Franchise Blog

When economic times are tough many franchise system watch their ranks thin, but in reality what is happening is the weak are discharged and those franchisees go out of business or transfer their less than successful units. Whereas this might alarm a franchise buyer this is a natural process in the wild world of business and it this very “survival of the fittest” that has allowed franchise systems to grow and prosper, while dominating their industry sub-sectors.

Should a franchise buyer of a franchised business opportunity consider a used franchised outlet for sale or should they buy a new unit in a new territory? Well, there are pros and cons to both scenarios, but consider this. If a potential new franchisee has been laid off from Corporate America, chances are they want to get to work as soon as possible. If they have to wait to build a new store or start a brand new franchise this could take months if not a year.

So, one of the greatest advantages to buying an existing location, even if it is under performing is that it does come with it a customer base and it is at least up and running already. A new fresh blood infusion might be all it needs to succeed. Sure it might take a little extra hard work in the beginning but what business doesn’t; franchised or not?

Best of all one must consider that if they are working in that business they are not sitting at home stewing over building permits, equipment package deliveries, inventory or trying to recruit labor, see the advantage. It’s definitely something to consider when looking into a franchised business opportunity for sale.

You have scouted the scene, you have researched franchise opportunities, you’ve talked with the head honchos and now you are ready to sign the papers. The adrenaline is coursing through your veins as you ponder becoming a successful entrepreneur. You’ve heard that a franchise is a fantastic way to get into the business world and be your own boss. Yet before you get started on your new franchise opportunity, it’s a good idea to ask the franchiser, “In retrospect, what would you do differently in your early years as a franchisee?” This little nugget of wisdom can take you far in your endeavors.

One common mistake that new franchise owners make is failing to negotiate the terms of their lease. Real estate costs are one of the biggest investments you’ll make when starting restaurant franchises, fast food franchises or other business franchises. It’s prudent to negotiate for the lowest possible base rent.

Sometimes, you can gradually increase the amount paid later on, but aiming for a period of three to six months of free rent, while you’re building your business, will save you a huge headache and allow you to focus exclusively on your business operations. Another option is asking for a leasehold improvement allowance, which could be anywhere between $5,000 and $30,000. This will help you expand your business location and make any necessary changes to your space, without having to pay immediately.

Another franchisee mistake is assuming that all contractors charge the same for build-outs. However, construction and fixture costs can vary greatly, sometimes costing owners of a franchise opportunity tons of upfront loot. Many rookies later admit that they should have used competitive bidding before contracting, as it could have saved them thousands of dollars.

The new franchisee can encounter a number of problems, but with a little bit of research and a lot of discussion, they can identify these pitfalls before it’s too late. Before you get involved with a new franchise, you need to make sure you’re the type of person who can handle these pressures. If you’re sick of the 9-5 and think you’ll be working less as a franchise owner, forget it! You need to be fully committed to this venture, particularly in the beginning, and you need to be aggressive in your pursuit of better prices and smarter ways of doing business. Tenacity and a hardworking spirit can go a long way for the right person.

If you’re looking into franchise opportunities, then you’ll be happy to know that there are many ways to finance your shift to entrepreneurship. Not everyone has the cash on hand to get started, but you can take out a home equity line of credit, use credit cards, get a Small Business Association loan, sign up for franchisor financing, dip into a retirement account, borrow from a business partner or take out a bank loan. Once you’ve decided what you can afford, you’ll need to scour the internet for franchise information to get the ball rolling.

You’ve always loved Subway, so when a franchise opportunity became available in your area, you jumped on it. To qualify, you needed $250,000 in the bank and another million dollars to cover the building’s lease, equipment and start-up costs. You already had 40% of that cash lying around and the other 60% was secured through a small business loan, which was pretty easy to get. The franchising fee was around $45,000, which went directly to Subway. This is the only real upfront fee.

Then you’ll spend the next nine months learning how Subway operates so you can adhere to certain quality, service and menu standards. You’ll need to stick with their recommended location, dress code and training manuals, but you’ll be able to capitalize on these proven strategies. A Subway field consultant will check in on you periodically to ensure your success and you’ll pay 4% of your sales to the corporate entity. Technically, you’re not your own boss and you don’t really own the business, but you’ll own the assets you’ve purchased.

Franchise opportunities are the backbone of our economy, constituting 35% of all retail and service revenue in the US. According to the Small Business Association, more than 50% of small businesses fail within the first year, with the vast majority crumbling due to weak management. By contrast, only 5% of franchise businesses fail because proven managerial strategies come with the territory, offering a fail-safe business plan. This risk-free safety net is probably the biggest advantage of the franchise opportunity. Additionally, you’ll have easier access to loans and supply discounts than if you had started your own business.

Selecting from among the franchise opportunities available is critical to your success. These business endeavors range from sports and restaurant franchises to travel and retail franchises. You’ll need to consider what sort of environment you’re interested in. For instance, fast food franchises may have you working late into the night, managing continuing turnovers of employees, dealing with the public and smelling like food when you come home.

Or fitness franchises could require you to purchase tanning beds and workout equipment, scout for qualified dieticians and fitness trainers and recruit new clients. Writing down some of your likes, dislikes and goals is a great start. Next, you can hit the web and research the franchises available at your investment level and geographic location.

In today’s economy the franchise business opportunity is a popular choice – as it offers entrepreneurs an opportunity to own a business with a ready-made system for success. Owning your own business is not a decision to be made lightly. Even a good franchise business opportunity with a good manager can fail, so consider your decision carefully.

What Are Your Resources?

Small business franchises aren’t handed out like free samples at the grocery store. You must determine what you bring to the table and the first thing to consider is money. How much can you afford to invest in a franchise business opportunity? Consider your current assets as well as other sources of financing such as small business loans.

What else do you bring to your business? Are you good with people? With figures? What is your skill set? This will affect decisions such as industries to investigate and whether you would be more interested in a traditional storefront operation or a mobile consulting business that you could run from your home.

Here’s a harder question: What are your weaknesses? Don’t kid yourself here; it will just hurt you later. If you prefer working alone then investigating a franchise business opportunity such as a restaurant where you will have to hire a lot of employees isn’t going to be the best small business franchise for you.

Narrow Down the Choices

If you look at a list of small business franchises available it can be overwhelming. Where do you begin? With this personal evaluation completed you can start crossing of certain industry segments. You aren’t looking at individual opportunities here, just broad categories. You might cross off computer repair shops but be interested in coffee houses.

Consider which segments are likely to be strong even if the economy continues to weaken. There are a number of industries such as fast food that do well in recessions and you would be well advised to lean towards those kinds of opportunities.

Once you have a few interesting industries on your list, start looking at individual opportunities. Focus on what each one has to offer, whether they have territories in your area, and whether they seem to match your own personal profile.

Focus On Your Short List

Now that you narrowed it down to a handful of prime candidates, contact each of them for further information. You will need to complete a questionnaire so they can ensure you meet their criteria for potential franchisees. Assuming you pass, they will send you more information including the FTC-mandated Franchisor Disclosure Document (FDD).

Study the FDD carefully as it will contain critical information from a history of the executives to details of company litigation. Contact the franchise for more information and get all of your questions answered before considering investing. They will be evaluating you as well so be prepared to answer a few questions.

When you have completed these steps you should have found the ideal small business franchise for you.

With recession the big threat these days, businessmen in most industries are afraid of looming business failure and hoping that they might just find the way to make it safely through to the other side of this economic storm. Operating a franchise business increases an entrepreneur’s chances of success, but to be utterly realistic, there is no surefire way to guarantee safe passage through this economic downturn, because there are simply too many business variables to control. A cure-all would be nice, but no such magical business potion exists.

That, however, is not to say that there aren’t practical steps a franchise owner can take to build the strength of his business, cut down on waste, maximize cash flow, and prepare for the hard times ahead. Though there is no sure-fire escape from the potential of great loss in recession, here is a list of actions you can take to help give your business a fighting chance of not only surviving, but thriving in poor economic conditions.

Keep Prices Competitive

This is a very obvious but necessary step to securing your continued place in the market. This means keeping prices on par with the competition, not dropping prices to unreasonably low levels that will win the customer but put you out of business. What this looks like as a Discount Party Store franchisee, for example, is visiting other party supply shops in a 10-20-mile radius, comparing prices on specific items like Halloween costumes, table cloths, wedding invitations, and gift wrap, and ensuring that your prices at least fall in the median range of all your competitors.

Expand Your Marketing Campaign

The vast majority of franchises come equipped with established marketing campaigns that advertise nationally and locally, wherever a franchise crops up, but there is always room for more. Whether that means putting coupons in the weekly neighborhood savings flyer, advertising before movies at the local theater, or printing your name and information on pens or business cards, come up with creative ways to get your business’ name out there and make it happen.

Give Clients Assignment Ideas

This idea works best in a consulting home business or other similar operations. Call to check in on dormant clients, and knowing their businesses, offer them business ideas custom tailored to their operations that you can perform for them. If they like what you propose, you may have found yourself a new assignment and another paycheck.

Don’t Be So Picky When Selecting Clients

Everyone is selective when they get to choose their own clients, but when the economy becomes as volatile as it is currently, it’s not time to be overly selective. The AmCorp Management franchisee, for instance, makes money when he can successfully recover his client’s finances that were lost to wrongful over-charging by vendors. Of course, the bigger the business client and the bigger their loss, the bigger the payoff to the franchisee, but in lean economic times, it’s important for him to pursue smaller business opportunities than he regularly would, just to ensure that he has some cash flowing in.

Offer Extra Services To Perk Up Sales

Since prices must be lowered, it’s tempting to believe that no great profit can be made, but that is not the case. Take a lesson from restaurant servers, who always try to up-sell their customers to increase the check total and therefore increase their tip. Make it a point to ask every client if he’d like small, additional services for a fee. You may be surprised what a business boost it can be.

Negotiate With Vendors

In the same way that you have to lower your prices to keep clients, so the business-to-business suppliers who provide your raw materials have to keep their prices competitive to keep your business. The Par-T-Perfect franchisee who refuses to negotiate for better prices on the cardboard hats, food, and table cloths that make his kids’ birthday parties a success is simply throwing money away without a fight. Don’t do that to your home business.

Cut Unnecessary Expenses And Redirect Those Funds

Whether it’s in supply costs, unnecessary technology, or too many business meals, most businesses are spending money somewhere that they don’t need to. Even if it requires bringing in a financial consultant, track down your finance leaks, plug those holes, and reallocate the previously lost funds to more vital areas of the business, like marketing or staff.

Stay On Top Of Accounts Receivable

What good is money if you don’t have it in your bank account? Imaginary money won’t help your home based business when the utility bill arrives, so it doesn’t make any sense that you should permit your clients to build up a continuously growing credit account without ever paying it off. A wise Archadeck franchisee taking care of his own billing with their custom computer finance system will always keep close tabs on clients until they pay for the backyard decks that his business has built. Not that he’s rude or pushy, but persistent.

Make Customer Service First Priority

Successful business leaders consistently agree: this is the single most important part of succeeding in spite of tough financial times. The key to a prosperous business is cash flow, and cash flow only comes with customers, so the only way to keep your business moving forward in good times or bad is by ensuring a steady stream of customers, repeat and new. Marketing brings in new clients, but only good customer service can keep them returning. Merry Maids may be one of the most well known work from home cleaning companies in the world, with a name that is recognized and trusted everywhere, but a franchisee who doesn’t ensure that his clients are as content as can be, will not see repeat business based solely on the power of the name.

Neither keeping a storefront nor a work at home business afloat through a recession is easy. But in the end, if you can hunker down and muscle through it, your franchise will come out all the stronger for your perseverance.

Indeed, there is a lot of highly negative news out there about the economy and the business climate. Many retail establishments are closing, some 70,000 of them. Those in the auto industry are worried and for good reason. With all the lay-offs, many are without work and some are considering on going into their own business, but, does that make sense right now? After all, business credit and commercial lending are tight and the consumers have stopped their spend-thrift ways.

The Franchise Business Opportunity Sector is not without its own headwinds, but things are not nearly as tough as they might seem. You see, many franchise chains are offering some in-house financing for their franchise opportunities, more-over many have extremely good relationships with financing firms. The US Economy has been hit hard, but on its way back up as the business cycle continues, the franchise companies have a superior advantage over other business models.

Amazingly enough, sometimes conventional wisdom is the opposite of what you should be doing, for instance the best time to buy a stock or mutual fund is not when everyone else is at the top. You make money after all by buying low and selling at the top.

Franchising is a lot like that; you want to get your franchise outlet up and running, as the up-cycle comes into play and ride it all the way up, build your franchise strong and then weather the next down cycle due to your strength in the local market and the goodwill you’ve built up through great customer service. I hope you will consider this while shopping for a franchise business opportunity that is right for you and your family.

As we approach the new year, many prospective franchisors wonder whether developing a franchise operation is a wise decision with the U.S. mired in a recession. Conversely, prospective franchisees wonder whether purchasing a franchise makes senses given the current economic climate. The quick answer to both is that it may not be.

A company that is looking to franchise their business mainly as a means of raising capital would probably be wise to defer franchising. Of course, a company in this position should probably never consider franchising, but that discussion is for another time. The same holds true for an individual who may be investing their last cent (and available credit) in purchasing a franchise business. In both cases, with the need for immediate revenue so great and little room for error, neither may have the staying power to survive through the current economy. At the very least, both would likely approach the endeavor with a mix of fear and trepidation…certainly not the best way to begin a new business.

This caution stated, it is exciting to share that the current U.S. economy actually offers incentives that makes franchising a business or investing in a franchise an excellent decision for many companies and individuals. Although franchisors in general have experienced a decrease in franchise inquiries over the past six months (our clients report 25-30% fewer leads on average), franchises are continuing to be purchased nationwide. In fact, one of our clients (ALOHA USA) announced in November that they had just granted their 25th franchise since beginning to offer franchises in August 2007.

So what incentives are there in this economy for a company to consider franchising?

First, in times of economic uncertainty the number of individuals concerned with their job status dramatically increases, which in turn leads some individuals to consider starting their own business. Due in part to the economy and mixed with a little “I’ve always wanted to operate my own business,” some ultimately choose to start a business. For other individuals, the opportunity to accept a buyout or early retirement package is the motivating factor for considering starting their own business. In both cases, rather than waiting for the proverbial shoe to drop, these people prefer to take destiny in their own hands. Of course, many prefer to do so with the assistance and support of a franchisor.

In addition to the “currently employed” candidates, a recessionary period creates tens of thousands of additional “forced” franchise candidates, who come from the ranks of the “recently unemployed.” Consider that with each ¼% increase in the unemployment rate, more than 350,000 people are added to the pool of prospective franchisees (another upside of high unemployment is the availability of qualified employees to assist in running a new business). Even recognizing that many of the recently unemployed will seek and find other employment (eventually), there are thousands of others who choose (and in some cases, are forced) to consider starting their own business. Many of these individuals take retirement funds, buyouts and/or severance packages with them when they leave their employment so from a financial standpoint, they are often ideal franchise candidates.

Which brings us to another affect this economy, and more directly, the stock market is having on franchising. With many investment and retirement accounts hovering somewhere below sea level, many people have opted out of the market. Now they are holding onto capital which they realize they need to invest somewhere. The question is where? Once again, some decide that investing in starting their own business is a good option, and what safer way than following the proven business model offered through a franchise system?

So what are the economy-related incentives for potential franchisees?

I will share three of the major ones. First, one of the key expenses associated with starting a franchised retail business is lease space and construction costs . With lease space going begging right now in markets across the country, many franchisees are securing lease space at discounts unheard of even a year ago. On top of this, landlords are increasingly offering high allocations for build-outs. In the last month, one client’s franchisee successfully negotiated an increase in the landlord’s build-out allowance by 300% (gaining an additional $40,000), while at the same time negotiating a 25% reduction in the lease cost.

Further incentives are available in the advertising and marketing arena. Many media are aggressively discounting advertising rates to attract business. It appears that we will see continued discounts from traditional media in 2009. The opportunity to advertise now at reduced rates can have a dramatic impact on a company’s bottom line following the recession period. McGraw-Hill studied the advertising expenditures of companies during the 1981-1982 recession. They discovered that companies who decreased their advertising during the recession increased sales an average of 19% following the recession while companies who continued to advertise during the recession increased sales by an average of 275%.

A third economic-related incentive relates to the cost of borrowing . Although credit requirements are much tighter than a year ago, capital is starting to flow again (think $70 BILLION bailout) and is available extremely cheap to individuals whose credit history, net worth and available cash meet the new requirements. The difference lower borrowing costs make to a company that is undertaking a franchise development program or to an individual who is purchasing a franchise cannot be understated.

When determining whether now is the right time to undertake a franchise expansion program or purchase a franchise business, prospective franchisors and franchisees should first evaluate their financial condition to determine whether they have sufficient capital to survive if revenues fail to meet expectations. During a recession, it is especially wise to follow the adage, “Hope for the best. Plan for the worst.” A thorough evaluation should also be conducted relative to the type of business being franchised. Is it in a industry that normally holds its own during recessionary periods? This alone makes a franchise business an attractive opportunity during good times and bad.

If both of these questions can be answered affirmatively, you may want to act now to take advantage of the incentives afforded by the current economy. In doing so, history demonstrates that you will be well-positioned to reap the rewards that come following a recessionary period.

Are you a business owner? Or perhaps looking to be one? Then this article is for you.

There are many factors that contribute to a fantastic franchise. One of the most crucial is the people who run the franchise. Successful individuals in the franchising field have been found to exhibit personal traits which can be categorised into four (4) major groups. These groups comprise leadership, interpersonal, decision making and time management skills.

Leadership Skill

When it comes to leadership, being able to influence people effectively is key. A leader must be able to take charge of a situation and express himself/herself directly, and apply appropriate force when necessary. He/she can listen to perspectives of others in a reasonably objective manner and make necessary adjustments in his/her approach. He can still be aggressive to reinforce his/her position when opposition is encountered, without being too demanding. He/she is motivated to persuade others and derives satisfaction from winning people over to his/her point of view. He/she can take most setbacks in stride.

Interpersonal Skill

He/she has strong service motivation which encourage customer activity. Naturally, he/she is engaging and personable and can develop rapport quickly with others which makes it easy for others to get to know him/her. He/she puts in time and effort needed to develop long-term relationships. He/she networks with people, reaches out to others where the chance arises, thus creating effective alliances and teams. He/she may be sceptical at times, but regardless would likely to be viewed as supportive and responsive.

Decision Making Skill

Being a practical problem solver, he/she relies mainly on accumulated knowledge, common sense and experiences rather than on “gut instinct”. He/she is also a calculated risk-taker who weighs both the advantages and disadvantages of a proposed solutions before moving implementing his/her recommendation. Decisions have been given much thought and reflect mature judgement. He/she may not be a highly abstract thinker, but will listen to input of others and be open to new ideas, yet be conscientious in gathering the necessary facts to support his/her decision.

Time Management Skill

Successful franchising people demonstrate a sense of structure and organisation in their approach. They are sensitive to organisational guidelines and requirements and operate by the rules, without coming across as rigid or legalistic. They have the most important details in hand, and adopt a systematic approach to manage priorities and daily demands. They switch gears when necessary while remaining focused on the basic plan. These qualities will support him/her in managing processes as well as in managing people.

A good businessman will gladly accept wise counsel wherever and whenever he can get it, especially amidst a global economy elbow-deep in recession. Most methods that businesses use to stay afloat in recession involve increasing cash flow and decreasing expenses. As it happens, that is not a business strategy that is only useful in times of economic meltdown, but rather it’s the goal of most businesses all the time. Therefore, any wise advice a franchise businessman can pick up and put to use in recession will likely be useful in good financial seasons as well.

For those in computer franchises, trying to keep their heads above water, here are 10 bits of wisdom from those who have gone before you.

#1) Do What You Love

If you’re already well into your own IT franchise business, it may be too late to put this gem to work for you, but if you’re just looking into a business opportunity, this is essential to success and satisfaction: do what you love to do. It’s become sort of a cliché notion in recent years, but if you would be doing the work even if you didn’t get paid for it, it’s the perfect job for you; one that you won’t bail on when times get hard.

#2) Start While Still Employed

The last thing any new franchisee wants is to leave a current job, open a new business, and find that the market is doing so poorly that it may be a few months before turning a profit. With a franchise, that may be a rare event, but the fear can still be a reality, so don’t hesitate to ease yourself into a new profession by working part-time until it begins to take flight. Some franchises allow for part-time involvement, which will give you time to make a smooth and financially solid transition from one job into the next.

#3) Keep Your Skills Up-to-Date

The big issue in the tech industry is that it’s always on the move: growing, adapting, and evolving. It’s a hard industry to keep up with, but when you work in the field, you have to; otherwise you and your business become obsolete and risk being thrown onto the scrap heap. If for instance you operate a TeamLogicIT home based business, in order to constantly address your clients’ IT repair and protection needs, it’s vital to know what kind of new equipment is out, what new threats exist, and the best new repair practices. The franchisor often works to keep franchisees abreast of changes, but staying on top of industry magazines, websites, and manuals is a good idea too.

#4) Find Out What You’re Worth

A great mistake that many self-employed IT professionals make is not knowing what the practical value of their service is and, therefore, either charging clients too much or too little. Study businesses similar to yours and see what the going rate for your kind of work is so that you’re not turning clients away with outrageously high prices or killing your business with unrealistically low ones.

#5) Get Advantages Wherever Possible

Don’t forget that in recession, just as you are lowering prices to keep clients, your vendors need to do the same with you. It’s perfectly alright to ask them for special discounts on the equipment and parts that you need for operating your Computer Troubleshooters computer repair and retail shop. And if you can manage deals with local newspapers, trading IT services for advertising, do that too. Don’t be afraid to ask for deals and discounts on anything possible.

#6) Market to Your Area

Nerds We Can Fix That, a quintessential work from home computer repair business, is much like almost all franchises in that it comes complete with national advertising already at work and a fully established local marketing plan. Whether your franchise comes equipped with all that or not, it’s always a good idea to seek out more ways to market yourself in your area. The more people see your business name, the more business you’ll get.

#7) Always Carry Yourself Professionally

Especially when you operate a home business, it’s very easy to forget to keep a professional demeanor when you interact with a client. Though your primary work goal is to fix the customer’s technical dilemma, you are not serving the computer you’re working on; you’re serving the human client. As such, your intent is to please him, which includes proving to him that you’re a mature businessman, not just an oversized teenager who can crack open a computer tower.

#8) Hire People with Complementary Skills

When operating any kind of IT business, it’s important to hire people who can do what you can’t. This is the very reason that Nerd Force franchisees with no previous IT experience work with a staff of trained technicians who actually make the house calls; their skills complement the franchisee’s business leadership.

#9) Don’t Neglect Your People Skills

Working with computers takes very little charm or charisma, especially if you work at home, but working with people requires a lot of both. Even if you’re the one fixing machines every day, do whatever it takes to keep from losing your ability to relate to other human beings. People are the ones who pay you, not the computers.

#10) Prepare for the Bad Days

In the midst of recession, today might be a bad day, but it’s always possible for tomorrow to be worse, so don’t let up on saving money and prepping the business to survive a hypothetically disastrous day.

People in all industries are just a little shaky in light of the recession, but it seems that many tech professionals agree that this period of economic decline is not likely to damage the technology industry because so many other businesses rely on technology to survive. Put some of these IT business practices to use and there will likely be many years of success ahead of you.