Pros and Cons of Franchising

Franchising your business is a great way to expand to more locations and increase your brand recognition. Still, it’s important to fully understand the benefits and drawbacks that come with franchising before you decide to make that choice. The following breakdown of franchising pros and cons can help you determine if it’s the right move for your situation.

Pros of Franchising

When you franchise your business, you’re able to grow it while taking a much smaller financial risk than financing new locations yourself. The franchisee covers the costs of opening a new location, so you don’t have to worry about saving money or going to the bank for a business loan. Not only will it be less expensive to expand your business, but you can do it quickly. With a popular brand name and a track record of success in your current locations, you could have potential franchisees all over the state or country.

While your franchisees will keep most of their profits, you’ll receive monthly royalty payments from them based on their sales. This means you’ll simply be making money off the name of your business and any support you provide to your franchisees, without the responsibility of running a new location.

You’ll likely need to provide franchisees with some assistance when they first launch, especially with training so they have the best chance of success. However, once they’re in business, they’ll handle day-to-day operations on their own. Although they may require some occasional support or advice, for the most part, you won’t need to put much time into your franchises.

Franchising your business is an excellent way to get ambitious, driven people on board. The most talented people would typically rather own their businesses, not just work as employees. When you provide the opportunity to own a franchise, you can attract people with better overall skills and more dedication to your brand’s success. Employees may want the businesses where they work to succeed, but they receive their salaries no matter what. A franchisee needs the business to make money if they want to make anything.

Cons of Franchising

One of the biggest cons of franchising is that you have less control over your business. When you own all your business’ locations, the people working there are still your employees, so your word is final. That’s not the case when you have franchisees, as each of them owns and operates their own location.

This may not become an issue, especially if you have a good relationship with your franchisees. After all, they still want your business to succeed, because the strength of the brand is important to each individual franchise success. However, there could be situations when you come into conflict with your franchisees. A common argument between franchisors and franchisees concerns coupons. While coupons are an easy way to increase a business’ sales numbers, they don’t necessarily increase profits. As a franchisor making royalty money off each sale, coupons benefit you. For your franchisee who is focused on profits, coupons may be an annoyance. The worst-case scenario is that franchisees don’t honor certain coupons, which can leave a negative impression of your brand on customers.

Franchising can make it more difficult to introduce new products or services. Instead of simply developing something new and launching it when you’re ready, you need to show it to your franchisees and ensure they will accept and promote it.

Of course, although a benefit of franchising is the potential for rapid expansion with less financial risk, the flip side is that you’re making less money from each new location. When you own a location, the profits go to you. With a franchise, your portion of the profits is small.

It takes time to choose the right franchisees. If you pick someone who doesn’t represent your franchise well, it can be detrimental to your brand and the new location may fail.

Deciding Whether to Franchise

When determining if you should franchise your business, it comes down to how quickly you want to expand and if you’re willing to sacrifice per-location profits for greater expansion. If you decide that franchising is the right move, it’s important to set up a thorough agreement that explains in detail each franchisee’s responsibilities, and that you choose the right people as franchisees.

June 22, 2017

How to Evaluate a Franchise Before Purchasing

A franchise purchase can be an exciting time in the life of any business owner or entrepreneur. Franchises offer the opportunity to own and operate your own business with the help of a well-established business model and brand.

However, franchise packages can include important details that make or break your investment. It’s important to carefully review and understand the details before purchasing a franchise. Here are a few things you’ll want to consider as you evaluate a franchise purchase.

Examine Financial Trends

Most franchise owners go into business to earn a profit. It’s important to research the financial success or failure of other similar franchise locations before making your decision. You’ll want to request detailed financial data. You should spend time reviewing this information and determining if success is feasible for your franchise location.

Review Competition

As you consider a franchise purchase, you’ll want to closely evaluate the market for competitors. Your chances of success decrease dramatically if a competitor has already established a large customer base in the area. In addition to competition outside of your franchise, you’ll also want to inquire about territory exclusivity. If the same franchise can be placed in your area, your sales and resulting profitability may suffer.

Understand Operation Flexibility

Unfortunately, many franchises have very strict operational requirements. These strict guidelines can limit the creativity and innovation that most business owners know and crave. If you are interested in franchise ownership for the opportunity to shape your own business, be sure to check into these requirements and inquire about issues of flexibility and innovation within the franchise operational framework.

Consider Training Opportunities

One of the benefits of franchise ownership is the opportunity to use a proven model. However, any type of business ownership requires training. You’ll want to ask about training timelines and opportunities, and whether or not there will be ongoing support after the franchise launches. This is important as you embark on your journey of franchise ownership and will ensure both a seamless transition and ongoing success.

Review Hidden Fees

Hidden fees are a killer, and are a known part of almost any contract. The same is true with franchise ownership. Many franchise branches will include fees like royalty costs, training expenses, or marketing fees in the overall package. You’ll want to be very clear about all costs involved in the purchase, and you’ll want to closely review these costs, as they can quickly add up and impact your overall financial assessment.

Ask About Real Estate Assistance

Many franchise opportunities offer real estate selection and lease negotiation assistance. A good franchise understands that location contributes to a company’s overall success and wants to help new owners identify a solid location for the business. In addition to site selection, you might also inquire about assistance with lease negotiation. Many franchises will offer this as a package deal and this shows support and consideration for your ability to succeed.

These are just a few of the many ways you can evaluate a franchise before purchase. You should carefully review each part of this process, and hire a consultant to help with the review if necessary. Purchasing a franchise is a big decision, so be diligent and detailed in order to make the most informed decision possible.

June 13, 2017

Your Community Wins When You Purchase a Franchise

Buying a franchise can be a wise move for your future and for the welfare of your family. It allows you to start your own business, typically at a much lower cost than if you started from scratch. You also get the guidance of experts who’ve developed a proven method and the benefit of a well-known name. There are so many franchise opportunities out there that you should be able to find something to capitalize on your own skills and experience. But one additional consideration in franchising is that it also benefits your community in a number of ways.

Employment Opportunities

The majority of job openings come from small businesses, not big corporations. When you purchase a franchise, you may require help from day one, or you may start on your own and grow into an operation where employees are needed. Either way, you’re creating local employment and paying out money to private individuals. Each employee will be paying for rent, utilities, taxes, shopping, entertainment, restaurants, and more. This puts money back into your local economy for everyone’s benefit, whether it’s a big city or a small town.

Local Services

When you decide to purchase a franchise, you may need to visit a lender to raise the money for the franchise license and some operating expenses. You’ll help them by paying back the loan with interest. You may want to pay a fee to have a local attorney look over the franchise documents before signing. If you have a large franchise operation, you may need to consult a real estate professional to locate some optimal office or warehouse space. You’ll probably want to do some advertising for your big opening, which means taking out print ads or producing flyers. That means putting money into the hands of local publications and printers. By using such services, you’re putting more money into the hands of area professionals to support their businesses.

Supply Chains

Another way that your new income is distributed back into local business is through vendors. Your franchise will likely require tools, equipment, and materials that must be purchased from suppliers on a regular basis. You might also require one or more vehicles along with accompanying costs for fuel, maintenance, and insurance. If you have a physical location, at some point you’ll be hiring contractors for painting, remodeling, or electrical work. The more your franchise grows, the more money you’re spending to support these other vendors that you need. You could even be helping them to grow and create additional jobs.

Giving Back

Franchise owners usually live in a certain community but do business in any number of towns in the vicinity. Successful business owners know that one of the best ways to improve the reputation of their company and create relationships is through giving back to these communities. You’ll find any number of opportunities to build a rapport with your potential customers through charity events and fundraisers, sponsoring local athletic teams or events, helping out with disaster relief, and contributing to public works. Giving back not only raises your visibility and public approval, it makes your location a better place to live.

Your Taxes

As a business owner, you’ll be paying taxes on every dollar you make and every item you sell. This goes back into the public coffers to provide public services like police, fire departments, and highway maintenance. The more you earn, the safer your community becomes. There may also be various permits or licenses required, which add additional funds to public interests.

These are just some of the ways that a business owner supports their local economy. The money you invest in the above ways, and others, benefits your neighbors in a number of ways, both directly and indirectly. Successful businesses support successful communities.

June 8, 2017

Purchasing a Franchise? Here’s Why You Should Use a Consultant

Purchasing a franchise is a fantastic way to gain access to a proven and successful business system. Instead of going through all the legwork of creating a business model from scratch, you can take the shortest path to success. Finding a good franchise in which to pour your efforts will likely provide you with the opportunity to generate a substantial return on your investment in a short period of time. However, not all franchises are worthy of your time and money. How do you know which one to choose?

Using a Franchise Consultant

When purchasing a franchise, utilizing the talents of an experienced consultant makes a world of difference. These individuals have ample experience finding the best franchise opportunities and then determining whether they are worth purchasing. What exactly does this type of expert have to offer you in your search for the perfect franchise?

Finding the Right Niche for You

A quality franchise consultant will not only evaluate the business opportunity, but will also seek to ascertain how it fits the entrepreneur. Just because a franchise is a quality business model doesn’t mean it’s the right one for you. The expert with whom you work should evaluate your personality, your business experience, your passions and everything else about you to determine which type of business is a good fit. Once they have a feel for what type of person and entrepreneur you are, they can help you zero in on the opportunity that will work best for you and your unique situation.

Evaluating the Business Models

In today’s franchise marketplace, there are many opportunities for you to choose from. In most business categories, there are several options available. For instance, there may be 10 different franchises to pick from that are all very similar. Although they may seem similar on the outside, each one possesses unique benefits and detractions that must be evaluated. An experienced franchise expert can examine the business model for each one in detail. After picking it apart and determining the possible worst-case scenario for each one, the expert can provide guidance regarding the opportunity that offers the best chance for success. If you’ve never dealt with a franchise model before, you don’t really know what to expect. An experienced franchise expert can show you what should be included, what isn’t included and the basic features that should be included.

Looking at the Financial Requirements

One of the vital aspects of buying a franchise is the financial requirements. Most franchises have an initial fee, as well as annual fees and other costs. In some cases, the financial requirements can vary significantly from one franchise to the next, even in the same industry. If you have limited capital available, you need an experienced hand to help you make a decision. Will you be able to afford all the ongoing franchise fees? Is it necessary to purchase all your equipment from the franchise, or are you free to shop around? Do you owe the franchise a percentage of all your sales? All these factors and more must be closely evaluated in order to make an educated decision.

Securing Financing

After you’ve identified the perfect franchise opportunity, do you have all the money you need to get started? If not, how will you come up with it? A franchise expert can help connect you with the financing sources you need to make the deal work. There are lenders and financiers out there that are willing to work with experienced business professionals when purchasing a franchise. However, if you don’t know how to find them or don’t possess any experience dealing with them, it might not do you any good. Partnering with a franchise consulting professional will make the difference between finding the money you need and only wishing you had a franchise.

Some franchises offer in-house financing options to qualified applicants. However, their terms and conditions may not be in your favor. Your franchise expert can thoroughly review the financing terms and determine if it’s a good deal. Even if you find what you believe is the perfect franchise, it still might not be worth pursuing if the financing terms aren’t attractive.

Connecting with the right franchise is an exciting and rewarding endeavor. Just make sure you don’t try to navigate the opportunity alone. A professional franchise consultant saves you time and money by providing the expertise and connections needed to select and purchase a successful franchise.