| A Franchise Opportunity - What Is This Exactly? | | | | indications based upon figures researched by the |
| The best way to describe a franchise is to imagine it | | | | International Franchise Association. They found that |
| as a business that is delivered to you in a box at a | | | | the annual gross income for a typical franchise ranges |
| certain cost and after approval. When you open the | | | | between $75,000 - $125,000 (before taxes). |
| box, you will find marketing materials, contract | | | | With an investment level of let's say $250,000 you |
| templates, business plan templates. In short, | | | | can expect a pay back time of around 3 years. |
| everything you need to get legally started with a | | | | It is clear that becoming a franchisee requires cash to |
| business, usually in an exclusive territory where only | | | | sustain yourself and the business in the first years. It |
| you can operate and sell. | | | | also requires some sustained hard work to get the |
| Why Are Franchises Popular? | | | | business off the ground so to speak. |
| Franchises are popular. Research was conducted by | | | | Franchise Entrepreneurs - Are You Capable |
| the International Federation Association and the | | | | An survey among Franchisors (by Franchise 500 and |
| National Franchise Association recently. In 2005, there | | | | published in Entrepreneur Magazine Jan 2007) has |
| were about 850.000 franchises operating in the U.S. | | | | revealed they are looking for the following |
| alone in which around 10 million people are employed. | | | | characteristics in a person to be considered to |
| Sales volume accounts for about 40% of all retail | | | | become a successful franchisee. |
| sales with around $1.5 billion. | | | | 1 - People Skills |
| At this point, I do not really know if there is any | | | | 94% of the franchisors that were interviewed |
| business left that has not been using the franchise | | | | mentioned this to be a key skill. Not really a surprise. |
| model already. You can find restaurant franchises, | | | | Even if you do not have staff, to move goods in |
| cleaning services and even dental practices. Most | | | | most industries, you need at least some |
| popular franchise categories still seem to be the | | | | communication skills. |
| restaurant, deli and sandwich franchises. | | | | 2 - Coaching |
| Franchises all have a couple of things in common that | | | | If you are unwilling to learn or accept proven |
| makes them attractive to potential business owners: | | | | formulas and methods it is very unlikely that you will |
| 1. Fast start up utilizing a working marketing system; | | | | become successful. Reinventing the wheel is not |
| 2. Peace of mind because it has been proven to | | | | what makes franchisees successful. A view shared |
| work already; | | | | by around 87% of franchisors that were surveyed. |
| 3. Exclusive territory (in most cases). | | | | 3 - General Business Skills |
| There are known disadvantages as well. For example, | | | | This is an interesting one. The percentage agreeing |
| a lot of franchise companies do not give the level of | | | | with general business skills being a requirement to |
| support they promise. Some of them can be overly | | | | become successful is 86%. Interesting because you |
| strict with their branding and marketing requirements, | | | | would expect proven methods and systems to be in |
| which may be disappointing for a creative | | | | place already. Not so. In order to make it all happen, |
| entrepreneur. And there is obviously the work | | | | you need to study financial information, cash flow, |
| pressure, especially when operating a franchise that | | | | balance sheets on a regular basis. You need to make |
| requires staff as well. | | | | decisions on your own regarding additional |
| Cost and Benefit Analysis - Quick Overview | | | | investment, marketing strategies, staff and so on. |
| Costs | | | | 4 - Access to Capital |
| The convenience and peace of mind comes at a | | | | If you do not have any money to get your business |
| certain price. Let's look at some typical startup fees. | | | | off the ground, it's better not to start at all. Careful |
| The average investment level is around $250,000 | | | | planning is the key combined with a preparedness to |
| excluding real estate. This is the average investment | | | | live a frugal lifestyle for years to come. |
| requirement for about 80% of the franchises. | | | | Conclusion |
| A typical example is Rising Roll sandwiches who | | | | Buying a franchise is a popular thing to do nowadays |
| requests a total capital investment of $300,000 and a | | | | but it never appealed to me. It always felt like buying |
| net worth requirement of $500,000. | | | | your own job. The amount of investment combined |
| So called low cost franchises can start with a capital | | | | with the amount of work to put in simply does not |
| investment typically in the range from $15,000 - | | | | match with my personal lifestyle. I would rather |
| $40,000. | | | | invest a bit less and work less hours but with a much |
| A typical example is a video business card | | | | faster pay back time. |
| distributorship that comes at a cost of around | | | | There are still plenty of opportunities with proven |
| $15,000. | | | | track records over a couple of years that are |
| Benefits | | | | suitable for lifestyle entrepreneurs and that will |
| No exact figures are known but I found the following | | | | generate good income for years to come. |