franchise, both short term and long term
• When the franchiser has the right to pull the franchise from you
• If you can transfer ownership of the franchise to another party
• Any non-compete requirements if you start another business

Other questions to ask include:

• If the company is planning on expanding in your state, what are the expansion plans?
• Have any franchises reverted back to the franchisor? If so, what were the reasons behind this?
• Are there or have there been any lawsuits against the franchise?

Do not forget to interview other franchise owners to get their input. If you do this, you will have information about how well the franchisor responds to problems and get a clue as to how realistic the franchisor is about franchisees’ businesses.

Buy a Small Business Franchise: Advantages and Disadvantages

Advantages of owning a franchise can include:

• Being associated with a proven brand, product or service
• Having a protected territory
• Not having to search for suppliers

Disadvantages in owning a franchise can include:

• Little or no leeway in changing your business
• Ongoing fees or royalties to the franchisor
• Depending on other franchisees to maintain the franchise’s reputation

Franchisers charge a substantive fee to franchise owners to cover the initial startup costs and to maintain grown within the company. Depending on the company and the type of franchise you own, the franchise fees can vary from business to business. While a franchise payment is important in allowing the company to grow and prosper, the main source of income for the company should always be based on the amount of royalties it makes from the sale of its products or services.

A franchise fee that is set too high may make potential franchisees think twice about becoming professionally involved with the company. It is important to determine an appropriate franchise expense and using your franchise consultant and legal team to negotiate a fee that works for both parties. Take into account the specific service or product the franchise will provide, along with the potential return of investment and profitability of the business.

Sometimes, in a market that doesn’t have a history of a certain type of product or service, these fees will have to be estimated because there is no statistical data on the ROI of the business. Your financial performance and the financial performance of other franchisees like you determine the fee that will be assessed in the future to other new franchise owners. If you’re entering a business environment with a product in a somewhat untested market, you may have a lower franchise fee. However, if you’re opening a franchise in an environment that has had proven success and profitability, the franchise fee will be higher.

You also must consider the startup costs and expenses the franchisor has to invest. If you are opening a franchise in an already established industry, for example – a fast food business, the difference in franchise fees may be more obvious. In this type of industry, the franchisor is responsible for the costs and expenses associated with the marketing and advertising. They will include these factors in the franchise fee, as well as the costs for training materials and other startup expenses such as the assistance provided during the grand opening phase.

Some franchise companies look to make a profit by charging a franchise cost that is too high. Others look to charge a fee that will even out, while some even charge a franchise fee that is low and will cost them money initially. The hope is that the royalties and profits made will far surpass any losses they endure from a smaller franchise fee. Most franchisers will try to at least make a 25% profit on the fee. Of course, they are providing the marketing materials and advertising development. If all goes successfully, you’ll recoup the money spent on the franchise fee and begin to operate a profitable business.

An option to consider for those with the entrepreneur itch is a franchise. To some, “franchise owner” may not have the same connotation as “entrepreneur” but for the most part it works the same way depending on what franchise you buy into. An article titled “8 Franchise Ownership Myths” was published by Entrepreneur. The article made some great points about how owning a franchise can mimic owning a unique privately funded business.

• Owning a Franchise Allows for Creativity… For many, entrepreneurship is about creating a reflection of your interests and talents, a reflection of you. Entrepreneur reports that there are over 900,000 franchised businesses in the country today. There are numerous niches to choose from and although corporate dictates the framework of the business (what is proven to work) there is often plenty of room for creativity and self-expression. Not all franchises are built the same.

• A Franchise Can Be Affordable… Many franchises can be set up for under $100,000 and some for as low as $12,000.

• A franchise is a business in every sense, you don’t necessarily have to know how to make a sandwich to own a Subway. Most franchise owners are coming from a variety of work backgrounds with versatile professional skills. Skills in delegating, managing, and marketing are all transferable.

If you look at a franchise just like any other business opportunity, you may be surprised at the opportunities available. There’s freedom and flexibility and of course room to grow as you expand your own business to fit your lifestyle.

A potential customer called a fence company for an estimate on a split rail fence he wanted installed on residential property. The representative stopped over, gave the client his price, and remarked that it was a minimum size job. The agreement was signed and the salesman promised the work would begin as soon as the homeowner obtained a permit. The homeowner obtained the permit, called the fence company, and left a message for the salesman to notify the work crew to begin as soon as possible. Repeated calls from the potential customer ended in frustration. Obviously, the salesman was very busy, and it was a small job, thus he never bothered to arrange for the work to be done.

A similar situation often happens in a restaurant. The waitress tells two customers just having coffee and discussing their business issues isn’t enough to justify serving them. She says they will have to leave because there are too many people waiting in line for a full lunch. It is pure ignorance on behalf of the franchise owner to allow this type of customer treatment to exist.

Borg’s Rule:Never ignore a small order-it can cost you big money.

Let’s examine the psychology behind that rule. First, even though the job that the customer requested was small, it could be the beginning of a potential relationship that would bring repeat and/or referral business. Second, every customer knows other people. Anytime he is pleased or disappointed about service, he talks to friends and acquaintances. On the average, a customer will tell 5-7 other people of a good experience he has had with a particular business or organization. Good advertising can result from good service. An unhappy customer will tell 9-16 other people of the poor service he has received. Bad advertising usually results from bad service.

How can we avoid offending the customer who has a small order? First and foremost, train your employees to give the same kind of service to that customer as they would to a customer with a large order. If that is impossible because your franchise is just too busy, then I suggest you find one or two smaller businesses to use as referrals for this type of customer. By doing this, you will give the customer the kind of service and respect he or she deserves.

When it comes to service, far too often the employees of a company or organization make the decision to short-change the customer because they don’t see the whole picture.

Remember some franchise owners approach their operation as if it were a 50 yard dash. They don’t realize that they are running a 26 mile 385 yard marathon. Unless their employees change their focus, frustrated customers and lost business will result. Contrary to popular belief, there is not an infinite number of eager customers wanting to buy your product or use your service. In addition to that, there are a growing number of competitors who are vying for those customers.

As a franchise owner or manager, make it a point to educate your employees on the value of each customer. Make it clear to them that their paycheck depends on long-term satisfied customers. In the end, your customers, your employees, and your business will benefit.