Franchise Alternatives

Is It Safer to Buy a Franchise or Start Your Own Business?

2010-03-09 16:29:06

As many first-time business owners find out, there is a high failure rate for independent, non-franchise businesses. Franchising provides a proven system and the support of a much larger organization. If you are first-time business owner the benefits of buying a franchise are even greater. Some of the advantages of buying a franchise over starting an independent company include instant brand awareness and credibility, administrative and/or technical support, franchisor-provided training, quicker return on investment, strong management, and a network of other franchisees and associations dedicated to supporting franchisees.

As a franchisee you typically have support every step of the way from people who are vested in your success, as well as knowledgeable about your particular business. As part of a franchise system you can count on the efforts of your fellow franchisees to compliment your own marketing programs. If a franchise in the next community or town sponsors an event, commercial or other promotion you will undoubtedly reap the benefits of those efforts. If you enjoy your particular franchise the opportunity to open additional outlets are improved over an independent business owner looking to open another store.

As an independent business owner you have to contend with franchise heavyweights that have a lot more resources for advertising and marketing, as well as ready-made brand recognition. Starting out you may have few time and monetary resources for getting your name out. If you are starting a new business you may be putting all of your energy into operations. Who will drive the sales campaign? Who will find, qualify and bring in the customers? While there is more creative autonomy in an independent business your chances are much higher as a franchisee of making it in cut-throat markets like food service, hospitality and retail.

A franchise business is definitely the safer opportunity. This study carried out over 7 years revealed that after seven years, over 90% of new franchises are still in business, as compared to only 20% of individual new start-up businesses. Most people, who do start a business by themselves, end up failing and losing a lot of money. I now that this is a sad fact, but it's true! If you start a business on your own, you have to make all the decisions regarding location, layout of premises and find and vet all suppliers.

With a franchise business, the franchisor will advice you on all the above. In fact, you might even find that you are told where to locate your business, who your suppliers are and have some choice in pre designed layouts.

A franchise business provides you with the consistency and quality throughout the franchisors territory. This leads to higher levels of customer satisfaction. The franchisor provides full training and support in running the business. If a site is required, the franchisor will assist the franchisee in selecting a site that fulfils the demographic requirements of the product.

A business start up has to learn from trials and errors until they hit on a formula that works. They have no training or support in managing their business opportunity. If any thing does go wrong, and in most businesses, it does, then they have no one to turn to for advice. The advantage they have is that there is no one looking over their back, telling them what to do and how to run their business.

The franchisee benefits from national marketing which is spread out amongst all the franchisees, enhancing the economies of scale. New products can tested in certain territories before they are rolled out nationally. A new business will have to trail any new products with their own capital and take the full brunt if the experiment fails!

The relationship between a franchisee and a franchisor is well balanced. Both parties need each other to survive and create a profit. Ongoing support and training is usually available for franchisees who are struggling. Due to the higher success rate, banks are inclined to lend a higher percentage of start up costs in a franchise business then they are to an independent start up. They are also more likely to give extra leeway when more funds are required.

If you have decided to go down the franchising route then it is important that you choose a franchise that is right for you. Don't just go for the opportunity that will make you the most money, instead, choose a business niche that you will enjoy. Decide how much capital you have to invest, and then choose the franchise opportunity that best fits your lifestyle. Decide how many hours you want to work and how many employees you are capable of handling.

Once you have made up your mind to buy a franchise, always have a contingency fund as there are always unexpected costs that arise in the initial years of running a business.

If you decide to go it alone, make sure you speak to other people running the same type of business in other parts of the country and learn from their experience. You will find other businesses in the same field as you more then happy to part with their experience once they realise that you are not going to compete in their territory. Make sure that you take professional advice before deciding to follow the franchising route or starting a business on your own.

Source: The Journal of Franchise.com

The Advantages and Disadvantages to Starting a Franchise Explained!

2010-03-09 16:25:16

Starting a franchise can be a great way to start your own business. It is worth bearing in mind though that as with any type of new venture there are some advantages and disadvantages which you need to be aware of.

Before you commit to starting a franchise make sure that you pick one that is suitable for you and that you would enjoy being part of. Ensure that there is adequate training and support as well as good earning potential. Never opt for a franchise that does not have a good reputation and a stable financial background.

It is also worth remembering that not everyone is suited to starting a franchise so think carefully whether this is the right move for you. The rest of this short article will show you just some of the advantages and disadvantages to this type of business.

Advantages

Perhaps one of the best parts of starting a franchise is that depending on the type you choose you can get set up quite quickly. This means that you can start earning money and getting your business up and running all within around 6 months.

If you choose to start a franchise with a relatively well known company then this can make life a lot simpler for you. Many people will already know what it is you do or sell and will often be drawn to you with minimum advertising required. This generally means that you have a really good chance to make a success of your business.

Starting a franchise can also mean that the company will usually cover the costs of advertising and promotions. You should also find getting a supplier is simpler too as the reputation of the franchise is enough to be able to secure a good deal.

Disadvantages

Perhaps one of the main disadvantages to starting a franchise is that you have to follow the rules set out to you by the company. You will also need to clear any changes you wish to make or big decisions with them first which means overall you get little say in how the company is run.

Another disadvantage is that you will have to give the company a percentage of your total sales regardless of whether you have had a good or bad month. This means that some months you could be left struggling so you need to be aware of this.

For those that realise that starting a franchise is not for them you can often find yourselves stuck for sometime as you will normally need to sign a set term contract. If you have any doubts then it is best to leave starting a franchise until you are more prepared.

Starting a franchise isn't always as straight forward as it might initially seem. Why not Consider starting an online business?

Source: EzineArticles.com
Author: Charlie Scott

Going Green Produces Savings for Your Franchise

2010-03-09 16:19:33

The green movement has brought about many changes in the way people live, conduct business and understand the world. A growing demographic is taking measures to evaluate their lifestyles and their impact on the planet, from the products they buy to the food they eat to the cars they drive. What was once considered a trend, is now commanding serious attention across many business sectors, political parties, and continents worldwide. No matter where you stand on the issue, many organizations and individuals are discovering that it pays to be green. Eliminating the wasteful practices has revealed substantial savings by reducing energy costs. Through energy management and conservation, businesses around the world are increasing their profits by minimizing their overhead.

Energy conservation and management can be addressed in two direct categories that can have an impact on your bottom line: energy efficiency and water conservation. These areas provide substantial opportunity for business owners of all types and sizes to curb carbon emissions while reducing the expense of wasteful energy practices and dated technology.

Energy Efficiency
Most businesses are heavily reliant upon energy to carry out the basic necessities of their existence. Fortunately, there are many “eco-friendly” solutions that are readily available to anyone looking to “green” their business. From lighting to appliances to everyday procedures, there are a number of areas to consider that can save business owners money while cutting energy consumption.

Lighting: Lighting is an obvious energy consumer that almost every business can relate to. In the last decade, lighting products have seen substantial advancements in energy efficiency, revealing several alternatives to traditional incandescent and fluorescent bulbs.

Compact fluorescent lights or CFLs emerged in the past five years as an efficient solution for cutting energy costs. Being four times more efficient and lasting up to 10 times longer than incandescent light bulbs, CFLs provide an immediate means for everyone to reduce their electricity consumption. However, they’ve come to be criticized for containing mercury, which, if not properly disposed of, can be very toxic and counterproductive to its environmental benefits. The Environmental Protection Agency recommends utilizing available local recycling options for disposing of CFLs.

LED lighting is emerging as the leading lighting solution for a number of reasons that make the CFL obsolete. The lights contain no mercury, eliminating any toxicity associated with disposing of them, are more efficient than CFLs, using less electricity to generate light, have up to six times the lifespan of CFLs, and produce almost no heat. One downside to LEDs right now is their cost, which is more expensive than their predecessors. However, the long-term ROI of LEDs outlasts that of CFLs.

Appliances: Businesses use electrical equipment to maintain productivity in the workplace. From computers to appliances to peripherals, organizations have substantial energy needs for a variety tools. Fortunately, the U.S. government’s Energy Star program establishes a standard for energy efficiency that’s been adopted globally. Devices with the Energy Star logo generally use 20 percent to 30 percent less energy than required by federal standards.

The program enables consumers and business owners alike to make more environmental sound purchasing decisions, no matter what industry your business specializes in. From restaurants to accounting firms to retailers, virtually every industry category can reduce its electricity consumption through opting for Energy Star-certified products.

Procedures: In the pursuit to cut costs, many businesses don’t think to assess their internal procedures and how they can affect energy costs. Perhaps it’s due to the misconception that appliances and electric devices don’t consume energy when they’re not in use or sitting stationary. To the contrary, any appliances plugged into the wall, whether they’re on or off, draw electricity that contributes to energy expenses.

These devices have been coined “vampire appliances” for their ability to suck electricity when you least expect it, while you think they’re off. According to a 2002 Cornell University study, vampire appliances cost consumers an estimated $3 billion a year or about $200 per household. How do you overcome these? Simply unplug your devices when they’re not in use. Or invest in an energy-saving power strip that automatically cuts power to devices that are no longer in use.

However, simply turning off equipment can go a long way, as well; especially with computers. The 2009 PC Energy Report, produced by 1E, an energy-management software company, showed that organizations pay approximately $2.8 billion a year to power unused computers and machines. This equates to about 20 million tons of carbon dioxide released into the environment annually from standby computers, alone.

Consider implementing procedural controls into the opening and closing duties of your business that will mandate your staff to power down and unplug all unused equipment. Eliminating the wasted electricity associated with vampire appliances and standby equipment can provide substantial savings over the course of the year.

Water Conservation
Water is a resource that presents many opportunities for energy and cost savings, without interference to your operations. Common places, such as bathrooms, water heaters, and kitchens, among others,   present starting points to assess your water usage and waste.

Low-flow faucet aerators: Water contributes to electricity expenses while, at the same time, it is a valuable resource in itself. So savings can be two-fold when addressing water consumption. The less water a business uses, the less it pays for and the less it costs to heat.

Many recent technologies have emerged enabling organizations to manage their water consumption. Perhaps the most cost effective solution is low-flow faucet aerators. Inexpensive and simple to install, low-flow faucet aerators can reduce your water consumption by more than 50 percent, while cutting energy costs from heating water by as much as 50 percent.

Standard faucet aerators provide for 2.5 to five gallons of water-per-minute. Low-flow faucet aerators reduce this flow to 0.5 to one gallon of water-per-minute. Low-flow faucet aerators are available for as little as $2 per faucet, providing an almost immediate return on investment.

Waterless Urinals: Bathrooms are an obvious source for water waste as with each flush, gallons of clean, fresh water go right down the drain. Depending on the amount of traffic a bathroom sees, toilets and urinals can use anywhere from 30,000 to 100,000 gallons of water annually, leaving ample room for conservation.

One solution to this dilemma is waterless urinals. As the name suggests, waterless urinals don’t use any water at all, enabling businesses to eliminate water waste from flushing, all together. Additionally, waterless urinals are odorless and touch-free, providing a substantial improvement to bathroom sanitation. The average waterless urinal installation saves approximately 150 gallons of water each day, providing a substantial ROI for energy and water savings.

Low-flow dual flush toilets save water in much the same way. Since toilets are a necessity, low-flow dual flush toilets save water and money by reducing the amount of water used per flush, from 3.5 gallons to 1.5 gallons. Dual flush technology is based on the simple logic that some times, two flushes are necessary, and thus, two flushes are recommended during these times. However, even two flushes on these efficient toilets use less water than a single flush on a traditional toilet.

LEED
The water conservation and energy savings tactics outlined above provide a foundation for re-evaluating your business’ environmental stance while reducing costs for these utilities. However, if you desire to take your environmental stewardship a step further, the U.S. Green Building Council has outlined the parameters for making your entire business green, from its operation to its overall environment.

Leadership in Energy and Environmental Design, established by the USGBC, is a third-party certification program and the nationally accepted benchmark for the design, construction and operation of high performance green buildings. It provides business owners with a checklist of items to pursue in their effort to make their businesses and its respective buildings more environmentally-friendly and energy efficient.

Based in Fort Lauderdale, Fla., Pizza Fusion is one franchisor that’s pioneered this approach to green business. Pizza Fusion builds all its restaurants to the standards outlined by the LEED program.

“Anyone looking to green their business should consider LEED or, at least, the techniques the USGBC requires for LEED certification,” said Vaughan Lazar, president and co-founder of Pizza Fusion. “Even if you don’t pursue actual LEED certification, the USGBC has created a recipe for greening virtually any business. Understanding its philosophy and approach will save significant time and energy as you work to make your business more eco-friendly.”

Pizza Fusion’s restaurants reduce water waste by 40 percent and electricity consumption by 20 percent annually. “On a store-to-store comparison, we save about $3,000 annually by building our restaurants to LEED specifications,” Vaughan said.

From energy conservation to water management to LEED certification, there are varying degrees of environmental commitment for businesses to consider. So whether looking to save money or save the planet, energy-efficient practices provide several advantages for business owners looking to go green.

Identifying a business’s goals provides a good starting point for exploring the many approaches to establishing ecofriendly operations. With the wide range of environmentally conscious resources available today, there are many ways to reduce a business’s dependence on energy. Start with the obvious, address each solution one at a time, and enjoy the financial rewards of green business practices.

Eric Haley is vice president of communications for Pizza Fusion. He can be reached at 954-449-7244 or e.haley@pizzafusion.com

Source: International Franchise Association

Franchises: Ready-made Businesses Have Appeal in Down Economy

2010-03-08 20:07:35

After being unemployed for a year, Pauline Hamian ditched the résumé and bought herself a job. The former Burger King employee had no luck finding a job after being part of a corporate restructuring in 2008.

While at an outplacement center, she stumbled on a webinar about franchising.

“I felt I had to do something,” Hamian said. “It provided an opportunity for me to do something I’ve never done before and never really envisioned myself doing.”

With the help of a franchise broker, she decided to invest in ShelfGenie, a company that installs sliding shelves for kitchen and bathroom cabinets. She didn’t need to buy a storefront — it all can be done from home. There were no fixed costs and her two part-time employees work on commission.

Jobs are still scarce, so the unemployed are reinventing themselves and becoming the majority of new franchise owners, industry sources say.

While banks continue their tight grip on lending, some franchisors are seeing a dip in investors and are responding by lowering fees and offering internal financing deals. And the troubles in commercial real estate are making it easier for franchisees by driving some landlords to negotiate — sometimes offering several months’ free rent or paying for remodeling.

“When the economy slows, people think opportunities become harder to find,” said Jason Mattes, a franchise-development adviser in Coral Gables, Fla. “If you have an entrepreneurial spirit, now could be the best time.”

He’s currently director of franchise development at Cruise Planners, where the fee is about $10,000 to start the home-based travel agency. Cruise Planners added 200 new franchises in 2009.

“I think people just aren’t aware of all the opportunities out there,” Mattes said. “They think of a Subway shop or a hamburger joint, so they feel it’s not a path to look at because it’s just too expensive.”

The lack of funds is what sent Hamian to the services sector. After being denied a business loan, she financed her future career with a home equity loan. The fee to cover one territory — that’s 250,000 households — was $40,000. But when you add up the costs of home show fees and product materials, she invested about $65,000.

“It was the biggest check I’ve ever written in my life,” Hamian said.

MatchPoint franchise consultant Jim Sebastiano is advising people without a nest egg to head for home-based businesses because of the credit crunch. He has seen investors use their 401(k)s or IRAs to help finance stores.

“I get a lot of calls from people that either lost their job already, or they’re scared to death,” Sebastiano said.

When you’re in a service industry, “you’re out there promoting the business more and the costs are substantially less,” Sebastiano said.

There are more than 3,500 different franchises available, but Sebastiano found most people he speaks to can only name 15 from memory.

“Don’t pooh-pooh any business until you do a little bit of research,” Sebastiano advises. “At least know what you said ‘no’ to.”

West Palm Beach resident Lisa Simpson, 47, reached out to a consultant after it became “mind-boggling” trying to sort through every option.

Simpson worked in banking for 26 years, and when her bank was recently acquired, she took a severance package to jump-start her dream of running a business. She filled out a franchise personality profile questionnaire to narrow her search. Her result: the painting business.

“I said, ‘Painting? Really?’ But the more I started looking into it, they had 300 franchises doing this, and they had a lot of training and support,” Simpson said.

After paying $50,000 for the franchisee fee, and an additional $20,000 toward direct mail, software and putting a logo on her truck, she now runs CertaPro Painters with her husband. It all came from her personal savings and that severance package — and she’s hoping she doesn’t have to dip into her home equity.

Hot growth areas getting attention: anything dealing with senior care, being green, and health.

KEEPING A SAFETY NET

These two local franchisees have been able to keep a safety net — their day jobs — as they launch their new businesses.

LILLIANS
The company: Lillians, founded by two sisters in Minnesota, began franchising in 2008. The Colorado Springs store, at 7477 N. Academy Blvd., is the 32nd Lillians. The store sells women’s clothing, accessories and handbags and is open only four days a month, the first Thursday through Sunday.

Local owners: Kelli Holt and her husband, Eric.

Getting into the business: “It’s funny, we hadn’t been looking for a franchise,” Kelli Holt said. “We weren’t even looking to open a business.” But after a family friend opened a Lillians in South Dakota, Kelli Holt starting researching Lillians, “and before you know it, my husband and I were flying to Minnesota to meet with the owners.”

The “occasional sale” concept means Kelli Holt can keep her job as an insurance agent. “It would be great if we could survive on the franchise and have that be our sole means of income,” she said, but she’s not counting on that any time soon.

Being open just a few days a month might sound odd, she said, but the aim is to build demand and a sense of urgency, since the inventory changes substantially from month to month. Customers can’t just pop in whenever they want to see what’s new.“The whole idea is really just to drive your customers through your doors in four days.”

Advantage of a franchise: “Just the marketing and the resources that are available to you” from the franchisor, Kelli Holt said. “Why reinvent the wheel, so to speak.”

The cost: The Lillians Web site cites an initial investment for franchisees of roughly $45,000 to $70,000, including a $25,000 franchise fee.

More information: www.lilliansshoppe.com

G’DAY! PET CARE
The company: G’day! Pet Care provides “a full suite” of pet services, including pet-sitting, home care, pet food with free delivery, pet transportation, dog-walking and pet waste cleanup. The company was founded and is operated by the same management team that launched dog-training company Bark Busters USA.

Local owner: Kristy Pring.

Getting into the business: Pring is director of marketing and communications for Bark Busters USA, so she knows and trusts the team behind G’Day Pet Care; she plans to keep her corporate job, at least for now, while operating the local G’day! Pet Care franchise with the help of family members.

“I always wanted to be an entrepreneur, to own my own business,” she said.

Advantage of a franchise: “I would say franchises help people avoid many of the pitfalls involved in starting up and running your own business. They really give you a road map for success.”

But do your homework, Pring cautioned. Carefully research a franchise before signing on. And be prepared to work.
“Even though you could be gaga about pets, you have to be business savvy to be successful,” she said.

The cost: The minimum initial investment for a franchise owner is about $25,000, including a $12,500 franchise fee, the G’day! Pet Care Web site states. “We are considered a low-cost business because its home-based,” Pring said.

More information: www.gdaypetcare.com

Source: gazette.com, Colorado Springs
MCCLATCHY NEWSPAPERS

How to Achieve Franchise Financing Success in Canada

2010-03-08 19:59:35

Franchise financing is an integral part of the Canadian entrepreneur's challenge of obtaining and building a success Canadian franchise. As most Canadian business owners quickly discover, franchisors do not provide direct or indirect financing in the Canadian marketplace. This leaves the business owner essentially on his or her own to generate the capital they need from chartered banks, finance firms, and other institutions.

It goes without saying that the budding entrepreneur needs to first make a significant investment in general franchise knowledge - i.e. the pros and cons, as well as of course focusing on financing the franchise.

Franchises in Canada are product and service related. When you purchase the franchise you should have strong level of confidence that the concept is proven and successful, as you will be trying to replicate that success based on the products, services and brand awareness of the franchisor.

Franchisees are encouraged to do a proper level of due diligence based on that availability of information with respect to the business success of the franchisor. If you are considered a franchise that is owned and run by a large well know public company - think McDonalds! You of course have the ability to carefully review the financial statements and management commentary that is available to anyone by virtue of the companies listing on the public stock exchanges.

The good news about franchise financing and the risk that the business entrepreneur takes is that there is a significant amount of disclosure required by law to you as a franchisee. In Canada, as well as the United States you should have the ability to get a copy of the franchisors financial statements. If you don't feel qualified to read and interpret a financial statement you should use the services of a trusted franchise financing advisor, or even your accountant or lawyer would be good choices.

Many franchisors in Canada will of course gladly give your franchisee references, and you should clearly talk to other franchisees about financial performance with respect to what you hope to achieve based on your personal investment and borrowed funds. When we say ' financial performance ' we of course mean general business basics such as sales, profits, working capital challenges, leverage ( how much debt do you need to take on ), etc.

In financing a franchise you clearly want to understand how much debt you are going to take on - this is also directly commensurate with what you need to put into the business as your own investment. Most business owners today fully realize that a franchise can never be 100% OPM. OPM= Other Peoples Money!

Our experience in Canadian franchise financing is that the financing of your newly acquired business has is a combination of your own investment, as well as borrowed funds. Franchise financing success in Canada is most commonly achieved by your utilization of the CSBF program, which is one of Canada's best programs for small and medium sized business. This program provides up to 90% financing of leaseholds and fixed assets. When our firm structures a franchise financing we supplement the CSBF program with a combination, as required, of lease financing, and in some cases a cash term loan if in fact that is required.

In summary, by carefully selecting your franchisor, understanding your overall financial risk, and carefully putting together a financing package that fits your needs, you will have a very strong chance of being successful in your franchise venture.

Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing, the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size. For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/franchise_financing.html

Source: EzineArticles
Author: Stan Prokop

Exploring The Franchise Option

2010-03-06 17:40:55

In today’s challenging economy, many people feel that they have lost a sense of control over their careers. Widespread corporate layoffs and downsizings have made the job market a tenuous environment in which to build a solid future. As a result, a growing percentage of executives are turning to entrepreneurship as a viable alternative.

Indeed, one of the best ways to gain more control over your career is by owning your own business. Your options include: (1) becoming a consultant; (2) starting a business "from scratch;" (3) buying a franchise; and (4) buying a non-franchised business.

Of the people who have elected to pursue the "entrepreneurial option," most have invested in franchises. Franchising has never been more popular, and the range of opportunities has never been broader. Owning a franchise combines the stability of a proven business model with the independence and income potential of self-employment.

Joining with an "established business system" is generally comfortable and familiar for executives who have spent their careers within corporations. It is important to understand, however, that acquiring a franchise is NOT "just buying a job." When you purchase a franchise, you OWN the business.

Such notable publications as Business Week and The New York Times have recently published articles stating that franchising may be the BEST option for mature executives who have been displaced, but who are not ready to retire!

In order to make an intelligent determination as to whether franchise ownership would be right for you, it is important to first gain a basic understanding of the industry and the opportunities it affords.

What is Franchising?

According to the International Franchise Association, the leading professional organization in the industry …..
Franchising is a method of distributing products or services. At least two levels of people are involved in the franchise system: (1) the franchisor, who lends its trademark or trade name and a business system; and (2) the franchisee, who often pays a royalty and an initial fee for the right to do business under the franchisor's name and system. Technically, the contract binding the two parties is the "franchise," but that term is often used to mean the actual business that the franchisee operates.

Franchising is also known as "a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management, in return for a consideration from the franchisee."

History of Franchising

The concept of franchising was born centuries ago. During the Middle Ages, local rulers granted to their subjects rights pertaining to specific activities, such as holding fairs or hunting on the ruler’s land. Later, monarchs granted similar rights on a larger scale, such as building roads or brewing ale. The Church granted the same kind of commercial interest when it allowed its tax collectors to retain a portion of what they collected.

In the middle of the 19th century, the Singer Sewing Machine Company began granting franchises for distribution of its sewing machines. By the beginning of the 20th century, the emerging automobile industry and the increased demand for local dealerships was contributing to the growth of franchising.

The modern age of franchising began in earnest around the middle of the 20th century, when Ray Kroc bought the rights to franchise a California drive-in restaurant owned by the McDonald brothers. The success of McDonald’s franchises led to explosive growth in Business Format Franchising. The increased standardization of operations now found in most major franchise businesses has played an important role in making franchising an attractive business model for both franchisor and franchisee!

Benefits of Franchising

Franchising is about minimizing risks and maximizing returns. It has often been said that franchising allows entrepreneurs to "be in business for themselves, but not by themselves." A quality franchisor provides proven operating systems, solid research and development, established marketing methods and instant credibility – plus extensive training and support – all of which can reduce risk and build success more rapidly and affordably than in an independent business.

Franchising is also about "the big idea." As an aspiring entrepreneur, you may have all the ability and ambition necessary to succeed – but without a compelling concept to sell, your business will not go very far. As a franchisee, however, you will be in a position to leverage some of the most innovative products and services available in today’s marketplace!

Business success requires going through a learning curve for the type of business you’re in. With franchising, the franchisor has already gone through that process and is highly motivated to share with you everything that has been learned. Franchises succeed because the franchisor has invested the resources to truly understand the business. There is a proven formula for success ready and waiting to be adopted by the new entrepreneur. How many non-franchise, independent businesses can say that?

And, because a franchise represents a large number of units with established track records, the prospective buyer has access to much more of the data required for sound investment decisions than would be available with a non-franchise start-up. Being able to study the actual performance of identical business entities is invaluable – as is the contact you’ll have with other franchisees, who can provide real-world insights into what it takes to succeed in the specific business you’ve selected.

Of course, what matters most is results. Franchising is by far the most successful entrepreneurial business model – boasting a better than 90% success rate across all industries and sizes. This fact alone makes franchising worth looking at very seriously!

Conclusion

Franchising is certainly not for everyone, and every business model has its "pros and cons." But if you've always yearned to own your own business, can’t return to your old career, or just want to escape the "corporate rat race," franchising may offer the solution you've been looking for. Franchising has many appealing and practical elements, and it just might be the best path for you to regain control of your future!

Contact a Franchise Consultant to explore whether franchise ownership could be right for you.

Author: Ford R. Myers
Source: Buzzle.com

Pizza Franchise Study

2010-03-06 17:15:38

This report gives a brief overview of the US pizza industry and outlines the costs and fees associated with a typical pizza franchise. The data contained in this report was drawn from the Franchise Disclosure Documents (FDD), formerly known as UFOCs, of a representative sample of 20 pizza restaurant franchise chains and from published industry sources.

Industry Overview

Given the current straitened economic conditions the restaurant industry is proving resilient. Eating out in restaurants and the purchasing of take-out and delivery meals is an essential part of the American lifestyle. The convenience and value offered by the restaurant industry makes management of consumers’ day to day living easier. Research by the National Restaurant Association indicates that consumers, although worried about the economy, intend to continue their patronage of restaurants. It is expected that quick service, take out and delivery style restaurants will benefit at the expense of upscale and casual dining. It is predicted also that moderating gas prices and other commodities will mean that consumers may have more disposable income in 2009.

The US pizza market is a mature, developed market and highly competitive. Franchised pizza chains account for around 60% of the market. It is estimated that there are around 150 well known pizza franchises in operation and an unknown number of local and regional pizza franchises. While the pizza market experienced growth until 2007 when it reached a value of $34 billion, the financial downturn resulted in flat sales in 2008, a trend which is expected to continue for 2009. As well as moderating sales, franchise operators are facing a minimum wage increase from $6.55 to $7.25 per hour effective July 24, 2009. On a more positive note, commodity prices are falling. The price of cheese, wheat and most pizza toppings has fallen in 2009. Also, the trading down by cash strapped consumers from casual and upscale dining to less expensive alternatives is expected to benefit pizza franchise operators.

Top 10 Pizza Franchise Chains

1. Pizza Hut
2. Domino's Pizza
3. Papa John's Pizza
4. Little Caesars
5. Noble Roman's Pizza
6. Papa Murhphy's Take 'N' Bake Pizza
7. Sbarro's Italian Eatery
8. Godfather's Pizza
9. CiCi's Pizza
10. Hungry Howie's Pizza

(Source: Adapted from PMQ’s Pizza Magazine September 2008)

Trends

-Healthier Options
There is increasing demand among consumers for healthy meals and healthy kids meals. Consumers are also more interested in where their food comes from and how it is produced, with a growing demand for locally produced and organic ingredients. Pizzeria operators are responding by producing dough with healthier fats, offering whole wheat pizza crusts, healthier vegetable based toppings and salads.

-Value
As consumers increasingly look for value, pizzeria operators are expected to respond with lower prices and promotions. Falling commodity prices will enable more aggressive pricing. Consumers have less to spend, but they still want to dine out for convenience and enjoyment. By responding with value pricing, specials and combo-deals, pizza franchises will meet this ongoing consumer need.

-Technology Trends
The major pizza players are offering online ordering and some are now offering text ordering from mobile phones, PDAs and other web enabled mobile devices. Major pizza chains are using social networking sites like Facebook and MySpace as platforms to build a loyal customer base and to facilitate ordering directly from the sites. With an increased focus on green initiatives in the restaurant industry as a whole, pizza operators are introducing energy efficient equipment such as high speed ovens.

Pizza Franchise Fees and Costs

Given the current economic conditions, the franchise option as a route to market is considered to be more attractive than entering the market with a stand-alone restaurant. The support offered by the franchise system and its proven business model reduces the risk involved.

Initial Franchise Fee

The average franchise fee for a single unit pizza franchise is $25,000. Fees for carryout/delivery pizza units are generally lower, ranging from about $5,000, while fees of $50,000+ apply to some larger full-service restaurant units.

Estimated Initial Investment

There is significant variation among initial investment estimates for pizza franchises. Costs vary widely depending on the location, size of unit and whether the restaurant is takeout/delivery only or dine-in.

Total Initial Investment: $100,000 - $3,000,000

Territory

The majority of pizza franchises come with a protected territory although some franchisors reserve the right to open outlets within a given territory in certain circumstances.

Earnings Claims

It is difficult to predict what the future financial performance of a franchise unit will be. Earnings claims are contained in about 25% of franchisors’ FDD. They are accompanied by so many disclaimers that they only give you a very general indication of what money you might make. In our sample of pizza franchises, one small family style pizza franchise gave a potential revenue estimate of $800,000 and a net income of $160,000.

Outlook

The pizza franchise sector, like most industry sectors, faces the challenges of a weak economy and stagnant or declining sales in 2009. Tight cost control, falling commodity prices and management efficiencies will help offset the intense pressure on margins from price competition and flat or declining sales. There will be positive outcomes for franchise operators who enhance their levels of service and food quality while delivering value to the consumer.

Source: Franchise Direct- See for complete list of pizza franchise industry statistics.

How to Achieve Franchise Financing Success in Canada

2010-03-05 22:38:41

Source: EzineArticles
Author: Stan Prokop

Start a Franchise Business - Difference Between Success And Failure

2010-03-04 21:25:44

Want start a franchise business but don’t know where to begin? This is a big decision for any entrepreneur and a lot of thought and planning must go into it. You need to consider several factors before you start a franchise business. These could become the difference between success and failure. Let’s see what we’re talking about.

Set your goals: This is what it’s all about. Make a list of the reasons why you want to enter this business. What do you expect to get in terms of return on investment or annual income? Most important, do you have the commitment to go the distance?

Identify your investment capability: Estimate how much capital is required and how much you can afford to invest to start a franchise of your choice. Hence you need to know the initial franchise fee, royalty payment terms and other expenses beforehand. You also need to decide if you want to go it alone or rope in some partners.

Know your abilities: As with any business, the success of a franchise will depend on whether you have the requisite skills. Take a long, hard look at your previous achievements and experience and focus on your areas of strength. For instance, you may be good at managing people or a sales whiz or great with computers! To become a franchisee of Subway® chain of restaurants, you need to pass a test in math and English. Choose a franchise opportunity that can leverage your strong points.

Do your homework: Look at the franchisor’s track record before taking up that offer of a franchise. Is the brand doing well? How are franchisees treated? What support services and training resources do they provide? An absolute must do – talk to other franchisees before you make that call.

Understand scope of business: Find out if there are pre-conditions regarding outlet size, operations methodology, restrictions on territory or any other. Know what you can and cannot expect.

Read the fine print: Once you have zeroed in on the franchise you want to buy, ask to see the inevitable Franchise Agreement. The agreement will list out the rights and obligations of both parties, and will govern the terms of your relationship. Be sure to take a professional legal opinion.

Also ask for a copy of the franchisor's disclosure document, called Franchise Offering Circular. This will help you assess the franchisor's financial stability and general business acumen and predict if the company is financially capable of delivering its promises. Under the Federal Trade Commission's Franchise Rule, you must receive this document at least 10 business days before you sign up.

Ask yourself: Finally, ask yourself the following questions before starting a franchise:

-Do I need any start up training?
-Which location is best suited for starting a franchise business?
-What equipment is needed?
-How many people do I need to begin operations? Have I considered all the risks?

Remember, due diligence is essential, and some professional guidance might come in handy. There are a number of sources you could go to for help, like www.great-opportunities.us or www.sourcebookpublications.com . Make sure you know your facts before you start a franchise business.

Source: Smart Entrepreneur

Why Franchisees Buy Franchises

2010-03-04 21:14:59

Research by the Franchise Advisory Centre indicates there are several key motivating factors for the decision to buy a franchise. While most of these factors will be present for different people’s decisions, the relative importance given to each of these will vary from one person to another, resulting in unique combinations which might arrive at the same destination, but take different paths to get there.

These key decision making factors are:

- Lifestyle
- Brand Security
- Self Direction
- Income
- Skills Development

Lifestyle

By far the greatest factor in the decision to buy a franchise – weighted at 33% - is the perception that franchising will provide an improved lifestyle. Rarely will two people agree on what lifestyle actually is, yet it seems to be something that the overwhelming majority of new franchisees and small business owners value and want.

What “lifestyle” is or should be will vary according to individual circumstances, such as age, gender, likes, dislikes, hobbies, sporting interests, family, friends and so on. Lifestyle for some people might involve playing lots of golf, while for others it may mean spending more time with their children. For others, it might mean less stress in their working life so that they are able to enjoy their home life more, even though their working hours may not change.

Lifestyle is often considered to be synonymous with leisure. In other words, a quality lifestyle may be one that involves lots of leisure time or activities. Many franchises are even promoted on the basis that operators will enjoy a good lifestyle, with the inference being that they will have more time, income or both to pursue their leisure activities.

Lifestyle for most people is not seen as work, but rather the outcome from work. Even though the nature of the work itself may provide lifestyle benefits (eg. travel, social interaction, outdoor activity, etc) these may not be the same leisure benefits sought by a buyer (eg. greater time for family, hobbies, etc).

Despite its role as the greatest factor in the decision to buy a franchise, the concept of lifestyle is also dependent on many non-business factors. It does not automatically follow that buying a franchise (or any other type of business) will result in an improved lifestyle. Additionally, lifestyle “needs” change over time. For example, people who choose a certain type of business in the hope of being able to spend more time with their children may find the business no longer suits this need if the children have grown up.

Brand Security

The next greatest contributing factor to the decision to buy a franchise is the strength of the brand and the support provided by the franchisor (a decision weighting of 27%).

Potential franchisees perceive that franchisors will provide complete training, knowledge, skills and ongoing support in the total front and back end operations of a franchised business. The perception that the all-knowing franchisor will steer the franchisee on a course to prosperity is often based on the success stories of other franchisees in the network, the demand for the product or service in the marketplace, and the franchisor’s own recruitment advertising and PR.

Potential franchisees – especially those going into business for themselves for the first time – place a premium on going with a business model that is tried, proven, or otherwise appears successful. By doing so, potential franchisees also assume that the risk of business failure is either eliminated, or massively reduced. The reality is that no business venture is without risk, but franchising is nonetheless perceived to be safer because of the franchisor’s experience, knowledge and support.

Self Direction

A third contributing factor to the decision to buy a franchise (weighted at 19%) is the concept of being your own boss, calling the shots, taking charge, and setting your own direction in life.

People who have lost their jobs, or worked in unstable industries or for employers with volatile businesses, poor workplace practices or high levels of staff turnover attach greater importance to controlling their own destiny, and see self-employment through franchising as a way of achieving this control.

Buying a business is the ultimate form of economic self-determination. Business owners don’t need to worry about a bad boss, and can control the work practices and stability of the business.

Taking control through becoming your own boss might solve these problems, but also replaces them with entirely new ones, such as meeting market demand and dealing with competitive forces.

Income

In the research, income was perceived as a much smaller contributor to the decision to buy a franchise. Ranking fourth after Lifestyle, Brand Security and Self Direction, income for many potential franchisees appears not to be the most important factor in choosing a franchise.

There may be several reasons for this. One is that potential franchisees assume that the income from their business will at the very least match their previous wage or salary, but often arrive at this assumption without any financial analysis to prove that the business is capable of supporting owner’s drawings at such levels.

Another reason is that the franchisee may place greater emphasis on lifestyle, and therefore decides to trade off income in order to achieve their desired lifestyle.

A further consideration may be that information about income is rarely available from franchisors. Franchise recruitment literature usually promotes lifestyle, the support provided by the franchisor, and the opportunity to be your own boss, but seldom discloses financial information. Advised by their lawyers not to provide financial data for fear of making representations, franchisors are conditioned not to offer this information, and potential franchisees may not pursue it in detail if the idea of lifestyle, support and self-direction are ultimately more appealing.

Skills Development

The last of these main factors in the decision to buy a franchise is the development of new skills (weighted at just 3%). Potential franchisees who have been in the workforce for 10-20 years may find that their job is no longer fulfilling or challenging, and that future prospects for advancement are limited or non-existent. The alternative of starting their own business can be very exciting and involve new experiences and the gaining of new skills, confidence, contacts and self-esteem not previously available as an employee.

A potential franchise may look to a franchise to deliver these skills through a combination of the formal and informal learning provided in the franchise network, as well as the person’s own desire to learn in order to succeed.

Conclusion

If you are reading this article and are contemplating buying a franchise, chances are your decision-making process will be largely governed by these five key factors. The relative importance you attach to each factor will be different from other people on the same search.

The weightings you apply to each major factor will change according to your personal circumstances, and even change after you have bought a franchise as you rationalise the purchasing decision to yourself.

For example, while lifestyle might appear to be important at the outset, lifestyle alone will not pay the bills and therefore the requirement for an acceptable income may rise in importance following the purchase of a franchise.

Once you know what relative weighting should apply to each of the five key factors for your franchise buying decision, you are ready to start looking for brands that meet your criteria.

Be sure to undertake adequate due diligence before making a final purchasing decision. A good rule of thumb is to allow one hour of your time on due diligence for each $1,000 to be invested in the business.

Then, if the business is the right fit, be sure to review your buying criteria over time to ensure it continues to meet your needs.

Source: Franchise Advisory Centre
Author: Jason Gehrke