Category Archives: Business Franchise Tips

Why Start a Franchise Business Today?

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It is a common perception for start up entrepreneurs to think that when you venture into a small business the major problem that you experience is funding. Recent report shows that one type of small business has shown stability during the past five years. This type of business is franchising which has been reported to receive more funding than any other small businesses in years after the global recession.

The year 2013 is a good year for start up entrepreneurs who wants to grab the franchise opportunity for a small business. Small Business Lending Matrix and Analysis reported that the franchise venture will release more or less $23.9 billion in a form of a loan which has been the biggest amount given since 2009 in financing and funding the industry. This available loan for franchise opportunity is deemed to sustain more than 59,000 franchise businesses, which gives more opportunity for entrepreneurs to buy franchise as their business venture. The government’s Small Business Administration has contributed to the loan program by granting about $5.6 billion to interested applicants.

The advocacy group International Franchise Association Educational Foundation prepared a report that mainly focuses on promoting the franchising industry by doing things like advancing the knowledge and professional standards in the industry of franchising. The business is said to generate almost 800,000-employment opportunity and about $106 billion in sales advancing the industry and attracting entrepreneurs to buy franchise. The report also states that the franchise opportunity for entrepreneurs has shown great improvements for four succeeding years followed by improved chances of growth, higher demand of transaction for unit and more banks willing to lend for an industry that has shown positive results and continues to improve year by year.

All the reports that was shown and released all produced positive feedbacks for businessmen to be convinced to buy franchise as their start up business. With the increased loans that are readily available to be granted to those who are interested to franchise business it is not a doubt that the industry of franchising will soon be a big one before other know it. However, with all the loans given the International Franchise Association reports that the $23.9 billion money is actually short for the total $26.5 billion that is actually needed to fund any start up operations or current business franchise opportunity at the present. The report was accumulated mainly using the data released by SBA, the Franchise Business Economic Outlook for 2013 and some other useful references available for compilation.

Franchise Investigation – Five Things To Find Out

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Let us first understand what is meant by ‘franchise investigation’. These are the areas of information you need to discover before investing your hard earned money on a new franchise opportunity. This is sometimes called ‘due diligence’.

When doing a franchise investigation, a prospective buyer of a franchise gathers detailed information about the business potential and profitability, financing requirements, operational risks and other factors that must be discovered and analyzed before proceeding with the deal. In turn, this also enables the seller or franchiser to evaluate the terms of the sale, the creditworthiness of the buyer, tax consequences etc.

Following are the five most important things you will need to do as a prospective buyer before you take the final step of signing up:

1. Understand your market: Once you have made up your mind on what type of franchise you want and can afford, investigate the demand for that particular product or service in your area. Just because the idea might have worked out perfectly for someone located elsewhere, does not mean it will work in the place where you want to open your franchise. Some issues you need to consider include the level of competition in your target market and whether the concept has only seasonal marketability.

2. Compare opportunities: Even if your heart is set on one franchise brand, it never hurts to look at other opportunities to make sure you are signing on with the best option that matches your skills and interests. Attend a franchise trade show and/or use a franchise consultant who will enter your criteria into a database and then present companies that match your parameters. There are also numerous websites that allow you to see a snapshot of several concepts at once.

3. Scrutinize the offering: Do not sign any contract or make any payment until you have had the opportunity to investigate the franchiser’s offering. The FTC requires all franchisers to disclose important information about the franchise system including their past earnings, franchise agreement terminations, number of operational outlets etc. You might do well to take the help of a franchise attorney and review the UFOC and franchise agreement, as well as have an accountant review the franchiser’s earnings claims.

4. Any training or support?: Before taking on a franchise, make sure that the franchiser provides intensive training on how to run the business and also offers some kind of ongoing support. This is very important because without it you will have no way of making a success of that business.

5. Talk to existing franchisees: The most important step you can take before signing the final contract is talk to other franchisees. They can give you honest feedback and validate what the franchiser tells you. Ask them about their experiences, and if they have any advice for you. Their input could be very valuable indeed.

Conducting a franchise investigation is an important information gathering process that will enable you as a prospective purchaser to assess the strengths and weaknesses of the target business, rectify and renegotiate any new terms of agreement, minimize post purchase “surprises” and determine whether or not to proceed with the deal. Make sure you do it well.

Franchise Location – Your Place or Mine?

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We’ve talked about the advantages of buying a franchise, and what it takes to set one up successfully. Let us now focus on an extremely important issue related to franchising – finding the right franchise location. What does it take to zero in on the ideal site? A quick look at this piece can be a good starting point.

The decision to award a franchise is highly influenced by territorial considerations. Very often, the franchiser will seek partners in specific locations, where their business might be unrepresented. So, when you sign up as a franchisee, you will have to work within a geographical boundary. In the happy event that you already own premises that are suitable for the new venture in the designated territory, cross out item number one on your to-do list. For the rest of us, scouting for a suitable franchise location is inevitable.

The space issue is a big deal with franchisers, so be prepared to let them have their say. This is only to your advantage, as they will speak from prior experience, and therefore, have a better judgment of the viability of a particular space. Franchisers will specify a few things – among them, size, layout, and the quality of the immediate neighborhood. There will be other considerations as well – such as approachability, availability of public transport or parking space, and visibility of signage. All these are very valid considerations, so think twice before you dismiss any. In addition, the franchiser may insist on a personal visit by their representative in order to reassure themselves regarding the appropriateness of the franchise location.

So, the place is identified. Bravo! But don’t pop the champagne yet – its time to get into the nitty-gritty of the lease documentation. If you’ve roped in the services of a real estate brokerage company, they will be able to guide you on the legal aspects of structuring the lease agreement. Alternatively, seek the help of a lease attorney. The franchiser is not likely to be left behind, and may have a thing or two to say about must and must not have clauses. Then there’s the landlord himself – if he is in a position of strength, chances are, you will have to accept the documentation the way he likes it.

That being said, most lease agreements will go by standard clauses – see for yourself at www.legalmessenger.net. From your point of view, watch out for the commercial terms – is the rental per square meter reasonable for that neighborhood and the condition of the premises? What is the stipulated escalation and when does it kick in? Another thing to consider while finalizing the paperwork for the franchise location is the term of the agreement and whether it comes with a lock-in period. A longer term saves you the bother of relocating frequently, but invariably specifies a minimum duration of occupation. This could be a good or bad thing, depending on how things pan out, but you don’t have the luxury of foresight when you make that call.

In case you have several options of space to choose from, go for a place that is the most commercial in character – by that we mean one that is located on the high street, or in the central business district of your city. Choosing to house your operations in a building constructed by a well known developer will offer the added advantages of well kept surroundings and a support system to handle any repair and maintenance issues.
Remember, the decision of choosing a franchise location is extremely crucial. Do it with care.

Key Characteristics of Successful Franchise Owners

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Before starting your search to buy a franchise, you might want to sit down and assess whether you have what it takes to be a successful franchisee or not. While there are over 1500 franchise companies in the US to choose from, getting a franchise is not as easy as you’d like to think. Each of these companies has different requirements before they partner with a potential franchisee. Working with a franchise brokering consultant might help match your needs to a suitable franchise brand that work out well for both parties.

According to Steve Hocket, president of the FranChoice Inc, a premier network of franchise referral consultants in the United States, there are a few key characteristics that every franchisee should be familiar with to determine if venturing into the franchise industry will work. Here are five considerations to look into:

Ability to Make Connections

Socket pointed out that a good franchisee should possess good interpersonal skills. Examine your past and current jobs, do you enjoy working with people or would you rather work on your own? When you buy franchise, you’re not a one man business but you become a manager of employees, building relationships and nurturing trust and loyalty.

Following a System

Unlike starting your own business where you’re the boss, franchising does not have the same environment. Instead of having complete autonomy on your franchise, you relegate some of the power to your franchisor. You’ll need to follow a system that has been tested and proven to work. You may not be comfortable with limitations on control but this is the essence of franchising as any franchise brokering firm would confirm.

Openness to Franchisor Support

As a franchisee, you are representing the brand and in most cases franchisors have teams of people to support, assist and even train you to fully understand the nature of the business. As Socket profoundly puts it, “The motto of franchising is that you are in business for yourself but not by yourself.”

Hard work Pays Off

Even if you work with the best franchise brokering firm, without hard work, success is going to be elusive. As Socket reiterates, “If you are someone who understands what it takes to be successful and have the motivation to make your business succeed, you have the cornerstone of a winning franchise personality.”

Risk Avoiders

In general, people who prefer to buy franchise rather than start a business by oneself are considered as risk averse. These successful businessmen target franchises with a proven track record and a tested business model to reduce risks as much as possible. If you’re a bold risk taker, it’s possible that franchising may not be for you.

Part 2 – The Big Dont’s of the Franchising Business

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A lot of new entrepreneurs become very tenacious when it comes to jumping on franchise opportunities. They want to make money quickly by banking on the national brand that is already trusted by a lot of patrons.  But they still make some errors along the way; here are some of the mistakes often committed by new entrepreneurs;

  • Failing to read and understand the business plan of the company

Before getting into the bandwagon of a franchise opportunities create a budget and review the startup expenses. Try to stir away from paying too much for your equipment.  You can ask other franchisers about less expensive products but of same quality.  If you directly get your equipment from the franchisor then you may be spending more than you bargained for.  Remember that you still have other expenses to worry about at the end of the month like bills, rent, and salary of your staff.

  • Failing to read and understand the Franchise Disclosure document

It is crucial for any entrepreneur to understand what kind of agreement he is signing in to.  Under the Federal Franchise Rule it is mandated by the Federal Trade Commission that franchisors should report such information as performance of company, risk factors, franchisee’s obligation, restrictions, and other details.

  • Not following the business plan

The business plan is the map how the brand reached its success.  It is the guide to help manage the business the way it’s managed by the franchisor.  It includes hiring of personnel, distribution, projection of sales, budget planning, sales and advertising.  It’s important to realize that there are legal implications associated to this agreement if you don’t stick to it.  So review carefully all the terms and conditions to avoid possible violation on your end.

  • Not getting support from your franchisor and other franchisees

It’s easy to make money in this business if you started everything the right way, but any form of business is still a gamble.  What is booming right now may have a different story to tell after just a couple of months.  One way of keeping afloat in the game is to network with other business franchisees.  Don’t stick to business owners in the same line of service as yours.  Try to get to know as many entrepreneurs and add them to your contact list to help you build awareness about the business world.  Join as many groups and associations as you can. You can join a community of franchisees and be visible during community events to allow them to get to know you too.  This can help you build your business and find support in a lot of areas.

 

Burger King and Beboca Forming new Joint Venture for Central America

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There are lots of ways for owners of retailing businesses to make money far beyond the amounts they’re enjoying at the moment. Methods to achieve this may range anywhere from improving operating efficiency of current outlets to opening branches in select regions.

Burger King Worldwide Inc. implemented a similar strategy to that of the latter, but took things to the next level by launching a joint-venture with long-time franchisee Beboca Ltd. Through a deal that was intended to help the fast-food chain expand their territorial coverage in Central America.

What’s interesting here is the fact that the companies will be operating these new outlets under a new name: BK Centro America. Beboca will take on the role as the master franchisee and developer for the proposed 178 restaurants in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

As of today, Miami-based Burger King is the second largest fast-food chain in the world with over 12,600 branches in total.  Meanwhile, Beboca currently owns 48 restaurants and Costa Rica and Panama. Both partners will be working to develop and promote the newly established entity destined for Central America.

The reason why this partnership was struck and the particular location was chosen lies within the area’s growing middle class. This has led to an increase in demand for products from fast-food establishments, which has also presented an exceptional opportunity for the partners to supply the demand and profit off it at the same time.

“Central America’s middle class continues to expand rapidly and this partnership will enhance our ability to grow aggressively and ensure we are the preferred choice among consumers in the region,” says Jose Tomas, Burger King’s current president of Latin America and the Caribbean.

Nevertheless, Burger King and Beboca aren’t the only ones looking to capitalize on this growing market. According to sources, Denny’s Corporations and Brinkler International Inc. are also shifting their focus to developing their own restaurant retailing businesses within the region as well.

Tomas will be joining the board the new joint-venture along with Jonathan Weisleder, its finance and business director for Latin America and the Caribbean.

Legitimate franchisors such as Burger King represent outstanding opportunities for businessmen and non-entrepreneurs to make money in consistently large amounts over a long period of time. Although such businesses are comparatively pricey to acquire as compared to other franchises, popular fast-food restaurants give a steady and large return on investment.

Important Key Points to Consider When Reading Franchise Financial Statements

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There’s a wide range of franchise opportunities prospective franchisees can choose from. If an individual is interested in automotive franchises, he or she will be happy to know that there’s a diversity of these business types to choose from here.

But before getting overly anxious when purchasing any sort of establishment, it’s imperative to carefully analyze the franchisor’s financial statements prior to making a purchasing decision. That being said, lawyers who specialize in reviewing these types of documents advise future entrepreneurs to determine the value of the company’s assets.

If the statement reflects few assets, or displays assets as “good will” or “value of franchises”, questioning the franchisor should be done immediately, as these terms typically represent no tangible value. That means if the corporation were to display a net worth of two million dollars, it could actually be worth several thousand dollars in reality if the majority of these assets happened to be intangible.

Second important point that should be reviewed is the franchisor’s profit and loss statements. If the group displays a loss or insignificant profit, it could be an indicator that the company isn’t investing enough into the business. Paying close attention to the expenses is important as well, mainly because there have been numerous instances wherein a substantial percentage of profits generated are used to should officer salaries.

Third aspect of the statement to review includes the notes which indicate the nature of certain transactions. Digging in deep to look for loans going on between the franchisor and its franchisees would be helpful. Moreover, folks are advised to be cautious when dealing with franchisors who owe large amounts to their founders as well.

Large loans taken on by the franchisor may be a sign that the company is currently in financial instability, especially when the due date of these borrowed amounts are drawing near. Franchisor commitments should also be carefully examined, especially the ones regarding contracts with suppliers, as well as long-term leases.

Caution should always be observed when it comes to capitalizing on any of the many franchise opportunities today. Some dealers of automotive franchises may have a few skeletons in their closets that they’re hoping their prospects don’t find out. This could lead to a world of financial trouble or headaches on the franchisee’s end when things suddenly take a turn for the worse.

When Should You Consider a Franchise?

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Turning a business into franchises for sale is one short cut to expansion. This is because it is the franchisees who will put up the substantial amounts of capital investment in setting up new business branches or outlets. With retailing businesses, it is possible to open multiple branches one after another.

Besides its being less capital-intensive, selling of franchise opportunities is much less cumbersome to handle in terms of human resources management. All that a franchisor would need is a small staff in an equally small head office to maintain a network of franchisees. These head office employees will be responsible in organizing and training the crew or manpower of branches of outlets, the hiring and management of which will be handled by the franchisees.

More commitment too can be expected from a franchisee than an outlet or branch manager. Franchisees are not only committed financially to the business. They also have an emotional stake, as most often, it will be a test case for them on how to start a business. Franchisees will put that extra push for the business to succeed.

Branch or outlet managers, on the other hand, may not be as well-motivated. As salaried employees, their only concern may be achieving mediocre success for as long as they have job security and perhaps some marginal pay increases along the way.

A franchise for sale, however, isn’t a solution for a floundering business. The franchise, to start with, has to be based on a business model that has proven itself to be successful and can be replicated. In effect, it’s garbage in, garbage out if a bad business model is the basis for the franchise opportunities offered in the market. A failing business that is franchised will only breed a whole bunch of branches or outlets whose bottom lines wallow in the red.

It is therefore a given that mere business ideas cannot be successfully franchised. These may be copyrighted, but there’s all there is to it. A business concept, first and foremost, has to have a proven track record of success, which should be the platform for franchising that concept. There’s no chicken-and-egg quandary when it comes franchises for sale. A star performer of a business endeavor has to exist first.

It is also vitally important to conduct a SWOT (strength, weaknesses, opportunities, threats) on a successful business that is being considered for franchising. If a business concept’s success relies solely on a particular market site or location or to the inimitable talent or expertise of its owner, then it is unlikely to achieve much success as a franchise for sale.

Using Twitter To Significantly Boost Business Revenue

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Learning how to start a business that gives impressive returns on interest is not an easy task, but can still be done. Purchasing a franchise for sale instead can save any individual from the daunting trial-and-error process involved with establishing and managing a commercial entity that can last the test of time.

Despite being given a major advantage by using a tried-and-tested system for financial success developed by skilled franchisors, franchisees still play huge roles in going beyond what’s taught to them, and implementing additional marketing strategies that’ll boost their own streams of income.

Twitter is one tool that can help any business increase revenue – millionaire entrepreneurs from fifty years ago would probably be billionaires if they could tap the power of this social media network. This micro-blogging site gives businessmen a cost-free method of building a strong customer base online, developing good relationships with consumers, and ultimately making money off of them.

There are three basic pointers that franchise owners should keep in mind when using this powerful tool to ensure sales go up. That being said, the first tip is: don’t be too pushy when promoting products or services.

Overselling, which is something that hosts at seminars on how to start a business warn against, should also be avoided in social media marketing as well. Followers of entrepreneurs already know what goods are available, as well as the company profile.

They don’t need to know something they’re already aware about, so repeatedly making tweets about the same merchandise, or how highly-qualified the company is, would be counterproductive. The better approach would be to make tweets about new merchandise or services (or advertisements on the owner’s intention to put up his own franchise for sale.) Alternatively, tweeting about the availability of special discounts during certain dates is also recommended.

Regularly making tweets about interesting facts regarding problems the target market may also be helpful – information, interesting news reports, or other sorts of info relevant to the market would keep them engaged, thereby increasing the likeliness of them seeing future tweets about product launches, sales, etc.

Lastly, responding immediately to any questions or concerns they may have is also important. Excellent customer service is one secret to the mystery around learning how to start a business that makes good money throughout many years of operation.

After acquiring any franchise for sale, making sure to utilize Twitter to keep constantly and effectively communicate with customers is undeniably important.

Improve Customer Loyalty through NPS

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If you want to know how to start a business and make money the right way, then understanding customer loyalty is essential.  The opinion of the customer is the most important factor that determines the decline or success of a franchise.  In general, franchisors who appreciate and understand the importance of loyalty from customers are able to make money and flourish in their business.

Franchise organizations that provide quality customer service and generate recommendations from customers get bigger return.  How a franchise organization delivers service to its customers greatly affects the company’s reputation, renewals, repurchase, and referrals.  Both the competitive market and today’s online word-of-mouth promotion intensifies the effect of customer loyalty on a franchise system’s financial performance.

The widely adopted NPS or Net Promoter Score is the basis of ranking customer loyalty at present.  Franchisors however must be able to understand and analyze their customer feedbacks and utilize them to improve the effectiveness of their organization instead of just knowing the number.

The franchise system has intricate structures and franchise locations are endless, making it difficult to address, understand, and measure feedback on customer loyalty.  But software approaches capable of delivering NPS are very useful as such software can turn the packaged NPS solutions commodity into a full system that can provide actions and insights to achieve success.

Promoters are individuals who recommend services and products either online or in person.  They are able to create stronger value not only on their purchase behavior but on their effect to others as well.  While those who have negative opinions are detractors that need to be addressed immediately as problems arise.  Closing the distance with the detractors will not only lessen negative business impression but fast attention given to them can also promote loyalty and turn detractors into promoters.  Results are attained by mobilizing promoters and recovering detractors, enabling franchisors to increase profits.

Segment reporting and alert management enable franchises to extend a specific action to enhance franchise operations.  NPS Go for example, provides routing alerts and insights to the right people in the franchise organization, which helps improve customer experience, thus achieving a good investment return.

Home page reports and dashboards that are role-based can also aid employees in supervising and addressing loyalty of customer by unit.  This allows franchises to implement the best strategies to enhance customer experience.