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.
Kimberley 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.
Tag: Kim Ellis
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.”
Kimberley 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.
I started playing golf about 10 years ago and over time have come to love the game. Although technique is a large part of what drives many golfers back to the greens, golf also has a very specific set of rules that define the game and create an equal playing field. The rules spell out how to play, how to keep score and how to determine a winner.
Franchising, too, has a set of rules, and these rules are manifested in a document called the Uniform Franchise Offering Circular (UFOC). Each prospective franchisee of every franchise company in the U.S. will receive this document as a requirement of the Federal Trade Commission. Effective since 1979, the stated purpose of the FTC rule is:
“The Rule is designed to enable potential franchisees to protect themselves before investing by providing them with information essential to an assessment of the potential risks and benefits, to make meaningful comparisons with other investments, and to further investigation of the franchise opportunity.”
In other words, the UFOC should provide you with enough information to be able to make an informed decision about purchasing the franchise. The UFOC serves as a protection for the individual against making a decision based on information not supported by fact and should be read carefully by each and every woman looking at buying a franchise as it contains such “need to know” items as the costs and fees involved, any litigation history of the franchisor and much more.
The FTC Rule requires franchisors to provide the UFOC to the prospective franchisee at the earlier of the first personal meeting or 10 business days before the franchisee signs an agreement or pays any money. (The UFOC will probably contain a receipt for you to sign and date, to show they have complied with this rule.) It also provides that the franchise agreement must be given to the prospective franchisee at least five business days before the franchisee signs any agreement or pays any money. A franchisor’s UFOC must be updated on an annual basis, or sooner if certain conditions are met.
Here are some of the items a UFOC must contain:
• History and Experience. The franchisor must provide you with a history of their past activities, especially as it may relate to potentially negative information. This information must be provided not only for the company itself as well as for its predecessors and affiliates but also for the officers and directors. The information includes factors like the business experience of the company and its principles and any fairly recent litigation or bankruptcy history for either.
• Financial Factors. The company must disclose to you the relevant financial terms of the franchise opportunity. This would include the initial franchise fees, other startup costs, and an investment range estimate for your total cost to get into the business. The UFOC must also disclose any other fees, such as the royalty, marketing and renewal fees that the franchisee will have to pay throughout the life of their franchise.
• Obligations and Restrictions. The company must disclose the obligations of both you and the company under the terms of the franchise agreement. They must also spell out any mandated restrictions that you will operate under in terms of your purchasing options and behavior as a franchisee. This may include such items as site selection and development, training, trademarks, customer service, advertising, personnel, territory, reporting and dispute resolution.
• Earnings Claims. FTC rules leave it up to the franchisor whether they want to supply information about the earnings that can be achieved in their business. If a franchisor does want to provide earnings claims, they must follow stringent rules on how this information can be given to a prospective franchisee. It is essential for the franchisor to make sure that the data provided is as accurate and representative as possible and they must also clearly label any assumptions or qualifications on the data provided. As a result, earnings claims can take a variety of angles and approaches, so reviewing the background information is vital.
• Exhibits. The company must also provide other data including audited financial statements, current franchisee lists with contact information, contracts and receipts. Item XX, information regarding franchisees of the company, is particularly important to you as you will be calling a number of these franchisees to learn about the business from the franchisee point of view. Item XXII contains the Franchise Agreement, which you will want to review with your franchise attorney before signing.
Individual State Requirements
In addition to the laws that mandate disclosure, there are also some states that have passed specific laws to further protect franchisees in that state. These laws may add additional disclosures or rules about franchise agreement terms. As an example of this, there are a number of states that require that the legal venue for any dispute must be in their state rather than in the state where the franchise company is located. These types of additional requirements vary from state to state but any that are appropriate to your situation in your state should be disclosed in the UFOC you receive.
Your responsibility
The most important point to remember regarding the UFOC is that you need to read and understand the material that the franchisor is disclosing to you. The FTC has a requirement that these documents must be presented in understandable English so that the material should be clear. It won’t make any difference, however, if you don’t carefully review the material. After you have read the document, you may want to have your attorney go through the paperwork as well.
Make sure you take the time to study the information supplied to you and you’ll have a much better chance of making sure that these legal requirements actually serve their purpose of protecting or safeguarding your interests. Just as a good SCRABBLE® player knows the 16 words that use a Q but don’t need the U, and that playing a 7-letter word like “qindars” will gain her 50 bonus points, those who read and understand the rules of the UFOC are also likely to be ahead in the game.
Kim 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.
The lure of franchise ownership can be a heady experience. You imagine the thrill of being your own boss, creating wealth for yourself instead of someone else. But you don’t want to enter the search process unprepared, susceptible to mistakes.
You have so many questions: Will you be happy as a franchisee? Can you make the money you need to provide for yourself and your future? Where do you even start, with thousands of franchise opportunities available?
Before you even begin looking at franchises, you need to do an introspective self-evaluation of your own strengths and challenges. Sit down, get out paper and pen, and as objectively as possible answer these questions:
SKILLS / STRENGTHS
• What part of your current and past jobs have you liked doing the most?
• List your skills and evaluate how well you perform each.
• Describe the work environment that most appeals to you.
• Are you an animal lover? Auto buff? Artistic? What skills/hobbies do you have that may be applicable to a franchise business?
• Are you status conscious? Does it matter to you what the product or service of the franchise is or does the business potential matter more?
CHALLENGES
• What part of your current and past jobs have you liked doing the least?
• List your weakness, those things you’d not want to do or would want to hire someone to do in a business.
MANAGEMENT SKILLS
• Do you have experience managing employees? Did you enjoy it?
• Are you comfortable with recruiting employees?
• Do you have the experience and skill needed to create a work environment that will allow you to retain employees?
FINANCIAL CONSIDERATIONS• How much capital do you have to invest?
• Can you afford to do without a regular income during the start up phase of your new business?
• What are your financial goals?
• How do you see your lifestyle changing as a result of meeting your financial goals?
• How do you feel about taking the risk of becoming self-employed?
ARE YOU A TEAM PLAYER?
• Franchising is all about following someone else’s system. Can you picture yourself in this role, executing a system you didn’t create?
Once you have answered these questions, you’ll begin to see a clearer picture of what talents you can bring to a franchise business and what you expect to receive in return. The next step is to start looking at opportunities and evaluating them based on your answers. It may take some effort to find the right franchise so don’t compromise.
Franchise opportunities come in many shapes and sizes and you never need to settle for one that is just not a great fit. There are businesses you can run yourself from your home and others that call for multiple unit locations in upscale malls with numerous employees.
Choosing the franchise opportunity that best matches your needs, interests and style is your greatest assurance of happiness and success.
Kim 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.
If you’ve ever dreamed of owning your own business, you’re not alone. The desire for the autonomy and financial security that being your own boss can provide has never been more prevalent than it is today. There are many reasons for this but a main one would have to be that as big business gets bigger, the value of the individual employee is diminished and people are fed up with being disposable. Owning a business is a great way for a woman to take charge of her future.
One way to become a business owner is through franchising and the franchise industry is at an all-time high. There are more franchised businesses than you can possibly imagine. A recent survey found almost 500 concepts in fast food alone, a category that represents only 20% of U.S. franchises. The IFA Educational Foundation’s Economic Impact of Franchised Businesses study indicates there were three quarters of a million franchised businesses in 2001.*
There are other ways to become a business owner, include buying a business opportunity and creating a business from the ground up. There are definite advantages and some disadvantages to owing a franchise business over these other business ownership options and the franchise model is not right for everyone.
To see if franchising could be right for you, compare your previous business experience, your motivations and your current situation to the following examples.
Franchise Ownership
Let’s imagine that you are in your early 40s and have worked for a half a dozen large companies over the last 20 years. You’ve been recently laid off but even before the layoff, you realized you desperately wanted to change careers and find something that would allow you to use a larger skill-set and provide a greater income. Your company has given you a cash settlement and you are keen to take charge of your life, become your own boss and try something different. You want a good income and are willing to put in whatever hours necessary to jump start the new career but your overall goal is to eventually work reasonable hours and have more time for yourself and your family.
If your history is similar, you are probably an excellent candidate for franchise ownership. This path will allow you to benefit from a proven system of operations and a training program that will quickly get you up and running. As you have no previous business ownership experience, the ongoing support you will receive from a franchisor will be vital to your success. Many franchise opportunities offer a turnkey package that will include almost everything you need to start your business. In addition, most franchisors require no previous experience in their industry so you can be open to a variety of types of businesses and won’t need to stick to the one industry you know.
Another advantage to franchising is that franchisees can take advantage of lower cost materials due to group buying power. They also learn from each other and usually form a peer support system. Because you won’t be occupied with every minute detail of owning a business, you will be able to concentrate on growing your business.
Franchisors learn from their franchisees and use this information to continually improve their systems. Data from other franchisees can be used to help you predict your break even timeframe and franchisors are required to provide you with a UFOC (Uniform Franchise Offering Circular), which will help you learn about the company, the officers, the current franchisees, and any litigation against the company.
Franchising is a business model that works very well for those who have previously been in middle or upper management – particularly women as they are historically more likely to comply with a franchisor’s rules. Women, many franchisors report, are also quicker to see the value of using a proven system and less likely to waste time trying to fix something that’s not broken.
Compliance with a franchisor’s rules can also been seen as a disadvantage to franchise ownership. A franchise lets you be in charge as long as you follow and adhere to all of the elements of the franchise system. This is necessary so that the franchisor can offer consistency across the brand – and let’s face it, they’ve done the research and tested the procedures so their way is usually the right way. This is also a benefit to the consumer who can expect comparable quality products or services no matter which franchisee he patronizes, anywhere across the country or around the world.
Another perceived disadvantage is that a franchisee must pay royalties and sometimes a marketing fee to the franchisor. Royalty payments are compensation for everything the franchisor provides, including access to the brand, the operating system and related items. The franchisor uses the marketing fee to provide national advertising to build the brand and drive market penetration at a greater level than a franchisee could do on her own. Also, national marketing funds enable franchisees to benefit from professionally produced marketing materials and realize efficiencies from commingled funds.
If your are comfortable learning from others who have experienced success and would rather follow a proven trail than bushwhack your way through the jungle, buying a franchise could help you achieve your personal and financial dreams. However, if you’re the type of woman who likes to run with scissors and would never stop to ask directions, there may be better options for you. Read on!
Buying a Business Opportunity
As another example, let say that a varied work history has given you some great skills which you wish to put to use running your own business. You are not concerned about the type of business you buy but want to have freedom to run it your way. You would be okay with a certain degree of risk but also recognize the advantages of an established system of operations.
A business opportunity is a business you buy outright and have the freedom to run any way you choose. The benefit of a business opportunity is that they generally provide you with a successful business model and possibly some training and marketing assistance. The initial investment is usually lower than for a franchise and there are no ongoing royalty payments.
A downside to a business opportunity is that the seller isn’t as invested in your success or failure as is a franchisor because they make their money up front. Therefore, you won’t have extensive ongoing training, assistance, a national marketing program, research and development, etc. The risk factor is probably greater than for owning a franchise but could be less than starting your own business.
Starting Your Own Business
In this third scenario let’s assume that you have a steady, predictable income, perhaps from a working spouse or other source. You think of yourself as a truly entrepreneurial woman and you are brimming with ideas for new products or services and love to “tinker” with things until they are just as you want them. You are strongly attracted to the idea of being your own boss and don’t like to answer to others. You’ve previously been a business owner and have enjoyed the experience. You have the drive to follow through on your plans and have a background in a variety of disciplines, including sales, marketing, accounting and management, so you are not looking for outside support. In addition, you have plenty of money to spend on researching and developing your product/service so a predictable timeframe for break even isn’t a concern.
If you are like this type of person, one who likes blazing her own trails, franchise ownership is not for you. Instead you will be more comfortable setting up your own business using your own ideas. This is the most risky way to become your own boss because you will not have the proven operations system, nationwide brand and marketing, and the ongoing support of a franchise company. You may also have more difficulty obtaining business loans and the time from inception to when you start turning a profit will be hard to predict. On the plus side, you will owe no royalties and can run you business just as you please.
Historically this is the model least likely to succeed on average so it is recommended only for truly exceptional individuals who have the desire and stamina to start their own business based on their own unique idea or approach.
The chart below will help you compare the advantages and disadvantages of these three types of business ownership opportunities. For a majority of people, franchising has proven to be a viable way to become a business owner. For the most part it offers the lowest risks and the highest level of support. Because a franchisor doesn’t succeed until the franchisees do, you’ll find a team of dedicated professionals willing and able to help you every step of the way, from site selection to employee hiring to grand opening. They will keep in touch with you from the very beginning to years down the road and have web sites, toll free numbers and dedicated staff to make sure all your questions are answered quickly.
But it takes the right sort of person to be a happy and successful franchisee. Before you become too involved in the process of finding a business to buy, carefully consider which type of opportunity will be right for you. It can make all the difference between the success and failure of your new venture.
Business Ownership Comparisons
* IFA Educational Foundation-FRANdata study released August 2006
Kim 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.