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Category Archives: Buying a Franchise

Need to know information if you’re buying a franchise.

5 Things To Consider Before Quitting Your Job To Buy A Franchise

Buying a franchise is serious business.
The lure of working your own hours, being your own boss and being more in control of how much you earn is enough to tempt anyone to consider quitting their job and dive nose-first into a franchise or their own business.

A franchise can be especially attractive, as after all, the brand is often already established, there are usually proven success stories and most of the time you are selling a product or service that someone else came up with.

But before you hand in the resignation letter there are a few things you should consider.

• 1) Think it through: Business decisions should never be made lightly, especially if it is your first business or is something new to your area. Research is key when looking to start up a business and this not only includes researching the franchise you wish to buy, but looking into the market in your area and if there is a real need for the product or service you will be offering. After all, you may think it is worth the money, but that doesn’t mean everyone else will.

• 2) Take responsibility: The success of your business relies on you and you only. Unlike previous employment where you may have had a manager to full back on, a business owner to take the wrap or colleagues to share the blame, all decisions and therefore consequences will fall on your head.

• 3) Be prepared to put in the effort: A successful business requires a lot of effort both on and behind the scene. It not only requires you to be a great people person and communicator, it also means you need to put in the work both before and after hours ensuring the smooth running of your enterprise. Be prepared for the possibility of long hours and stressful conditions, especially when you first establish your franchise.

• 4) Consider education: While most franchise opportunities include significant training and support, it is wise to get some education in the field before investing in a business. This may include administration, customer service, or bookkeeping, and can be undertaken while you are with your current employer to ensure you have income while completing your education. The point is – be prepared and equipped.

• 5) Save, save, save: Even with more attractive lending practices on many franchise businesses, buying one will still involve you needing a deposit to secure finance. You need to ensure you are financial enough to not only enter into a business, but have enough working capital behind you to allow for varying scenarios, and it not playing out exactly how you thought or wished it would.

By: Emma Webb http://www.franchisebuyer.com

Three Important Things You Should Know Before You Franchise

1. Before you even think about it – You cannot franchise your business unless you have already achieved the following:

  • (a) You must have a business that is profitable. It must be profitable enough to produce a good profit to your franchisee even after you deduct franchise fees, not only those ongoing fees but, the initial fee also.
  • (b) Generally the business must have been in existence long enough to know that it can survive a range of economic environments.
  • (c) The business must be systemised and the systems must be recorded in a detailed and professionally drafted operations manual. It is better that you complete this job yourself, but you will need someone to proof the document. Let me repeat. Detail is critical.
  • (d) The business must be unique. The operations manual must reveal the uniqueness of the business. In a coffee franchise, for example, the operations manual does not only describe how to make a coffee. It describes how we, in this franchise system, make a coffee. If an operations manual is the text book description of how a coffee is made then the document is failing its purpose. There must be some uniqueness about the document. It may be what the waiter says, the way the cup is placed or the unique chocolate that accompanies each cup. The operations manual must focus attention on the differences from the standard processes that others may employ. The differences make the system, and they need not be mind blowing. It is often the little things that do the job.
  • (e) One operation is not enough! The business of franchising is about helping franchisees achieve success using your system. It is obviously essential to have the knowledge of how to run the franchised business. It should be just as obvious that you will need to develop the necessary skill to run head office. Operating a franchise system requires an entirely new skill set from the original business. This is a concept too many first time franchisors do not respect. Before franchising your business you must open at least two more operations, and run these successfully at a profit.

2. The set up of the structure. At this early stage it is essential to look at your goal and think big. There may be no second chance to change things once the franchise system is operating. There are some very simple, inexpensive things that can be done at the inception of the franchise system that can protect your assets, discourage would-be litigants from suing you and minimise tax. After operation commences the great ideas that come with experience will cost a lot more to implement.

If your franchise system requires premises should these sites be controlled by the franchisor or the franchisee? Careful thought needs to go into how this system should work. The companies that have the risk should not in most cases be the companies that hold the assets. This is a fundamental rule. We have set up many franchise structures, please contact JJ Riba & Co so that we can help you learn from the mistakes that others have made.

Even the decision in relation to who holds the leases is not a decision that can be made lightly. In this current economic environment many franchisors may find themselves wishing that they had not taken on the responsibility for the lease. If they had not, then the landlord would be chasing the franchisee for payment and may not be chasing them! Do I take the risk associated with the lease of the premises or don’t I? There is always a third option. Why not do both, take some leases and leave others to the franchisee? Which you may take the risk on, depends upon the importance of that site to your system.

3. The Franchise Agreement. Franchising is all about consistency. Consistency in process, in product or service, and consistency across a range of franchisees. The burger must be made the same way, every time, regardless of when or where.

This process of achieving uniformity starts with the franchise agreement. It is very difficult to properly operate a franchise system, if each franchisee within that system, operates using a different Franchise Agreement. Yet each franchisee is likely to request (or demand) changes to the agreement that you are offering. Even what may seem minor variations may create unnecessary work. Franchisors should not generally need to change their standard franchise agreement if it is properly drafted from the start.

Franchisees may draw negative conclusions about a franchisor who is willing to change the standard Agreement. Agreeing to amendments may show a lack of experience, and may even give the appearance of desperation. Disclosure documents operate on the premise that the agreement is the same (taking into account changes over time) across all franchisees in the system.

With these fixed terms however comes the responsibility to make sure that these standard terms are fair. The national unfair terms legislation (Trade Practices Amendment (Australian Consumer Law) Act 2009) does not apply to agreements between franchisees and franchisors. Nevertheless, the existence of this legislation shows that our law makers are focused on this issue. It is essential for franchisors and their lawyers to understand the purpose of each clause in the franchise agreement. Much of what may appear to be unfair at first glance, is necessary so that Franchisors can protect their own interests, and protect the system for the benefit of all franchisees. There is obviously a difference between a clause which may appear to be unfair but, is genuinely needed, and a clause designed to take an unfair advantage. If your system is to grow and prosper you will need to learn the difference.
It is not an easy process but with some discipline and dedication it is not beyond reach. If you need help contact J J Riba & Co

By: jjriba http://franchiselawyers.wordpress.com

What to Consider Before Investing in a Franchise Business

One way to start a business and eventually expand out is to invest in a franchise business, but before you do, there are several things that you should consider and do. One of the things that you should do is learn about the business that you are considering buying a franchise from. You should also know where the money is being invested and make sure that the returns are satisfying. You should also know the track record of the franchise to make sure that it is a stable and secure franchise, and that there is a customer following.

You also need to make sure just how much of an investment you are going to be required to make. Most franchises do require a significant fee initially so you need to make sure that you are ready to match the amount of funding with the costs of the franchise. You may also need to raise a significant amount of money if need be in addition to the initial investment. When you invest in a franchise, you are responsible for the insurance, taxes, advertising costs, salary, and more even if the sales fall below what you expected.

You should also know the regulations and rules of the franchise, which should be reviewed with an attorney before signing the paperwork. Before you make the initial investment, you should make sure that you invest in a franchise that has a product or services that interest you because you are investing a lot of money.

Source: http://www.richarie.com

8 Important Things to Consider While Choosing a Franchise

Make the Right Decision, and Don’t Get Stuck in a Money Pit!!
Investing is a franchise for the first time is a huge commitment, and it should be done with razor-sharp prejudice and meticulous research.

Please read and implement my advice on choosing franchises, because it could save you thousands and perhaps even millions of dollars in the long run!

1. Speak With Several Franchise Consultants and Don’t Fully Trust Any of Them!
Franchise consultants are useful in recommending franchises that could possibly match your preferences and business experience, but they make a living by selling franchise programs to people like you. Clearly communicate with them, and tell them exactly what types of business interest you. Some franchise consultants will try to persuade or push you into purchasing franchises that will pay them the highest referral commissions!

Always take this into consideration while you are investigating the franchise opportunities that they recommend. Perform your due diligence to determine if their suggestions will fit your expertise, budget, and preferences.

2. Speak Directly with Other Franchise Owners to Gauge Their Level of Satisfaction and Success
Often, a franchise consultant will put you in touch with a franchise recruiter or area developer who works at the franchise’s corporate office.

Some recruiters are amazing salesmen, and they will paint colorful pictures of wealth and paradise with their slimy words in order to convince you to buy their snake oil. Recruiters RARELY give you the reality behind the actual experience of owning their franchise because, of course, their compensation is usually based on how many people they recruit instead of how successful their recruit becomes.

This compensation structure differs in some franchises, but do not believe everything that these bug-eating reptiles tell you.
Instead, contact at least 10 CURRENT franchise owners who are actively running the franchise because they will give you a better understanding of the day-to-day reality of owning the franchise.

After speaking with several franchisees, you might discover that owning that franchise will involve a greater scope of work and capital than what was communicated by the recruiter.

3. Carefully Read the UFOC Sent by Each Franchise
Franchises are required to deliver these thick, god-forsaken, prospectus-like booklets to you whenever you investigate a franchise opportunity. They contain many pages of detailed information about the operating costs, territory sizes, marketing methods, and relevant data about the franchise.

Remember, these UFOCs usually contain AVERAGES, and they are only word-for-word accurate when it comes to outlining their franchise fees, training costs, and royalty fees. To obtain realistic numbers, contact the current franchisees whose phone numbers will be listed within the last pages of the UFOC. They will always give you more accurate expectations without the marketing fluff of recruiters and UFOCs.

4. If the Opportunity Feels Right, Run the Numbers
If an opportunity appears enjoyable and achievable, run the numbers and determine your return on investment.

First, determine how much you will be investing to get it up and running, and also figure out how long it will take to achieve positive cash flow. Basically, calculate the payback period, which is the period of time it takes for your franchise to pay off or to fully return your total investment. In a simple example, if you invest $150,000 in a franchise, and it delivers a net income of $75,000 per year, then the payback period of this franchise is 2 years.
Plus, you must also calculate your break-even point. This is the point at which your operating costs and expenses are equal to your income, and it is important because you must be selling or moving product or performing services above your break-even point in order to stay in business and become successful. The formula for a break-even analysis is:
Break-Even Point = (Fixed Costs) ÷ (Price of Subway Meal – Variable Cost of Subway Meal)

For example, if you own a Subway franchise, and your fixed monthly costs are about $7,000, you divide that by the price of the meal (about $12) minus the cost of making the meal (about $4).
($7000) ÷ ($6 – $3) = 875 meals per month to break even

This formula will help you price your products or services while setting realistic goals and expectations. Normally, prices will be predetermined by the franchise, but you will still have to know this for your marketing campaigns.

Also take into account the franchise’s monthly advertising fees and royalty fees. Some franchises will charge you a marketing or a monthly support fee, which can vary greatly, depending on the franchise. Plus, they will also charge a percentage of your gross income, normally 3-6%.

These fees can eat up all your profits during the initial start-up months, and you must make sure that your profit margins are wide enough to account for them. For example if your average profit margins are only 20% of your gross sales, and your franchise fees eat up 8%, that’s already 40% of your profits going to the franchisor. Don’t invest in a franchise that has a strong “pimp hand”, and do all the necessary calculations before making any commitments.

5. Involve Your Trusted Family Members and Friends
If you are married or engaged, it is important to gain the support of your wife or fiance. Many successful franchises are family-owned, and spouses can make great employees and business partners.
If you have a trusted friend who has similar interests and goals, it might be a good idea to create a business partnership with him or her to gain a helping hand and distribute the risk evenly. Many franchises are very capital intensive, and they require investments of over $120,000 during the first year alone. It might be a good idea to have a partner to share both the workload and the investment.

6. Conduct More Research and Analysis – Porter’s 5 Forces Analysis and SWOT
Just because you counted your beans and feel all warm and fuzzy about the new franchise, you won’t quite make millions just yet. It could make alot of sense on paper, but will it really make dollars in the real world?

The way to determine if your franchise will make money in your neighborhood is to investigate its competition and determine whether or not your franchise can establish and maintain a long-term competitive advantage.

Consider the number of direct competitors are within the territory of your franchise, and conduct a Porter’s 5-forces analysis to determine if your franchise can sustain profitability.

This analysis takes into account the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the amount of competitive rivalry within an industry, and the threat of substitute products. Since the details of Porter’s 5 forces can be found in every major search engine, I will only discuss the 6th force, which Dr. Evan Scheffel described as the Effect of Supplements.

Most of Porter’s forces are pretty doomsday-ish, and they deal with the rise of threats and power that can benefit or be detrimental to your business. The 6th force deals with the appearance of supplementary products or phenomena in the industry that can improve your company’s bottom line.

For example, if you own a gas station franchise that catered to electric cars… the advent of a supplement such the creation of an affordable electric family sedan would be a positive force that would bring increased profits and customers to your business.
In addition, performing a SWOT (strengths, weaknesses, opportunities, and threats) analysis of your franchise would also be important to sum up position in the marketplace.

7. Inquire About Financing Options Given to Franchisees
Some franchises have such proven systems that their franchisees receive preferential treatment by lenders. Depending on your credit history, franchises can link you up to banks that will lend anywhere from $25,000 to $200,000.

Achieving the perfect debt-to-asset ratio in any business is important. You don’t want to tie up all of your liquid assets in your business if it does not offer much liquidity, and you also do not want to finance your entire business with debt if interest charges eat up all of your profits.

To have a happy, healthy cash cow, you must determine the precise mix of cash and loans to use. Fortunately, most franchises will have recommendations and guidelines to follow.

8. Attend Discovery Day, and Investigate the Support Staff
Finally, you’ve expressed an extreme interest in a franchise opportunity, and you are ready to knock on doors every day to sell drapes, window covers, and blinds to people. Or perhaps you will be hiring teams of janitors who will clean movie theaters and office buildings. Or maybe you will be selling new and used video games at a shopping mall to prepubescent skaters.

Before you take the ultimate plunge and send in the first check to pay for the franchise costs and the training fees, you will have to attend a “Discovery Day” session at the franchise’s corporate office.
There, you will meet the support staff, the president, the recruiter, and everyone who will be training and guiding you through this wondrous experience of owning and managing your franchise.

Make sure that they provide you thorough support such as peer-to-peer mentoring, online best-practice directories, technical support for software and machines, customer service, marketing support, and reselling options for your territory. Again, don’t believe everything that they tell you at discovery day. Cross-reference it with the accounts of the franchisees that you call, and call at least 10 franchisees to get a realistic perspective.

Remember, do not let anyone pressure you into making this decision because it is an important and expensive one to make. If anyone tries to push you into a franchise, perhaps they have more to gain than you do. Always look for bedbugs between their sheets, and you’ll be amazed at what you’ll find!

Source: http://ericsoberian.hubpages.com

5 Things to Consider Before Franchising Your Business

If your small “mom and pop” shop starts to get recognized in a particular community and becomes quite popular, perhaps it will be just as popular in another community too. Moreover, if your business has a particular look or identifiable brand, and a portable business model, perhaps franchising is the smartest next step for your business. Franchising is a unique way to grow your business that involves licensing your brand and business model to a franchisee. A franchisee will use their own start up capital to open up a shop that is exactly like the flagship store and will pay you a commission of the monthly or annual sales. Here are 5 things consider before franchising your business.

1. How much room for growth is there? It is important to do your research before you are ready to make your business ready to franchise. You might think that your business will thrive in another community, but there might be a few factors you haven?t thought of before. Moreover, what if you want to take your business global. Will your business model work in the most remote parts of the world, one with a totally different culture?

2. Can you afford it? Yes, the franchisee will need his or her own capital to open up a franchise of your business, but you will need the capital to hire a lawyer who will draft all the paperwork and make sure that you are positioned to franchise. There is a lot of paperwork involved and it can be complicated for anyone to sift through. And you want to have all the right documents signed and notarized, because you don?t want to lose your business or the franchise. So, it is important to have the money to pony up to a lawyer.

3. Have you created a structure and protocol manual? Creating a detailed protocol and structure list is important because you want each and every one of your franchises to maintain the same integrity as its flagship. That goes from the way people greet customers at the door to the exact placement of lettuce on a hamburger. The whole concept of a franchise is that anyone can buy any item at one franchise and still find the same exact item at another franchise hundreds of miles away.

4. Have you made your business available on a directory? Letting the world know that your business is available for franchise is important. This is why franchise directories are so useful. Sites likes?FranchiseExpo.com?give business owners the opportunity to make their establishments available to franchisees across the world.

5. Are you ready? It takes years of experience and know-how before you can make your business available to franchise. Not only do you need the capital to back up your forecasts that franchising will be successful, you need to have a track record that your product or service is marketable and salable across a wide demographical spectrum. You don?t want to wind up franchising your business, only to realize you needed a bit more time. The key to success isn?t just about striking when the iron is hot, but having the sense to know if it is hot and if it will stay that way.

Source: http://jack3d.divljakusica.info

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