Category: Franchise

Franchisees and Franchisors…the two work together to create and expand a successful business concept. So what role does each play in relation to the other?
The Franchisor
The Franchisor has built a successful business system and is willing to sell you the right to use that system, and all that goes with it, to begin your own business. An important distinction is that the franchisor is not selling you a business—he/she is selling you a right to operate a business using an established system.
The objective of the franchisor is the same as any other business owner—to increase the value of their business. In the franchise world, this is accomplished by selling the right to use their business model so that there are more franchise locations doing business successfully. In this way they expand their market reach, increase the value of the franchise, and the brand as a whole grows. As the number of successful units grows, the franchisor’s royalty stream (the percentage of profits they get from each unit) also grows.
It is in the franchisor’s best interest to continue to support you as you exercise this right to do business. Some of the things you can expect from a franchisor are:
* Professional national marketing and advertising materials and campaigns: they will manage the overall strategy of the brand.
* Management of products and services for the brand as a whole, including research and development of new products and services. A proven system of doing business.
* Protected territory from other in-brand units: in other words, they will manage how close your market area is to another unit so there are both enough stores to have good market coverage, and also enough territory for each store to generate the business they each need to operate successfully.
* The ability and option to own more than one unit.
* A network of colleagues.
* Frequently, a buying cooperative—that is, a group of people who together have more buying power and ability to negotiate prices than does a single business owner.
The Franchisee
The Franchisee is ready to start a new business, but may not have enough experience in running a business to be comfortable starting one from nothing. Most new businesses have a fairly high failure rate—sometimes due to mistakes made by inexperienced business owners, other times due to unexpected conditions in the market. What the Franchisee is looking for is a leg-up in starting a business so they have an increased probability of success. This is exactly what purchasing the right to use an existing business system and brand name provides them.
What you need to keep in mind is that this is your business, but someone else’s brand. It’s your responsibility to find and negotiate your lease or building, but the Franchisor will usually provide guidance. You are responsible for hiring and training all employees, but again, the Franchisor can provide helpful tips for recruiting and employee development. You manage all of the pieces of the business yourself, tapping into the expertise of those from whom you’ve purchased this system whenever you need advice. You can also expect the franchise to provide training in the methods of running your business according to the system they licensed to you.
What is important for you as the Franchisee to understand from the beginning is that while you are part of an entire franchise system and will work as a partnership, you are not actually a partner. This doesn’t mean that you have no say in how the business is run, but it does mean that your say is limited. In more established franchises, there is usually a franchise group that represents the franchisees’ interests and works with the franchisor to present ideas and resolve business issues to the benefit of the franchise as a whole.
If not quite a partner, the franchisee still can expect from the franchise those things outlined above. So what can the franchisor expect from you?
* Well…money, of course. You can think of it as leasing their ideas. Each month you will report on your financials and a certain percentage of the profit you make goes to the franchisor. They use this money to fund things like advertising campaigns and research and development of new products, and to grow the value of the brand.
* You to run your business according to their standards regarding products and services. Consistency from store to store is what brings customers into franchise businesses. A customer should expect to get the same product or service from that brand name regardless of which building they walk into. If you don’t, other units suffer.
It’s important to note that the services listed above are somewhat standard to all franchise systems, but the extent to which they are applied varies greatly. Your Franchise Agreement will explicitly state the levels of support you will get in terms of advertising, training, and other areas. If it isn’t in writing (in your Franchise Agreement) then it’s not required. Keep this in mind during your conversations with any franchise organization.
This article is contributed by: Franchise Genius
FranchiseGenius.com is the largest, most comprehensive online directory of franchise concepts, with 1,700+ concepts summarized, and includes a franchise resource center full of objective and useful information.

Ultimately, that?s up to you to decide. But it helps to layout the pros and cons of both situations. Your aversion to risk, business experience, and financial considerations should all be taken into account.
Pros and Cons of Starting Your Own
Whether purchasing a franchise or starting your own business, one of the most common reasons indicated by would-be entrepreneurs is to be their own boss. It?s a great feeling to have that autonomy and freedom of decisions. It?s also very rewarding.
If you have the financial wherewithal to fund, and in some cases bootstrap?, your business, starting your own can be the way to go. Even if you start your own company in the evenings and on weekends, still keeping your day job until it?s up and running, being your own boss is a powerful draw.
But there is a higher failure rate among new business ventures than among franchises. There is no franchise support, no franchise community to ask for advice, and it?s often more difficult to get financing for a company that doesn?t already have any history. There are also no economies of scale in terms of purchasing and real estate, no brand recognition, and higher costs for things like advertising and design ? costs that are shared in a franchise system.
Pros and Cons of Purchasing a Franchise
Perhaps the biggest perceived drawbacks to purchasing a franchise are royalties and other fees paid to the franchisor. The trade off is that many of the negatives of starting your own business are mitigated or eliminated: franchise support, purchasing power, research and development costs, real estate and legal help, construction help, and a proven model with instant brand awareness. A franchise fee and royalty payment (usually a percentage of what you have made) are often small potatoes compared to the ?tuition? charged by the ?School of Hard Knocks?.
Franchises charge a fee for a reason: they went through the pains of developing products, systems, and a brand image to be successful. Consequently, the failure rate for franchise systems is lower than most new businesses.
It should also be noted that not everyone fits into the mold of being a franchisee. For some, the thought of being accountable to rules and systems of others is too constraining. Again, it?s up to you to weigh your aversion to risk with your need for autonomy.
Keep in mind that the strongest argument for purchasing a franchise is brand recognition. To open your doors with a customer base from day one, get preferred pricing on equipment and supplies, and have a network of support is a powerful motivator. But if you open your franchise in a new market where there is low unit density, the advantages of brand awareness are diluted ?which could cost you more money in advertising and grand opening costs.
You may also find that real estate is harder to come by and distribution challenges might make your cost of goods higher than a unit in the franchise?s hometown. Careful research and questioning of franchisees in less developed markets will help you to gather the information you need to make the right decision.
Things to Consider No Matter Which You Choose
Consider what it really means to be your own boss. Being the boss of a start up, whether it?s your own or a franchise, also means that you?re in charge of everything ? from sales and accounting to healthcare and sweeping the parking lot.
Being the boss means leveraging your savings, sometimes even your equity, all for the privilege of sleepless nights worrying about payroll. For many, these arguments are a strong reason to continue working for someone else.
But for thousands of Americans every year, living the American Dream of starting something from the ground up, even if someone else helps to point the way, is too big of a pull. Conducting research, asking the right questions of the right people, and knowing some of the hidden risks ahead of time help to make sure your decision is the right one.
This article is contributed by: www.FranchiseGenius.com

As a franchise sales consultant I am often asked what are the advantages of the master franchising business model and buying a master franchise. Master franchising, some times referred to as sub-franchising, is a form of franchising that allows an individual to buy the rights from a franchise company (The Franchiser) to sub-franchise their business concept in a specific territory or large geographical area. In general the individual or master franchisee’s goal is to sell and open a pre-determined amount of franchise units in his or her specific territory. The master franchisee benefits from populating his territory with new franchise locations by receiving a share of the franchise fees and royalty fees generated by each unit opening and operating in their designated territory.
The reason master franchising works is that it creates a “win win” scenario for both franchiser and the master franchisee. By allowing its concept to be sub-franchised and developed by qualified individuals broken down by territories, the franchiser can often grow its system much faster and more efficiently than trying to sell single units itself. The master franchisee in return can also benefit in numerous and significant ways from this arrangement including the following below.
Residual Income: The ability to develop a residual income stream is in my opinion the most attractive benefit and number 1 reason to buy a master franchise. Although all franchise agreements are slightly different, typically the master franchisee and franchise will split the royalty fees (typically 5 to 7%) generated by the units opened in the master franchisees territory. Imagine getting a nice fat royalty check every month based on the gross sales from all the franchise units in your territory you sold. This is a personal income stream that can potentially last a lifetime!
Franchise Fees: With most master franchising agreements when you sell a franchise unit in your territory you typically receive a franchise fee or commission from the franchiser for your efforts. These fees tend to range anywhere between $15,000 to $30,000 and generally most franchise agreements allow you to keep all or most of it!
Low Overhead: Because being a master franchisee at the end of the day is a “sales job”, there is no real need to rent or lease a retail office space. You can in most cases easily start out in a home based office and accrue all the benefits and flexibility that option offers including low overhead, no commute, generous tax deductions, more personal freedom, and a better lifestyle.
Few Employees: Most master franchisees typically start out as a 1 person owner operated business. Once the business reaches a certain critical mass regarding number of units sold or operating, you may in some cases find it advantageous to hire some support staff such as an administrative assistant or sales assistant to keep the business growing and running smoothly. In general however, most master franchisees don’t have a lot of employees and all the headaches and costs associated with having a large staff.
High Success Rate: As with all franchise businesses, master franchises generally enjoy a very high success rate. Keep in mind however that not all master franchising opportunities are alike. It’s important to make sure that you adequately investigate and research any franchise opportunity before moving forward. As part of your due diligence I would ask the franchiser if you could speak with an existing master franchisee in their system to get some feedback on their experiences.
About the Author:

Ray Haiber is a franchise sales consultant and the founder of AZfranchises.com, a franchises for sale directory. You can research and view research master franchises for sale in the USA here including fast food, automotive, senior care, and home based opportunities.

If you’ve always wanted to own a franchise, you may have mistakenly thought that franchises cost hundreds of thousands of dollars. You’ll be happy to know that there are plenty of low-cost franchises that will allow you to start your own franchise business without breaking the bank. Low-cost franchise businesses range from a few thousand dollars to just under $50,000 and provide you with the experience that only a franchise can give you.
In business since 1988, Coffee News is a low-cost franchise with a unique business model and very low start-up costs. Coffee News allows you to offer something that all businesses are looking for ? cheap advertising! The total investment for this business is between $3,000 and $5,000. As the owner of a local Coffee News distribution service, you’ll connect with local coffee shops, restaurants and cafés to provide them with a unique way to advertise in the form of a weekly newsletter. This low-cost franchise is ideally suited for people with desktop publishing backgrounds, but is easy enough to learn that anyone can do it.
Goin’ Postal is a low cost franchise business that allows you to provide a variety of shipping services in your town or city. When you become part of this low cost franchise, you’ll be able to offer UPS, FedEx and US Postal Service shipping assistance to people from the community. Getting started with Goin’ Postal can range from $4000 to $150,000, with an initial
investment of $20,000. The memorable name combined with excellent customer service, allows you to run a successful shipping business.
The Whole Child Learning Company is a low cost franchise that assists you with offering educational enrichment programs to children of all ages. The low-cost franchise owners conduct programs at preschools, childcare centers and elementary schools. Because there is no storefront to this business, start-up costs are very low and the total investment is just $7,500. The Whole Child Learning Company has four unique curriculum programs to choose
from as well as continuous curriculum updates from the training staff.
HomeTask Handyman services is a low-cost franchise that focuses on providing small repairs and routine maintenance for homeowners. HomeTask owners can even branch out to service small businesses and assist apartment property managers. This low cost franchise is ideal for an existing handyman and has a total investment of under $30,000. It offers monthly bookkeeping services and a handy online scheduler, among other tools to ensure success.
If you’ve been looking for a way to get into the home improvement industry, Closet Tailors might be right for you. This low-cost franchise business provides organizational services for home owners who want to take control of their closets, garages and other small spaces that tend to attract clutter. Closet Tailors has a total investment of just under $50,000 with ongoing support and training in various workshops to assist you with your business.
These are just a few of the dozens of low cost franchises available. Don’t let a perceived lack of funds stop you from owning a franchise. They are a lot less expensive than people think. Your most comprehensive source for low-cost franchises is www.franchisegenuis.com.
This article is contributed by:
www.FranchiseGenius.com

There are advantages and challenges to nearly every business model. The key is to understand what they are and the impact they?ll have on your business ahead of time so you know what to look out for. The idea here is not to scare you away from franchising. On the contrary, the more you know about the challenges involved the more likely you will be a successful franchisee.
Advantages
A franchise system gives you the best of both worlds: established systems, purchasing power, and professional advice from those who have been through opening a unit on the one hand, and personal, local ownership that creates a bond with customers on the other (what Mom-and-Pops are known for).
Established Systems
An established concept gives you brand recognition and gives customers a level of comfort that they know what they can expect from your business. Franchises can, by and large, open for business sooner than an independent, who has to start from scratch, enabling you to begin recuperating your loans faster.
Purchasing Power
The benefits of the increased purchasing power you will enjoy through a franchise are straightforward. Saving money increases your profit. You will enjoy lower overhead because you?re essentially buying everything in bulk, from food products to kitchen appliances. And you won?t waste money on things you don?t need ? the logistics and troubleshooting have been done for you. Note that you may not realize the full benefits of bulk purchasing if you are the first unit in a new city or region. Distribution costs vary by region and, if you’re the only unit, there are fewer economies of scale. Be sure to consult other franchisees regarding their experiences in this area.
Professional Advice
Plus, in a franchise system, there is no such thing as a first time task, because someone (a franchisor’s rep, another franchisee, experienced vendors) has been through it before. So, if you need a particular permit from the city in order to sell goods at an outdoor event, another
franchisee can probably tell you which department to call, what to specifically ask for (?make sure to allow for a generator?), and what factors to avoid (?don?t leave trash in the area ? they are very strict?). Franchise support personnel share best practices among their store owners and serve as an information resource for system tools.
Marketing
Marketing through advertising is rarely successful unless done on a large scale, targeting audiences via many venues and with tremendous frequency. This is impossibly expensive for a small business to achieve without economies of scale. Through the combined marketing fund your franchise manages you will get the benefits of name and brand recognition. It is up to you to make the most of the brand recognition by using local store marketing techniques to establish your location and reputation in your community. The combined efforts of your franchise advertising and your local marketing can be a powerful and lucrative combination.
Financing
It can be difficult for small businesses to acquire substantial financing to get a solid start. When you have the backing of a popular and proven franchise it can be easier to get sufficient funds at reasonable rates and schedules to get off on the right foot. While this also will depend on your business history and finance savvy, a big name and established concept can have the same beneficial impact on your financial backers as it will your customers.
Challenges
The challenges of being a franchisee often have to do with unreasonable expectations ? you?re not your own boss, the brand is your boss. If you want to serve ice cream (because your customers are asking for it), but the franchise has a policy against selling ice cream, you can?t sell ice cream. Brand standards reach every part of your business, from uniforms and how
they are worn to what types of coupons you can and cannot use. Know your tolerance for rule-following and look for a system that fits your comfort level.
Keep this in mind, even if you follow all brand standards, adhere to all franchise-prescribed processes, and cross all T?s and dot all I?s, other franchisees in your market may not ? and this will affect your business. Franchisee inconsistency defeats the purpose of a franchise, whether it?s your inconsistency or someone else?s. You?re only as strong as the weakest link.
Another thing to watch out for in a franchise system is relying too heavily on the parent company?s services. You are one of many and the success or failure of your store is completely up to you. Know what services are guaranteed from the franchisor and be realistic about what you need to do in order to make your business a success. If you?re waiting on a national ad campaign to drive your sales, you might be very disappointed in the results.
There are other issues too, which do not always affect all businesses, even within the same concept. Territory rights might make it impossible to obtain a great location, channel conflict (especially online or through grocery stores) can reduce demand at your location, and the use of only approved vendors (?I have a guy who can do this for less??) often are not thought of before signing the franchise agreement. Keeping all of these factors in mind while conducting franchise research and UFOC research will help you sign an agreement you can live with.
Every franchise system is different, as is every franchisee. Know what you?re looking for, ask questions, and look for a system that fits with your goals and comfort levels.
This article is contributed by:
www.FranchiseGenius.com