Want to own a business? Learn whether owning a franchise could be the right choice for you!
If you're tired of working for someone else and have a strong desire to have your own business, lets take a look at your options. You can start from scratch and build your business from the ground up; you can buy an existing business; or, you can buy a franchise!
This article on owning a franchise is written to help you decide which option will work best for you. It is also designed to help you make a good decision based on facts rather than emotions.
It is so easy to get caught up in the sales presentation that the franchisor is presenting on the benefits of owning a franchise.
All you do is buy their franchise, put some time and effort into it, and you have a super business that will bring you a great income for the rest of your life, right? While this is true in most cases, there is no guarantee. Below is just one example of how this may turn out on occasion.
Some close friends were interested in being their own boss and having something they could call their own. They invested over $200,000 in a well-known franchised sandwich store. All of the projections and sales promotion at the meetings looked great. It was a well-recognized national brand. But not having any experience in the food industry, not having the right customer service attitude and working 10-12 hours a day for months at a time was their downfall. Their first year in business they lost $55,000. The second year was better, they only lost $38,000. The third year they sold it to another person interested in being their own boss. The selling price was only $80.000 and they were able to turn it over to another ambitious owner. The cost to my friends was $293,000 in capital, 2-1/2 years of hard work and almost resulted in their divorce. The new owner has been able to offer better customer service, stay open longer hours, and at this point, it looks like they will be making profit for themselves. The American dream come true: Successfully owning a franchise! Can you make it a reality for you?
Franchising opportunities, according to a study completed by PricewaterhouseCoopers, accounts for more than 18 million jobs in the United States alone and produces $1.53 trillion dollars in economic income. There are over 750,000 franchises in operation.
The terminology you need to be familiar with in owning a franchise is "franchisor" and "franchisee". The franchisor is the corporation that is already established, who will sell or grant you a license to operate a business using their name, trademarks and products in a specific area or region. The franchisee is the one investing into owning a business and wants to be part of the larger corporation that has been established for a number of years, thus enhancing their chances of success.
Owning a franchise is not the same as owning an independent business. As a franchisee you will be issued strict guidelines, operation methods and operating manuals that are used to maintain control and quality set up by the franchisor . There are a lot of built-in advantages to owning a franchise. One major benefit is the name recognition that has been established. The knowledge of how to operate the business combined with the franchisor's experience will give you added value and will help you become successful. Many financial institutions will take into consideration the franchisor's reputation and base the lending decision on the individual's credit report and the success rate of the franchise when determining the amount they are willing to lend. This makes it easier for people to get financed into a franchise than it would be if you are starting up a new business on your own.
While the franchisor sets up the business plan and establishes guidelines for each of its locations, it does allow for the franchisee to operate a business in a specific area or region. They often allow and even help with special promotions. As a rule, hiring and firing of employees is left up to the franchisee but guidelines are often offered to help get the right people employed to help insure your success.
Another benefit to the franchisee is that they have the back up and knowledge of the corporation to help and guide them should they have any problems. Most will have managers or a support team that can answer any question that might come up.
Training is a key to success and most franchisors have intensive training programs required for the new business owner. They want you to learn every aspect of the business to help become a successful operation. While in the training period you may be required to actually do some of the training in an existing location to gain experience dealing with real customers or clients. The longer and more intensive the training schedule the better your chances are for success.
Being able to keep costs down on product and merchandise is a big advantage. The franchisor knows how much inventory you will need, exactly what you will need. They are able to buy product in huge quantity and get a better price. McDonald's can negotiate a much better price on hamburger patties than a small restaurant that will only sell 100 hamburgers in a day. Keeping cost down will help you be competitive and still make profit.
Should a franchisee decide to sell the franchise, the franchisor will have a list of potential buyers to buy-out your interest and will help with getting your business sold quickly.
As with any business, there are advantages and disadvantages of owning and operating your own business. If you are very independent and prefer to make all of the decisions on how your business is run then having a franchise may not be best suited for you. If you prefer to have a large corporation giving you help and support to build a business then a franchise may be your best option. There are thousands to choose from. Pick one that lines up with what you are interested in. If you enjoy working on cars, don't look at a franchise that helps people prepare their taxes! If you are going to build a successful business it is better to enjoy what you're doing.
Take the time to get all the information to make a wise decision. Go to other franchisees and ask how they are doing. Find out if there is anything they would change. Is the franchisor living up to their part of the agreement? Find out if the actual revenue is close to the projections that are being given to you from the franchisor.
By getting as much information as possible about owning a franchise, you can soon be on your way to operating a successful business, and with time and effort, you will be financially rewarded!
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