Category: Franchise

When broken down, franchising simply represents methods of distributing products and services. For some time now, entrepreneurship has been the career path for many victims of downsizing and corporate layoffs. Despite the uncertain job market and the unstable economy improving considerably in recent years, business ownership remains a standard means of employment.

Franchising has become a major priority for people who seek the freedom of owning a business without undergoing the struggle of creating a concept from the ground. For that reason, franchising will continue to be a relevant part of the economy. Studies show that when done right, it can be a powerful business model for quick growth. Franchisees win through economies of scale, a defined system, mentorship, and support. As more entrepreneurs look at franchising as a viable path to success, it is vital to understand the emerging trends and how one can take advantage of them.

Increased Technology

Technology has made business ownership easier. The major concept taking root with franchises today is the ubiquity of software services usually hosted in cloud. This means a software that resides on the web instead of one installed on a computer. Today, technology allows the business owner to transfer all the software programs installed on their individual computers and move them to the web. On the web, it is easy to host them in a single secure environment. That way, it is also easy to get access from any internet-connected device, whether in a phone, a tablet, and etcetera. By virtue of their size, franchises command a lot of volume. Even small franchises are always in need of modern systems to take charge of the complexity of the trade. As a result of the increase in demand for IT reliance in business, this trend will certainly continue to expand.

International Expansion

The internet has been the science behind the expansion of businesses of all sizes in foreign markets. While startups may have difficulties in establishing and building their brand presence globally, franchising has a high potential of achieving success quickly internationally by venturing into locations where there is a clear market for their products or services. Looking closely, it is certain that there is incontestable demand for high-quality products and services in countries where there is urbanization. International expansion of cabinet refinishing companies and more helps in filling a void in an emerging market by creating a potential first-mover benefit within that market. In turn, the move increases global brand awareness. Also, it gets easier for franchisees to test new services and offerings and optimize the existing model to meet the local demand.

Internal Financing

Throughout 2016, internal financing options will continue to expand. That will, in turn, make business ownership possible for more interested parties. Through individual franchisors, internal financing options are available to allow the franchisee afford the cost of expanding business in new locations. Grout cleaning companies programs alongside others present varying benefits. These appear in a low-interest with more relaxed approval standards easier to obtain as opposed to traditional loans offered at banks. It is clear that buy-in fees are way higher than the average person can afford in one go. Even the cheapest come with an exorbitant cost. For first-time entrepreneurs, it can be tough to obtain a business loan; the reason internal financing programs have been set up. These programs will keep providing franchisees with ready access to the capital necessary to seize opportunities.

Mobile Marketing

Clients will keep having a great impact on franchises in 2016. Smart companies are hence optimizing their websites for mobile devices. With the increase in tablet and smartphone usage, there is today, it is critical for every franchise to have a website that is compatible with such devices. When the mobile savvy user can’t have the opportunity to view the website from the available mobile device, chances are they will find a competitor who is technologically advanced.

Franchising is swiftly evolving and is mostly associated with home services and fast food. However, its benefits can be applied to nearly every industry, especially those that lack powerful management or those that are expanding rapidly. Powered by innovation, strong business models, and the need for immediate results, a franchise can be highly profitable.

Article Contributed by Lee Flynn

Believe it or not, the franchising system has existed since the late 1850’s, and has been a cornerstone of American business ever since. Since it started out in the late 1850’s, franchising has branched out from its American roots to become a mainstay of corporate risk-management all over the world. The differences between American and international franchising are notable, but the system remains relatively consistent.

Franchises

A franchise is agreeing to use a company’s brand. Someone buying a McDonald’s, for example, is an individual who owns a business that is based on the brand; this is, in essence, what a franchise is.

The modern franchise system was pioneered by A&P in the late 1850s. Until the 1930s, it was an under-utilized structure, but modern franchising exploded in the 1950’s as a result of fast food. Colonel Sanders of KFC recognized the potential franchising offered his business, and the incredible success his company experienced began a fast-food boom.

While this corporate structure began in America, it has since spread to many other parts of the world. Kumon Education, Spar and Bata are all examples of franchises started outside of the U.S.A. Regardless of which country a franchise originates from, many traits are universal.

Individual Business owners

Most franchise owners are individual business owners. Most franchises require a very sizable initial licensing fee, so it it takes the entrepreneurial spark to start a franchised operation. It is estimated that anywhere from 8 in 10 to 50% of businesses will fail within the first ten years. Franchises often require large capital outlays to begin with – a sort of demonstration of good faith from the franchisee towards the company whose brand they seek to utilize – and so it requires a real propensity for risk and solid past results for an entrepreneur to start a business.

While the United States is often criticized for its regulatory burdens, at least in domestic politics, many other countries have much harsher standards of regulation on franchising. Australia has a franchise code of conduct, for example, while Japan is so weary of franchises that it published its regulations under the Japanese anti-monopoly regulations.

Smaller Businesses

Some businesses cannot be franchised, of course. Fast-food and clothing stores might be easy to franchise, but certain businesses are not. Specific and niche tasks that require local knowledge are difficult to franchise. Oriental rug cleaning companies would be difficult to franchise, of course, since the target audience would be such a small niche. Other tasks like plumbing, electrical work or a kitchen cabinet refinishing businesses would be difficult to franchise nationally due to the specificity of local conditions.

Aside from those smaller businesses, a franchise can provide excellent advantages. Though the initial investment is often costly, the brand recognition a franchise can provide more than makes up for it. McDonald’s is known the world over, while “Bobs Local Burger Shop,” is a total unknown. This is the reason Australians are willing to pay extraordinary amounts of money to buy a Wendy’s franchise license, even though Wendy’s is an American company – the credibility of a name-brand, especially one of the major American restaurant brands, more than makes up for the capital outlay it requires to purchase that license. McDonald’s and Burger King are available all over the world and provide a safe harbor for any Americans anywhere else in the world. Being able to attract tourists is another reason franchises are so attractive in the international markets.

Of course, this is a bare bones examination of domestic and international franchise differences. Further reading on this subject include, ‘The Educated Franchisee’ by Rick Basio, ‘The Franchise Fraud’ by Robert Purvin, and ‘Franchising for Dummies’ by Michael Seid and Dave Thomas. Dave Thomas was one of the great pioneers of franchising, as the owner and operator of the Wendy’s Franchise.

There is a big difference between being an entrepreneur and owning a franchise. When considering purchasing or starting a small business it is wise to understand the differences so that you can make good choices for your situation. A franchise has much less control over product, strategy and marketing, but has less risk. An entrepreneur controls their fate but does not have the advantage of brand recognition and a ready-made market.

Leadership

An entrepreneur dreams and dream and creates a business from it. This includes feasibility studies, market studies, start-up strategy, funding, strategic planning and business planning. The entrepreneur has tremendous latitude to develop the business according to their own vision and subsequently to respond to the market for the product. The owner develops the leadership for the business and in the end controls the critical decisions.

The franchise owner must be a great manager and accepts leadership from the franchisor. Marketing, product, strategy and policy decisions are made by the franchisor and the franchise learns to manage the direction and materials they receive. Leadership for the franchisee is more at a management level; who to hire or fire, how to schedule, and how to implement franchisor policy.

Carpet cleaners are a good example. You could become a franchisee or you could purchase or start your own carpet cleaning company. In the former, all of the structure, supplies, market and vehicle are provided. In the latter, the business owner must develop and implement it all from scratch.

Business Beginnings

When an entrepreneur starts a company many complicated variables come into play. Issues like staff, supplies, policies, operations, marketing, start-up, and funding all have to be decided upon and implemented without the support of a larger company. The trade-off for an entrepreneur is that they get to pick their territory, their products, their market, and their operations plan. The entrepreneur has no idea how long it will take for their product to penetrate the market and make a profit. Startup may be slow going, until customers find “Charlie’s Carpet Cleaning.”

When a franchisee begins business, often the location, the product, the market, the operations and the policies are already complete and ready to go. The startup may be significantly faster due to the brand and franchisor marketing already in place. Everyone knows “Stanley Steamer” carpet cleaner from TV and print ads.

Operations

The entrepreneur sets the strategic direction for the company and can change directions on a dime. The standard operating procedures, policies and procedures are developed by the owner and are tailor made to fit the business and they can be changed as quickly as they were developed. The owner can be as involved or as distant as they wish depending on who they hire and how they are trained.

The franchisee manages the operational and strategic directions of the franchisor. Changes are made very slowly, even if market demand is driving for a change. Franchisees cannot change policy or standard operating procedures. At the same time, they don’t have to create them and they rely on the experience and success of a larger company who has time tested them.

Marketing/Brand

The entrepreneur has to rely on instinct and if they are lucky, marketing research to develop brand. Even if the market demand is strong for the product, that doesn’t mean that the product will sell. It requires marketing expertise and marketing strategy for the long haul to make it work. The life cycle of a product with no brand is greatly extended compared to the life cycle of a franchise product.

The franchisee has a ready-made brand that may be nationally recognized and loved. There is no need to create demand because the demand is already there. Sometimes the only marketing a franchise will do is put up the store and the sign.

ROI/End Game

The ROI for an entrepreneur is unlimited, but also highly unpredictable. The ROI may not come quickly. The end game for an entrepreneur is also highly unpredictable. Many businesses have no value except for any assets the company has in product, equipment or buildings. May be difficult to count on a business as a plan for retirement, depending on the type of business and the success it enjoys.

For a franchisee, the ROI is limited and more predictable. The franchisor has lots of data and experience and usually can predict the life cycle of the business and the ROI. The end game may be to sell the franchise back to the franchisor or another franchisee. Value is most likely going to there.

It’s without a doubt that starting a business can be difficult because there are unforeseen obstacles and challenges that may lie in the road ahead. Overcoming the hurdles is the main key to success but of all the new businesses that start each year, 7 out of 10 survive the first two years, half make it beyond 5 years and a third continue to at least 10 years. Those numbers can be a little hard to swallow but entrepreneurs may have a better chance of survival by going the franchising route.

Proven Success

Starting a business involves serious legwork like generating an effective business plan, maintaining a strong customer base, creating a branded identity and much more. When you take a look at franchises, these things have already been tried and tested in the real world with proven success – making the option of running a franchise quite attractive to the prospective business owner. This allows for a safer sense of security in terms of survival because the brand may already carry consumer value and have operational assistance from the corporate entity.

Corporate Guidance

Any good franchise will offer some kind of training to get you up and running which can help turn a profit quicker than going it alone. This allows the franchise owner to understand what strategies are effective and how to run a successful business. Also, franchise owners will be able to get marketing guidance that can bolster sales and promotions that ultimately lead to positive gains. But it must be understood that franchises need devoted and hardworking owners who will do their part in running the business. While there will be help, it comes down to the diligence and dedication of the franchisee to be successful.

Flexible Benefits

It’s without a doubt that being your own boss has its perks like hiring employees, making work schedules and managing a team. This allows for aspiring entrepreneurs to be self-resilient rather than relying on the uncertainty of the current job market. Franchises also significantly reduce the market risk that is commonly associated with startups because the level of certainty is more predictable than the latter. It’s better to have a track record of success rather than hoping for the best and owning a franchise can provide that stability.

It’ll take a lot of work to successfully run any kind of business, regardless of the industry, but one thing to keep in mind is that there will be assistance from the corporate branch who wants to see you succeed. It’ll take a solid foundation to build upon and having the resources you need to thrive will be within reach when running a franchise.

About the Author

Andrew Hill is the owner and operator of Pet Assist Pet Sitting in Sharon, Massachusetts. As a franchisor of Pet Assist, he likes to give instrumental advice and tips about running successful pet franchises to aspiring business owners.

Article Contributed by Ann Shirley

If you’re an aspiring business owner looking to get your foot in the door then you may want to consider becoming a franchise owner. Becoming a franchise owner is a great way to gain valuable experience in the business world. You will be able to build connections with other franchise owners and people who work for the company. While you will be free to run your own franchise, you can lean on the support of others in the business to help you with marketing and advertising and other modes of assistance that will allow your franchise to grow and prosper. If you’re interested in becoming a franchise owner you should carefully consider these four questions.

1. What kind of franchise should you invest in? There are countless options available from food to retail and even education. Food franchises can be risky. There are many options available for people to purchase water ice franchises. However, these franchises are usually only open for a season. During the downtimes you may find yourself strapped for cash. In addition, unpredictable factors such as the weather may affect sales. A safer option is to own an educational tutoring franchise. There will always be children in need of tutoring services, and even in the summer you’ll have students in need of SAT prep.

2. Does the franchise have a good reputation? One of the only drawbacks to owning a franchise is that you’re not a completely independent business owner. This can be very beneficial for thriving businesses. However, if a business is struggling you may want to avoid investing in one of its franchises. If the business folds you could lose your franchise and be out of money. For example, fitness franchise Curves has been in a lot of hot water recently for its closing. Look for a franchise that has a proven track record of success, less competition, and is innovative and willing to try new ideas or take advice from their franchise owners. As a franchise owner you may not have total authority over the company, but you should still have your concerns addressed and work with a company that is willing to listen to your ideas.

3. What kind of support will your franchisor offer? It is important to choose a franchise that offers you support. While you will be running most operations yourself, you’ll want a franchisor that can help you with marketing and advertising and offer you extensive training and support as needed. Owning a franchise is a great way to get started in the world of business especially for aspiring entrepreneurs, but it is crucial for franchise owners to have outside help and assistance to allow them to learn and grow within the business.

4. How much will it cost to own and operate the franchise? Discussing the cost of owning and operating your own franchise can be tricky. There are many important factors to consider including a franchise fee, legal fees, build-out costs, inventory, and cost of supplies. Talk with your franchisor ahead of time to find out which costs they will cover and which ones you will be accountable for. Also, find out if there are any annual or reoccurring fees that you must pay. It’s recommended that you make a list of any questions you may have regarding finances ahead of time.

You may also want to ask questions about taxes. Some franchises may be tax deductible which would allow you to get some of the money you invest back at a later time.

Are you a franchise owner or are you considering becoming one? What are or were your biggest concerns or questions regarding owning a franchise? Is there anything you wish you would’ve asked ahead of time? Leave a comment letting us know!

About the Author

Ann Shirley is a freelance writer from New York. As a franchise owner for Hunting Learning Center, she enjoys writing articles about business and entrepreneurship for others to benefit from.