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Pros and Cons of Investing in a Franchise…

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Perhaps the main motivation for potential franchisees willing to invest in a franchise or business opportunity is to escape the mundane world of “nine to five” working for someone else to fulfilling a long-cherished dream of business ownership. However it is naïve to think a franchise is the “perfect” business ideal. As with everything in life, there are both advantages and disadvantages, and in the case of franchising this is no different.
If you are aware of the pros and cons of investing in a franchise prior to signing on the dotted line, you are in a much stronger position to make positive changes as you go along. So here is a list of the pros and cons of investing in a franchise…
Advantages…

1. Proven business concept
A franchise should have an established brand name and corporate image before deciding to expand the business concept into franchising. The franchisor should have tested and proven the business model works effectively before expanding it as a franchise operation. You should always check the business model has been successfully proven, by talking to existing franchisees. In this way you know the “hard work” of starting a new business has been completed. It is your job as the franchisee to help the franchise network grow successfully.
2. Reduced Risk
Following from the above, franchising sets out to attract franchisees by eliminating much of the risk associated with starting a new business from scratch. It does this mainly through the franchisor putting the concept to the test of the marketplace and remedying any faults with the system prior to expansion. With the franchisor keeping a watchful eye on business pitfalls that might emerge for franchisees, risk is again reduced. The possibility of failure comes, as the saying goes, with the territory!
3. Combined Resources
The combined strength of a franchise network can have many advantages that a single start-up business can not avail of. The main advantage of the combined network is in the opportunity for franchisees to avail of bulk buying at competitive rates from large suppliers.
A well-established franchise can enjoy the same buying power as big companies can. But you should also double check with a franchise investment that you are either to buy your supplies from head office only or you are allowed to buy from different suppliers depending on time, money and other restrictions. Nevertheless, the extensive buying power of a large franchise network can be advantageous for the growth of a new unit.
4. Finance
It is much easier for a potential franchisee to attain the relevant financial funding from a reputable financial institution than it is for an individual setting up a business from scratch. Why? Banks and other financial organizations “love” the idea of franchising and know only too well the minimal risk associated with lending to a franchisee. That is, the franchisee, albeit he/she may be inexperienced within the business system, has the support and backing of a well-known franchise business model, existing franchisees and of course the franchisor. This makes lending money to a prospective franchisee more attractive than lending to a new business start up.
5. Exclusive Territory
Franchising seeks to eliminate the danger of competition within a specified franchisee territory, by granting each new franchisee the right to operate in a territory exclusive to him or her. However you must be aware that although you can avail of an exclusive territory to conduct your business endeavours, a similar franchise operation to yours can set up shop beside you and there is nothing you can do but rise to the challenge of competition.
As a potential franchisee you should research your preferred area for business and analyze any competition you may have and then ensure the franchisor can grant you exclusivity. This will help your chances of success and potential profitability.
6. Independence
As a franchisee although you may not have full control of the franchise network operations, such as marketing campaigns, business accounts etc, for many franchisees the idea of having someone else guide and help the business grow is a good thing. The overall success and failure of the business will depend on you, and that is a sure mark of being your own person– you should accept that you alone are not the sole author of the business. Franchisees generally are aware of this prior to investing in a franchise and this contributes to the success of the business.
Disadvantages…

1. Inflexibility
Franchising brings with it a certain amount of inflexibility, that is, the franchise operation and network is governed by a set of pre-described rules and the operations manual set out by a franchisor. This inevitably results in the continual need for uniformity amongst all franchisees involved within the franchise network.
These restrictions can be seen as a point of cohesion and strength. However, if the industry market is unstable, the franchise in general may be slow to react to fast industry changes. This can be frustrating on the part of the franchisee who may want to react to industry changes as they come along, while they must wait from an initiative set down by the franchisor.
The wisest franchisor will overcome this problem by a free flow of regular communication between franchise and franchisees. Regular seminars, conferences and talks will enable difficulties to be raised and solutions sought within a matter of hours. This creates cohesion and a sense of community participation for all involved and the risk of inflexibility decreased dramatically.
2. Not quite your own boss
The tight restrictions franchisors place on controlling the franchise network might appear too constricting for potential franchisees. But it is a necessary pre-requisite for franchisors to keep a tight rein on the franchise network of franchisees in order for the business to grow and expand successfully. The ideal situation is for the franchisor to maintain control over standards while at the same time allowing franchisees sufficient freedom to enjoy running the operation as their own business.
It is impossible for a franchisee not to put their own imprint on the business and in most cases a franchisor is happy to let the personality of the franchisee shine through the business operation. The best franchisors will encourage franchisees to contribute to the development of the whole operation.
3. Regular Royalty Fees
As part of the franchise agreement between you and a franchisor, you will be expected to pay a regular royalty fee at a specified time, how much and how frequently will be a clause stated within the franchise agreement. For some franchisees the idea of paying a regular fee to the franchisor can be a sore point.
However tough this may seem, continuing fees are an important issue to understand before accepting and signing the franchise agreement. You may run your franchise business successfully without the support of the franchisor in the long term.
Nevertheless, the franchisor can urge a franchisee to increase turnover in order to boost the amount paid in fees, which is calculated as a percentage of sales. The franchisee may prefer to increase profitability which does not mean an increase in turnover. This is undoubtedly a potential weakness in a franchise system and one to look out for.
4. The Franchisor- An “Unknown Element”
A potential franchisee does not have long to get to know the business personality of the franchisor in question and if you encounter a difficult relationship with the franchisor after investing, you will have a very troublesome business relationship to contend with.
Therefore, one of the risks associated with investing in a franchise operation is the “unknown element- that is the franchisor- involved. As a franchisee it is up to you to research the franchisor and the business by talking to existing franchisees and asking relevant business questions.
As you can see here from the outline of pros and cons of a franchise investment, the advantages of investing in a proven business model clearly out-weigh the disadvantages, and with careful consideration of the cons a potential franchisee can eliminate the cons quite quickly and focus on the positives of the business operation.

AineMeadePhoto.jpgAine Meade is a Website Editor for Franchise Direct, a leading Internet franchise advertising portal. Aine creates high quality franchise information for its international websites in the U.S., and Europe. Aine has a BA (First) in English and History; MA in Literature & Publishing; Diploma in Media Journalism and a Diploma in Marketing.

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Franchisor Support: What can you expect from your franchisor?

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If you are considering a franchise as your next career move, you probably already understand a number of the benefits to being a part of a franchise system. However, as each franchisor will offer different levels of assistance, it can be confusing to someone trying to evaluate a potential franchise purchase.
Since the value of a franchise is that the system has been developed to have replicable results, you will want any system you evaluate to score high in those areas that are important to the success of your unit.
Location – Location – Location
If your franchise is going to be site-dependent, the franchisor should, at a minimum, provide guidelines for selection of a site and the general terms of a lease agreement applicable to this type of location. Some franchisors will provide company personnel who will help you search for and select a site while some even work with national real estate brokers to find the best properties. If your franchisor provides help in site selection and lease negotiation, you are working with a good company.
Build-out Assistance
A typical franchise will provide each franchisee with instructions for the design and lay-out of the store along with details of where to purchase the components. As group buying power an important benefit of being part of a franchise company, you should expect to pay less for these components as a franchisee than if you purchased them as a sole proprietor.
At the high end of franchisor build-out assistance are those companies with design groups who help the franchise design the store, sometimes with such high-tech devices as CAD (computer-aided design) systems. Also, some franchisors will even hire a construction team to do the build-out and then deliver the components right to the new business.
Initial Training
The majority of franchised businesses do not require a new franchisee to have previous industry experience, primarily because they believe they can train a person with good business acuity to run the business successfully. A good training program is therefore essential. Most franchise companies will bring the franchisee to corporate headquarters for classroom training and some will allow time for hands-on training at a nearby franchise unit or corporate store.
This initial training should cover all aspects of the operations of the business, including book-keeping, record-keeping, operations, recruiting and retaining employees, and finding customers. The franchisee should receive an operations manual and get answers to any remaining questions she may have so that she feels confident she will be able to get her business up and running.
Some franchisors will provide corporate or field personnel to work side-by-side with the franchisee during grand opening and during the first week of operations, ensuring the franchisee has mastered the training and achieves a comfort level with the business. Franchisors that are willing to train a franchisee’s manager along with a franchisee are providing a value-added service.
On-going Training and Assistance
A good franchise business will continue to improve and evolve with time and the addition of new units and on-going training is often a necessity. Similarly, a good franchisor will offer continuing educational opportunities to franchisees as well as providing on-going assistance as needed. Many franchisors provide a help-line for issues that come up in the field and some will make regular visits to the franchisee’s location. A company that provides conferences or other opportunities for a franchisee to connect with fellow owners has the best interests of their franchisees in mind as these opportunities allow for creative problem-solving, the sharing of best practices and can reenergize the business focus.
Marketing Expertise
Your franchisor should provide you with a complete marketing plan for your new business that covers grand opening through at least the first 3-6 months. Since the franchisor has every reason to want you to succeed, a savvy franchisor will do much more. Many will provide you with the actual marketing materials, professionally produced. These may include pieces such as posters, banners, direct mail postcards, newspaper ads, and maybe TV and radio spots, all of which can be customized for your location.
Permits, Compliances and Other Legal Issues
Depending on the type of business, you may also need assistance in dealing with local governmental agencies for various permits. If your franchise involves food or beverage, there are numerous health-code compliance issues you will need to handle. Your franchisor should provide help in these areas so that your opening is not held up waiting for permits to come through.
There are several ways to find out how the franchisor handles these support items. The first, of course, is that you will want to ask questions about each as part of your investigation into the business. The second step is to talk to existing franchisees about the support they received and how well prepared they were to open and run the business.
Be sure to ask these franchisees if they felt there was anything missing from the training and support they received and if there is anything they wish had been more complete or done differently. If the company you are investigating scores well with these franchisees, you can be confident you will be happy with the support they will provide to you.
KimberlyEllisPhoto.jpgKimberley Ellis is the President of Bison.com, a leading online resource for franchise and business opportunities. She has been quoted as an industry expert in USA Today, Wall Street Journal and a variety of local and regional publications regarding trends in business and franchising. Kim combines her entrepreneurial spirit with a diverse background in marketing and operation to help others succeed in franchising.

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Franchise

Gaining Promotion: Importance of Marketing and PR

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Perhaps one of the most important elements in driving the success of your business or franchise venture is to market you business in the most effective manner to get high visibility of your company, products and services. While you may think a start up business will not have the capital available for a huge advertising campaign that involves national exposure on television, billboards etc, but PR can offer a cost-efficient and effective alternative…
One great aspect in investing in a franchise is the instant solid brand recognition you receive from the start. Your business will have been established within a consumer’s mind prior your investment in the franchise. However, in order for your franchise to succeed within its own exclusive territory, you need to gain promotion of your business with local people to make it truly successful.
Your first step in building a visible marketing business portfolio is to create awareness of your business within the local market place. And how do you achieve this? Gaining coverage in local media, whether it be press or radio or local TV, will help put your business ‘on the map’ and has the added advantage over advertising of being more likely to be read- and more likely to be believed!
If someone reads an editorial piece on how good your business service, products is, then they are more likely to trust this source, than a 30 second advertisement recorded on radio…In saying this, editorial coverage has also the added benefit of providing you with the opportunity to say more about your business, products and services than a short advertisement will allow.
So what makes a good PR story? The launch of your new business within the local market place is a good start. Thereafter you should announce:

  • new business gains;
  • achievements and awards;
  • special deals;
  • promotions and
  • family, birthday and seasonal occasions.

A regular flow of newsworthy information will increase your business credibility and visibility in your locality and even outside of your local marketplace. This is a classic example of pull factor, whereby word of mouth can drive new customers to come looking for you. Once you have achieved this pull factor, your well on your way to business success and profitability…
Next make sure you send your story to the right place. It is important to find out the correct names of editors, writers, news reporters, radio editors who you will be contacting to promote your PR story. Keep your communications simple and to the point. Journalists do not what novels! They want snappy and short editorial pieces of news that is to the point, gives factual information and possibly a short bio of the business. Where possible include a photograph to illustrate your story too. As readers our eyes are drawn first to pictures in the pages of newspapers and magazines, and a good picture with your PR story should grab attention…
There are other forms of “PR” that falls under the banner heading of press releases, such as your business sponsorship of local sports events and charity events, supporting customers and clients can be an effective means in creating brand awareness and high visibility of your business. The principle of PR is based on fostering positive perceptions of your business through communication of information. What people feel and say about you- your customers, suppliers, business franchisees and franchisor, the wider community- will influence potential customers and make a real difference to your business success in the future.
In short, PR is not just about generating a “feel good factor” but in making a significant contribution to real business success for you and the franchise operation.
For more information on PR and marketing campaigns and incentives, please feel free to leave me a comment…
AineMeadePhoto.jpgAine Meade is a Website Editor for Franchise Direct, a leading Internet franchise advertising portal. Aine creates high quality franchise information for its international websites in the U.S., and Europe. Aine has a BA (First) in English and History; MA in Literature & Publishing; Diploma in Media Journalism and a Diploma in Marketing.

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Franchise

Looking for a New Career? Franchisor Training Can Be Your Shortcut to Success!

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If you are like most women, you chose a career path at the tender age of 18 or 19 and have dutifully followed that path for many years. But let’s say you’ve grown tired of your career, or worse yet, never liked it to begin with. What are your choices?

-Stay where you are and make the best of it
-Change careers and start all over at the bottom
-Take advantage of the training offered by a franchisor and become your own boss in any industry you choose!

Let’s imagine a woman has been in public relations for ten or fifteen years but has a burning desire to spin pizzas instead of situations. What is she to do? As everyone knows, it isn’t easy for someone 40 or 50 to quit a career and start over, especially if she wants to try an entirely different field. She would have to give up a steady income and face months or years of reinventing herself. Perhaps she’d take a job at a pizza parlor and hope to learn enough to open her own shop someday. An alternative solution may be that she could buy a pizza franchise and take advantage of the training and support offered by the franchisor. Provided she has the financing, that would-be pizza chef could be managing a team of pizza spinners in just a few months.

Many or even most women will change careers at least several times their lifetime, whether because of changes in the economy or workforce, or because their careers don’t provide them with enough money/control/opportunities/ etc.

While it was once common for someone to keep the same job from college to retirement, this had changed dramatically, particularly in the past 10 or 20 years, and this trend is expected to continue. Studies suggest that teens today may have between six and 12 careers in their lifetime.

Besides – many people really enjoy the challenge of a taking on a new career. Corporate executives replace their suits with sweats and open fitness centers. Doctors become fried chicken moguls and teachers get remade as pet groomers.
How do they make the transition? Many times through the power of franchising and one of the bonuses you’ll discover about franchising is that they can train you to excel in a job you’ve never done before!

No Experience Necessary

If you are a woman who is ready for a career change via franchising, the training a provided is one of the most important benefits a franchise system will offer you. An education from the top online schools or graduate schools pales in comparison. The benefit of training goes both ways. It provides you with the tools you need to learn a new career and be successful in your new business. But it is also important to the franchise company. The franchise system depends on the integrity and stability of their brand from store to store and franchisee training is essential to this process.

You’ll find that a good franchise system will take pride in their training programs because, through the payment of royalties, your success becomes their success.
And guess what? Most franchises don’t require you to have experience in their field. In fact, many don’t even want a franchisee with previous industry experience. Because the systems of a franchise are structured for maximum success, previous industry experience often gets in the way when training a new franchisee.

Branding

Branding is another area where a franchise can offer you a shortcut. From California to Washington DC, you can buy a Häagen-Dazs ® Mayan chocolate cone and the quality and taste of the product will be exactly the same. If you own a Häagen-Dazs Shop, the public will know what you sell and that awareness will often make the difference between the success and failure of your business. Imagine how long it would take you to create a branded awareness of your new business if you started from scratch, not to mention the cost of hiring firms to create and advertise your brand.
Just as important to the quality of the product is the service the public expects from a franchised concept. You never know what to expect from the staff at “Jane’s Ice Cream Parlor” on the corner but you can trust that the people serving you at a Häagen-Dazs Shop will be friendly, clean and efficient. Why? Because the franchisor has set standards for employees and provided training and guidance in hiring practices. Everything that effects the perception of their brand is accounted for in the franchisor training.

Franchisors Care About Your Success

Your number one reason for choosing a franchise business over creating your own concept is that studies show your chances for success are exponentially greater. The franchisor has done many things before franchising the business that you, as a franchisee, you won’t need to, including establishing and building the brand, testing a variety of marketing concepts, finding the best way to deliver a quality service or product, and researching the best value in suppliers.

Most franchisors offer help to their franchisees in a combination of important areas, which may include: site assistance, initial training, operations systems, field support, grand opening assistance, national marketing programs, on-going training, and full-time encouragement for you to succeed. They become your business coaches and cheerleaders as you establish your new career.

The greatest merit of a franchise system is that you should be able to walk right into your new business after training and expect to have the tools needed to make it successful. It’s up to you, of course, to put in the hard work that will make that success a reality.

If you are thinking about a career change, don’t overlook the advantages of letting someone else do much of the work for you. A great franchise will offer you the training and tools you need to not only start a new career but to own your own business in any field you choose! Consider it a “shortcut to success.”

KimberlyEllisPhoto.jpgKimberley Ellis is the President of Bison.com, a leading online resource for franchise and business opportunities. She has been quoted as an industry expert in USA Today, Wall Street Journal and a variety of local and regional publications regarding trends in business and franchising. Kim combines her entrepreneurial spirit with a diverse background in marketing and operation to help others succeed in franchising.

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Franchise

Top 10 Franchise Food Trends for 2008

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The food franchise industry is the largest and the most profitable of all the franchise industries. The biggest sub-industry of the food sector is fast-food franchises, such as McDonald’s, KFC, Burger King, 7-Elevin Inc, and many more fast-food franchises. But every year there is always a new departure in the food industry that rivals fast-food eating and dining, and 2008 is no different.
This begs the questions, which way are consumer food trends heading for 2008? Although consumers are constantly bombarded with messages about healthy eating, encouraging them to cut down on fats, sugar and salt, obesity levels are still at an all time high. Convenience foods and takeaways are increasing. Nevertheless, there is a still a huge part of the market that is interested in new, healthier food which is all part of a global campaign for awareness of living a healthy, balanced life.
As a result the food industry is responding to consumer’s demands and changes in the market for fast-food convenience food. I have identified 10 key food trends that are encompassing this new desire for healthier foods, and these trends will be big news in the food franchise industry in 2008.
1. Wellness Foods
In response to government and health organizations warnings for greater awareness of what we take for granted in relation to excessive food habits, food companies are producing more foods with lower salt, less fat, more grains and fibres as well as other types of nutritionally beneficial ingredients.
The combination of nutrition and medicine is offering franchisors the opportunity for unlimited scope for new product developments. Recent examples include green tea drink with ginger that burns calories rather than adding them, vitamin enhanced beer and dark chocolate sold as an antioxidant.
2. New World Foods
There is a burgeoning interest in new foods sourced from “new” or “exotic” places. Superfruits like the purple acai berry from the rain forest, which has already achieved a market place in health food shops could make the transition to mainstream if undertaken effectively by clever business people.
Some have suggested that Peruvian cuisine- a combination of Spanish, Italian, Indian, Japanese and native cookery- could be the next big ethnic food. Coconut is finding new uses such as natural juice while fruit soups have also been encouraged as holding consumer potential.
3. Ethical/Environmental eating
This trend overlaps with wellness since both espouse organic and free range foods. However ethical eating goes beyond natural taste and health and into the realms of green politics and anti-globalization. It includes concepts of “fair-trade” and “sustainable” and also “food miles”, which brings together the related concepts of locality and seasonality. Good farming practices in terms of the treatment of livestock are also part of this trend. Organic or free-range food products will be a top of the food list for food franchises 2008-2012…
4. Ethnicity
Ethnic flavors that draw inspiration from distant cuisines are increasingly popular in the U.S. and across Europe. Vietnamese cuisine is becoming popular and, in cities, sushi is now a mainstream restaurant cuisine, and, in some locations, a mainstream supermarket product.
Spanish cuisines and South American restaurants are identified as trends with consumer potential. Similarly Asian food is also becoming quiet a popular food trend across the U.S., with great tasting low fat cuisines full of flavor becoming the dish of the day!
5. Water
Water is huge and is increasingly becoming a political and social conundrum, with the effects of global warming and the reduction in levels of water both for living and for consumption. The market potential for bottling naturally flavored water is huge and continues to be a highly lucrative industry. For example, there are now water bars, water menus along with some water sommeliers in restaurants to pair water with good food choices.
6. Specialities
Making ordinary food special, such as the way water can now be viewed as having health or other benefits, and can come in a range of product variations, is another growing trend.
An example is salt which has been diversified into gourmet sea salt, Hawaiian Red, Black Lava, Sel Gris, pink salt from the Andes and Tahitian vanilla salt. The variations are endless and any “ordinary” food product can be diversified into numerous “types”.
7. Portion Control
Portion control is one of the keys to attaining a healthy diet and losing weight effectively. This principle is also having a key influence on products and services within the franchise industry, such as “portion-controlled scoops”, or “portion-controlled plates” that help individuals effectively measure what is a good amount or bad amount of the food groups for each meal.
In addition, Spanish tapas, Greek meze, and Japanese izakayas are all types of the “portion-controlled” food an individual can buy in a restaurant. Manufacturers have also developed calorie-controlled mini portions of snacks and confectionary in response to healthy eating trends.
8. Constant Diet
Dieting will always be big franchise industry news, with the rise in products and services that help people diet lose weight and manage their weight. The increased pace in everyday life, the stress and longer working hours has ensured a consumer society that is dependent on quick food products.
But this is not great for the waistlines! Manufacturers have as a result come up with new services and products to encourage healthier eating and dieting. More personalized diets tailored to an individuals needs is becoming the new constant diet trend…
9. Provenance
Consumers are increasingly becoming aware of where their food comes from and its origins for safety. This trend overlaps with both wellness eating and ethical eating, but it is also a food trend and consumer preoccupation in its own right. Consumers no longer accept less than transparency. And this means products and services must display origins of content and structure…
10. Retro eating
Consumers, particularly boomers and generation X, tend to evoke sentiments of traditional food products. For the younger demographics, the concept of retro eating can be fun and exciting. There is an association with foods that are additive-free and pure, which, ostensibly, predate mass production and factory farming. And then there are as many new angles to retro eating as there are hindsight re-interpretations of history.
Appeasing today’s consumer is no small task. Food products need to address health concerns with features such as whole-grains, pro-biotics, omega-3, antioxidants, carotenes, vitamins, sugar-free and low-salt together with a dash of the three E’s- ethnicity, exoticism, and ethics- to top it all of, they need to be packaged in convenient, calorie-friendly portions!

AineMeadePhoto.jpgAine Meade is a Website Editor for Franchise Direct, a leading Internet franchise advertising portal. Aine creates high quality franchise information for its international websites in the U.S., and Europe. Aine has a BA (First) in English and History; MA in Literature & Publishing; Diploma in Media Journalism and a Diploma in Marketing.