Monthly Archives: September 2012

Franchise Opportunities: Protecting The Business’s Trade Secrets

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When it comes to running businesses within certain industries, the environment can quickly move from hard to real tough upon the arrival of other commercial establishments. While looking at the various franchise opportunities, and selecting a particular franchise for sale a businessman should try to buy a franchise in something they know really well. A person can surely gain a strategic advantage over rivals by knowing about a franchise’s trade secrets.

A trade secret is generally defined as any type of information that gives the owner the “upper hand” over its competitors. Moreover, the info is unknown by everyone else, and isn’t easily ascertainable by other groups or individuals. For clearer understanding, a great example of a trade secret would be the formula used in the creation of Coca Cola products – nobody except the giant corporation knows the formulation of these beverages, and it gives them a significant advantage over their rivals.

However, if the secret recipe were to be disclosed to other groups, they could just as easily reproduce Coca Cola beverages and sell it to the target market. In addition to this, getting a patent on the formula would be out of the question, since the information a patent protects must become public knowledge after a patent expires in twenty years.

So before buying any franchise for sale, it’s best to closely examine the measures taken by franchisors of various franchise opportunities to protect their trade secrets.

With that said, before sealing the deal with any franchisor, see to it that the trade secrets are itemized in the franchise agreement. This may include things such as recipes, formulas, programs, techniques, processes, etc.

The agreement should also state that the items classified as trade secrets are being licensed to the franchisee, instead of being sold. Additionally, for the security of all franchisees, the agreement should state that the franchise owner is prohibited from “reverse engineering” all items categorized as a trade secret.

Having the contract include arguments which stress the importance of keeping the secrecy of trade secrets would definitely be helpful. It should also include statements, which reflect the significant value of every trade secret, and how it provides every franchisee with a competitive advantage over competitors in the industry.

The inclusion of statements similar to the ones above in the franchise agreement can help safeguard the franchise’s trade secrets. There are of course, additional details that should be stated within the contracts when screening potential franchise opportunities and ultimately acquiring a franchise for sale.

Franchise Owners Expected To Make More Money In The Years To Come!

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A great way to make money is done by learning how to start a business, especially one that business owner is passionate about. However, passion without a systematic method of operation can only take a businessman so far, and will often result in financial failure.

Luckily, franchisors have already developed tested and proven strategies for effectively running businesses so that their franchisees don’t have to. This in turn increases franchise owners’ chances for generating a large and consistent stream of income.

On the other hand, now that the economy isn’t exactly in tiptop condition, many people doubt the touted longevity and income stability rendered by these types of commercial establishments, especially those that are essentially small businesses.

Contrary to that, research conducted by credible organizations, such as the Office of Advocacy, U.S. Small Business Administration (SBA) and Franchise Business Review (FBR), say otherwise. The latterwhich is a national market research firm, recently released a report stating that 72% of the franchisees interviewed believed that their opportunity for growth (to make money) is strong to very strong.

The respondents include over ten thousand franchisees located in the US and Canada alone. Of course, the 28% that didn’t believe their growth potential was strong is inclusive of individuals who just recently learned how to start a business.

“The economy may be weakening in many places but franchisees are very positive about their growth,” said Eric States, President of Franchise Review.

“When you consider the little known fact that the top 50 public franchise companies have outperformed the S&P 500 by 70% over the last six years, you can understand why franchise owners are so optimistic. The focus of the media is always on the ‘doom & gloom’ of the economy. Meanwhile, the franchise industry is booming! More people should stop watching the stock market tumble and consider buying a franchise business.”

Furthermore, a study conducted by the SBA suggests that households, which own small businesses, had increased chances for landing within the top ranks of income and wealth. Their report was quite lengthy, but one noteworthy fact includes: households which owned more than one businesses were more inclined towards becoming high income earners and wealth holders as compared to households owning one business.

With that said, any individual can easily capitalize on the enormous opportunity for growth by learning how to start a business, and running it efficiently to make money. For those who want to skip the trial and error process involved with operating a successful commercial establishment, they could always opt to purchase a franchise instead.

Franchises For Sale: Review Territory Rights Before Buying

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There’s a wide variety of franchises for sale that people can acquire to start making money on autopilot. And out of the many types of businesses, automotive franchises are one of the biggest moneymakers.

But before taking that leap and buying just any franchise, which competes within the automobile industry, fully understanding every detail of the contract created by the franchisor is a must. With that being said, territorial rights are one aspect of the agreement that should be carefully reviewed.

The last thing any individual would want to happen is to witness another fellow franchisee open shop a few blocks away. Some franchisors are known to recruit multiple franchise owners and place them within close proximity of each other. Naturally, the type of relationship these individuals will have with one another would be cannibalistic, and could easily lead to their downfall.

In order for a businessman to preserve personal interests, the contract written by the franchisor should never be overly ambiguous. The details pertaining to the relationship between franchisor and franchisee needs to be clearly stated, especially when it comes to territorial rights and exclusivity – the more detailed the discussion on territory is, the better.

When reviewing the contracts of automotive franchises (or other franchises for sale), it’s important that the agreement stipulates how the franchise territory will be protected in the event a merger between two franchises take place.

For example, the franchisor decides to purchase a rival franchise company, and the latter has a certain number of outlets operating within the former’s franchisee’s territory. The franchisor then decides to change the name of the competing outlets to his brand name – this means that there’ll be more competition, which would obviously be bad for the franchisee’s business.

 

Such a risk can be taken out of the picture if the agreement stipulates exactly how the franchisee will be protected against the occurrence of a merger or acquisition. Moreover, some contracts may state that the “converted outlets” allowed to operate within the territory must pay a percentage of their sales to make up for the franchisee’s lost income.

In short, the course of action taken will depend entirely on the details stated within the contract as agreed upon the franchisee and franchisor. With all that said, never forget to review all details of the contracts tied to automotive franchises for sale (or franchises for sale in general) before making the final purchasing decision. Keep in mind that things can quickly take a turn for the worse if there is no form of protection described within the agreement.

 

How Family Relationships Affect Home-based Businesses

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The economy has been beaten black and blue and countless people in the US are losing their jobs at an alarming rate. With that being said, it’s no surprise that more individuals are learning how to start a business at home.

Automotive franchises in particular gained popularity over the past few years because of the high income potential it bears, and because it can be run from the owner’s residence. However, one possible risk that all home-based businessmen face is “destructive” family relationships.

Family members can either help nurture the business, or bring it down. Sometime working at home can blur the line that separates family and work activities, which in turn will gradually damage both the relationship with loved ones and health of the commercial establishment itself.

Small children have the tendency to feel “jealous”, in the sense that the venture is receiving more time from a parent then they are. Upon noticing this perceived problem, the parent may decide to compensate for lost time at the expense of his set working hours.

On the contrary, while spending more time with the kids (or even a jealous spouse) may fix any damage dealt to the family relationship, giving less time to the business slows its growth, and can even lead to financial problems in the future (like in the case of other owners of home-based automotive franchises in the past.)

On the other hand, these dangers can be eliminated if an individual thoroughly learns how to start a business within a dwelling, and run it effectively while maintaining the balance between work and family relations.

With that said, it’s crucial that a work-at-home entrepreneur acquires full support from each loved one – they need to understand that time and effort is needed to stimulate the company’s growth, which in turn will benefit everyone.

Direct involvement isn’t the necessary means of support (although it’d ideally be helpful) that should be given by members of the family. The mere fact that they understand why more attention has to be given to the business, and that they shouldn’t do anything that’d intervene with operating and working hours (especially in the case of automotive franchises) is enough.

In some instances, funds usually allotted to support the family’s lifestyle may need to be redirected to the business for continuous and smooth operations. Getting the kids and spouse to understand the need to do so is a must.

By learning how to start a business at home and identifying the potential family relationship “dangers” involved, the chances for the venture to develop and make more money will increase.

 

Pointers For Selling A Franchise

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Making that decision to buy a business or franchise, run it in the most cost-effective yet efficient way possible, and risk failure to make money can be daunting. For plenty of people, their bravery and entrepreneurial plus financial skills was rewarded with financial success, while others weren’t so lucky because they came into the business ill-prepared.

There’ll eventually come that point in time where a person will have to sell the business. Unfortunately, many franchisees go through the selling process unprepared, which can lead to massive amounts of frustration, and even getting significantly less payment for what the franchise is really worth.

To avoid any further headaches and getting ripped-off by buyers, below are a few tips to keep in mind when undergoing the process of selling a franchise.

First tip is to keep the franchisor informed – the guys at corporate office may have a few rules or more regarding the sale of their franchises. These regulations are usually stated in the contract signed during the initial purchase of the franchise itself, so going over a copy of the agreement to review these stipulations is highly advisable.

Moreover, it’s possible that the franchisor knows potential buyers, that want to buy a business that can make money in vast and consistent amounts (hopefully, this describes the reader’s venture.) If this is the case, the process of selling should be easy.

Second tip is to make the actual preparations for the sale – this involves establishing the true value of the business, setting a price that’s fair for both parties, pooling financial information, putting together a sales packet, plus more. Additionally, notifying key employees of the business may also be necessary.

Third tip is to identify and thoroughly understand the potential market – things such as what type of individual would actually be interested in buying such a franchise, how much were similar businesses sold in the past and whether the target market is momentarily hot or cold should be thought over. In addition to this, knowing what they expect from such an operation can further help with preparations for the sale.

Fourth and last tip is to advertise the franchise in every way possible. The more exposure it gets, the better. This may include listings in newspapers, the internet, social circles, and more. Also, making a good sales pitch is imperative – if the buyers don’t see the financial logic in deciding to buy a business or franchise such as the one pitched to them, or if the venture has no potential to make money then they’re likely to back-off.

Tips for Staffing Retailing Businesses

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Retailing businesses and franchises for sale don’t come with employees upon purchase or setup, unless the venture was bought second hand. In the majority of cases, the entrepreneur will have to hire people to get the business up and running.

When hiring employees, it’s important that they’re qualified for the job, and possess the desire to work towards the satisfaction of customers and the company’s growth. In some instances, this can in some way be a difficult task. Some franchises may have positions that require unique skillsets that aren’t easily found.

In this case, looking beyond the usual sources for hiring may be necessary. One good source in particular is former employees of similar businesses, particularly those who’ve worked at another outlet owned by franchisee of the same franchise company.

These individuals will certainly possess the skillset required to fill out certain positions. Regardless, thorough screening may be required, since the reason why they left their former employer might be something “bad.” And since he’ll be working within the same company with identical policies, it’s possible he’ll be quitting for similar reasons.

With some franchises for sale, staff training is often rendered by the franchisor, especially in the case of retailing businesses. With that being said, it is probable to hire someone with little to no knowledge regarding a specific role in the business, and instill the necessary skillset through training programs setup by the franchisor.

The franchisors usually create these programs so that employees will be able to work effectively and in compliance with the franchise’s standards. If every franchisee’s commercial establishment performs well, then the franchisor benefits more, so it’d naturally be in their best interests to see that everything is done to ensure the success of the business is taken.

When creating a staff comprised of skilled and driven employees, it’s vital that the operations of the business aren’t heavily dependent on anyone of them, especially on the ones with low-income positions in fast food and retailing businesses (and even in most franchises for sale).

When the employee turnover becomes high, immediate replacements that are not trained may have to be hired, which will negatively impact the consumers’ perception of the business.

With that being said, having more employees work shorter shifts (instead of the other way around) is a recommended course of action. If one of them quits, it’ll be easier to cover the number of hours he worked by having another employee temporarily work overtime.

The Importance Of Building A Good Brand Name

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Considering how fierce competition is amongst companies in almost every industry is today, learning how to start a business that can last is absolutely necessary. Some people like to set their focus on how to make money quickly without using a key method that’s crucial to any commercial establishment’s financial success, namely: developing a brand name.

This goes way beyond the aesthetic value brought about by fancy logos and font styles. Branding involves “psychological programming” of customers to associate positive emotions and perceptions towards a certain company.

The process of getting people to tie feelings or thoughts of positivity to a company name doesn’t require a master’s degree in psychology, but it does require the entrepreneur to grasp clear understanding of the target market’s needs.

Upon fully understanding what exactly it is they need, selling them products and services that target those needs can be done. Reinforcing customer loyalty may be done by relaying a message which tells them that the perfect solution to their problems can be rendered by the business.

Moreover, these solutions should be given in a timely, sincere and consistent manner to further program the minds of the target market towards believing that the business establishment is the best at doing what they do.

No one can actually learn how to start a business that can make money in consistently large amounts throughout the years without branding. There are several methods that can be used to create a good company image that people will learn to love.

With that being said, the first strategy on the list is to give excellent customer service – while it’s possible for businesses to offer the exact same price of a range of products, the way the staff treats customers will vary from company to company. Always keep in mind that customers will go back to the place where they’re treated well.

Second strategy is to produce professionally designed marketing materials. Upon seeing nicely designed logo, cleverly crafted advertisements plus other materials, people will subliminally associate the company’s image with credibility and financial strength.

The third method is to differentiate the brand name from that of the competitors. This must accurately explain what makes the company better than the rest (without using mudslinging tactics) and why the consumers should buy from the particular business instead.

There are of course other strategies, which may be implemented to further develop the brand name. The ones here are a few basic pointers that an individual should keep in mind when he decides to learn how to start a business, which can make money consistently through the establishment of a trusted and credible brand name.

What Every Prospective Franchisee Must Know

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A whole new world is facing a franchisee! Before newbie franchisees buy a business, they have to get nuggets of wisdom from John P. Hayes, Ph.D., a professor with over three decades of experience in guiding new franchisees to success.

National and regional franchises for sale are different, but there are generalities that can be given to each type. No two franchisees are alike; there are more exceptions than rules to be considered. Dr. Hayes stated that potential entrepreneurs must note that some national chains have an advantage over smaller chains, and that active research and development are essential. People in the industry should not only consider the business today, they should also consider how it would be five years from now. There will be changes, as effected by government regulations, economic factors, and other issues. This is where research and development comes in.

To be successful in business means clarifying unclear information and issues, so ask as many questions as possible. Don’t be embarrassed, as there’s really no such thing as a stupid question. The issue of royalty is a touchy one, be sure to clarify how much percentage is due.

Dr. Hayes stated that franchise success and emotions are not compatible. Of course, emotion is involved when people buy a business. It seems that the emotional part takes precedence in the purchase while the intellectual aspect comes later. When an investor considers franchises for sale, he must understand what the business is all about and find out if it is a profitable venture.

What is the best option for a prospective franchisee? Learn more about the business by attending symposia and seminars that provide more insight into franchising. Dr. Hayes said that in his symposium, he directly tells attendees that franchising isn’t for everyone. He considers this a refreshing alternative to sales pitches that exclaim how everyone can profit from franchising.

According to Dr. Hayes, another good place is the International Franchise Association at franchise.org. They have loads of good material and information that will help people understand how to investigate franchising opportunities.

Dr. Hayes suggested that going back to school is a wise option. A great franchising online course is offered at Southern New Hampshire University. However, the course is offered as a graduate program.

When people buy a business, they have to learn as much about the trade as possible. Many franchises for sale are available, but not everyone will make a successful franchisee.

What To Consider When Looking For Franchise Opportunities

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A wide range of franchise opportunities can be found everywhere, but not all franchises for sale offer good or even mediocre income streams for its owners. There are of course, plenty of seemingly obvious warning signs that indicate a bad investment, such as companies with shrinking systems, unreasonably high turnover rates, and unhappy franchise owners.

However, other indications of a bad franchise investment may not be so recognizable, but need to be identified in order to save the investor from future frustrations. One indicator of a bad franchise would be rapid growth – while continued growth and development is often a good sign of the company’s strength, hasty and massive expansion can be dangerous.

An example of the above statement would be what happened to Reebok in India during the early months of 2012. Subhinder Singh Prem, the former managing director of Adidas India, quickly increased the number of Reebok outlets from 100 to 900 in a span of a few years. A few months after, franchisees ended up with old stock plus other problems. Things got unstable, and the head office at Adidas Germany finally decided to slash one-third of all the outlets.

Another way to tell which franchises for sale are bad bets is during the interview process between potential franchisees and the franchisors. If the latter seems to be willing to sell the franchise opportunities to anyone that’d pay them for it, then it’s often an indication of the company’s instability. All it takes is one poorly managed outlet to make the entire chain look bad, so be cautious about such companies.

Another sign that a particular franchise isn’t worth investing in is an inexperienced or poor performing management team. This group should be able to handle multiple individuals looking to become franchisees, and all relevant details tied to the process of becoming a franchisee as well. If they have experience in franchising in the past, then that’d be better (so long as the experience was positive.)

If a company doesn’t possess ample resources, technology, and staff to handle continued growth, then it’s likely they’ll soon be in over their heads. They should be willing to increase the number of franchise employees, develop current technology and systems to further accommodate recruits so that stability is maintained throughout the years to come.

Last point to take into consideration when examining different franchise opportunities is territorial rights – there are plenty of franchises for sale that don’t offer exclusive territory, therefore it’s possible for the franchisor to recruit another franchisee and place him a few blocks away.

The last thing any entrepreneur would want is competition courtesy of his own franchisor. With that being said, bringing up a discussion regarding this concern is highly recommended.

Why An Accountant Is Important In Retailing Businesses

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Before an individual decides to buy a business or franchise, having a certified accountant on standby, who’s ready to work immediately, is a must. When it comes to operating any commercial establishment, especially retailing businesses, having an employee who can crunch all the numbers at the back-end, make informed decisions that are beneficial for the company’s growth, and handle every financial matter in general, is unquestionably important.

James Layton, CPA and director of Systems Support & Development for the accounting firm Fiducial says that while most franchisees possess the entrepreneurial spirit and are generally operations-oriented, many of these individuals lack the financial skills to effectively run a business.

“A good accountant can provide them with the information necessary to make informed decisions and serve as a trusted adviser on financial matters much like an individual’s family doctor. We all know we want to be healthy but we’re unsure of all that we need to do,” said Layton.

“Our family doctor gathers information, such as blood tests, x-rays, etc. and uses that information to advise us on health matters. The accountant in a similar fashion gathers information, such as reviewing costs of goods sold, ratio analysis, etc. and uses that information to advise the business owner on financial matters.”

This professional can even help an individual with the decision-making process that takes place when he finally decides to buy a business (e.g. the initial acquisition of retailing businesses.)

To be more specific, a good accountant can help out with analyzing and ascertaining the financial strength of a franchisor, which is information that’d definitely aid the franchisee in deciding which franchise to buy. Moreover, he or she can aid with determining the probable earnings and overall potential for profit a certain franchise plus its location may have.

Another role tackled by an accountant involves finding out if the advertising fees and royalties are reasonable. Additionally, the “money expert” should be able to determine whether or not the advertising fees are spent in a way that actually benefits the franchisee – this is important, since there have been instances where the franchisor spent all the national advertising funds for certain areas, while leaving none for other areas.

There are of course, plenty of other roles that an accountant will take on, wherein each role is beneficial to the financial well-being of the company. So when a person finally decides to buy a business, or even a chain of retailing businesses, having a qualified accountant on the team is a must.