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