Tag Archives: automotive franchises

Questions to Ask Before Making a Franchise Decision

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A franchise is an excellent way to capitalize your opportunities and exercise your skills in entrepreneurship. Before buying your own franchise, it is necessary to get familiar with the type of business you are interested in by coming up with the right questions for the franchisor such as the following:

1. How many franchises are there and where are they situated?

This provides you an idea if the area has other franchises such as automotive franchises that might put your business in direct competition. Knowing this will help you assess if the location is profitable or not.

2. Are training and assistance provided?

A number of franchisors provide assistance and training to new franchisees to start the business and have it running successfully. Sometimes the training is not free so better inquire if additional expenses would be needed.

3. What are the initial and long-term fees and costs?

Some franchisors charge upfront fee so you have to prepare for it before you start franchising. You need to have an appropriate fund to pay for additional fees and other expenses throughout the duration of the business. You also need to ask your franchisor regarding the royalties you have to settle, if there are any.

4. How are other franchisees treated?

Talk to other franchisees to learn the pros and cons of the franchise that you are interested in. They can provide you answers regarding the business instead of asking the franchisors who are more likely to sugarcoat everything.

5. What is FDD or Federal Disclosure Document?

Franchisors are required to provide FDD. The FDD contains the company’s litigation history, which lets you know if the franchisor has been involved in lawsuits or if the franchisor has filed for bankruptcy before. Knowing the franchisor’s financial competence and the risk that you have to face when you purchase the franchise is a big help.

6. What is the previous profitability of the franchise?

Analyze the franchise’s profit margins to know if the business is worth investing in or not. Seek a legal professional to analyze the franchise’s earnings so as not to be misled.

7. What are the restrictions?

When you buy a franchise you are expected to adhere to its restrictions. In most cases, you have to give up and sacrifice your business-oriented freedom and follow the established business model.

Starting your own franchise can be profitable however you need to operate by certain guidelines and rules, which can either help you or hurt your business. As a buyer, you need to spend more time researching on the franchises for sale prior to buying one and the questions provided can help you a lot.

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.

Purchasing a Franchise

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The entrepreneurial among us who are looking at franchise opportunities are wont to neglect consultation with an expert, in a misguided attempt to cut corners and reduce expenses.  However, shying away from the inputs of those with the expertise in franchises for sale may not be cost-effective.  There are many areas of concerns on how to start a business involving franchises, issues which can only be addressed and resolved effectively with the help of a professional franchising consultant.

It is critical for entrepreneurs to choose the franchise just right and tailor-fit to their individual capabilities and business preferences. Those, for instance, with a mechanical bent will likely go for automotive franchises. While the choice may come out naturally for some, an inventory of one’s skills and preferences may have to be undertaken in order to come out with a satisfactory franchise selection.  And this is where a franchise consultant can be most helpful.

There may even be no extra cost involved in having that professional advice. Many franchising companies retain the services of consultants to screen potential franchisees to determine if a mutually beneficial relationship can be achieved with the franchise grant. Another approach is to attend franchising exhibitions and fairs or conduct preliminary research. There are many printed publications devoted to retailing businesses. Online franchise portals are rich sources of information too. Some may even offer matching services. At the end of the day, a consultant may only be necessary to validate an entrepreneur’s initial findings.

The assistance of consultants is also valuable in sourcing the funds to buy a business franchise. Many of these professionals have already established contacts in banks and lending institutions. These institutions often have special departments handling franchising loans, manned by financial analysts who will determine the business viability of the franchise loan application. A consultant with a network at these lenders can help facilitate funding for a franchise which often calls for a substantial amount of capital outlay.

Analyzing the franchising agreement is the ultimate hurdle for franchisees wherein the advice of a franchise consultant would be most helpful. This agreement, after all, is the contract specifying what the franchisee is entitled to get from the franchisor, e.g. services and/or materials necessary for the business franchise. Besides having a consultant, it would also be prudent to have a lawyer evaluate the contract to ensure that the franchise opportunities given are achievable and for real.

Five Franchise Marketing Techniques To Boost Sales

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While many businessmen depend on the traditional “word of mouth” marketing strategy, it can hardly be considered effective in today’s world, especially since the country hasn’t fully recovered from the economic beat down. Whether entrepreneurs run retailing businesses, automotive franchises, or whatever sort of commercial establishment, evolving marketing strategies is unquestionably a huge determinant for success.

That being said, the first promotional technique for generating larger streams of income (or surviving in a competitive industry) is networking. This is sort of a more advanced form of the word of mouth method, but it takes the relatively inferior tactic to a whole new level by utilizing technology.

Getting other people outside the organization to promote the business is an excellent method to attract more customers. This can be done through a variety of medians, such as in person, through emails, and social media networks.

Creating a network comprised of the right individuals (e.g. those who benefit/regularly use the products/services sold), and maintaining good relationships with them is a great way to build a loyal customer base.

By rendering these individuals topnotch customer service, as well as an array of all merchandise they need, they’ll naturally be inclined towards telling others about the outstanding experience they had while shopping at the establishment.

Second tactic is to engage internet marketing – retailing businesses, automotive franchises and all other commercial entities will benefit by using this strategy. Online campaigns can either be paid to draw in traffic, or developed through search engine optimization strategies to channel traffic through organic search results from Google and its counterparts.

Bottom line is that online advertising is a cost-efficient technique for reaching out to thousands across the area, let them know of the goods/services being sold by the business, which in turn will gradually lead to a notable spike in sales.

Third strategy involves exploiting the media – advertising by using flyers, posters, or even radio stations and television networks are effective for drawing local and national attention to any commercial establishment. Using these medians for promotion may be expensive, but they’re great for gaining much needed exposure to markets, and even boosting credibility.

With these three marketing strategies, retailing businesses, automotive franchises, and all other commercial ventures can significantly generate larger streams of income. Consistently using these methods, whenever necessary, will also help stabilize revenue, thereby substantially increasing chances for the business’ survival in its industry.

Determining A Franchise’s Income

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People putting up retailing businesses or purchasing automotive franchises have different reasons for doing so. Some folks do it because of their passion for automobiles, certain retail products, or a natural inclination towards engaging services within such industries. These types don’t mind if they make bundles of cash or not, so long as they get to do what they enjoy doing.

Others build these commercial establishments with hefty profits as their only motivator. Even if they aren’t into cars or retail services, the profits are more than enough to compensate for the perceived disadvantage.

Whether entrepreneurs actually like the trade, or are in it for financial rewards, the bottom line is to make money. People operating out of passion are admirable, but ultimately need to meet the business’s financial demands to keep running smoothly.

Franchisees need to know the potential income of their retail or automotive franchises to get a rough idea as to where they’ll be in the near or distant future. While hiring an accountant is the usual method used by franchise owners, especially those engaged in retailing businesses, the simple formula below can be used to help the entrepreneur do so without professional help.

With that said, the first step is to check the franchise disclosure document (FDD) for total royal payments to determine how much cash current franchisees are jointly paying the franchisor. This document is usually presented by the franchisor to prospective buyers of franchises during the pre-sale disclosure process.

Second step is to jot down the percentage of sales franchisees pay as royalties (commonly referred to as the royalty rate,) as well as the total number of full-time operating franchises recorded in the system.

Third step involves executing the actual formula: divide the total royalty payments by the total number of franchises. This in turn allows the franchise owner to compute the average royalty payment paid by each owner of all retail or automotive franchises.

Fourth and last step is to divide the average royalty payment per franchisee by the royalty rate. The final figure will reflect individual franchisees’ average gross sales.

This formula can be used by all franchise owners of automotive or retailing businesses to identify their potential income. However, it’s important to note that the actual success and possible income of any business doesn’t solely depend on franchisors’ operating systems, but on the management plus entrepreneurial skills of the franchisee as well. 

The Important Role of a Franchise Consultant

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For a lot of people buying a franchise can be very risky and challenging.  Hotel franchises, food franchises, automotive franchises etc., are great opportunities for business-minded people.  However just like any other business, before one can acquire or buy a business franchise, careful planning is needed.

In a recent statistic, a total of 650+ franchises would be available for the year 2012.  If this is true, then it would pose difficulty for people who want to acquire a franchise.  This is where the franchise consultant or a franchise broker comes in.

A franchise consultant is generally defined as someone who negotiates with franchisors in setting up, operating, and helping expand a certain franchise system.  Some groups however are taking liberties in adopting the title and job descriptions of a franchise consultant such as the franchise brokers and even field support staff.  This article will refer to franchise brokers as the people who represent various franchises and help franchisees sell the brands directly to new prospects.

There are several kinds of franchise brokers however among the most popular and largest groups, some common features and similarities are observed.  Most groups of franchise brokers represent 20-100+ brands covering various products and industries.  A lot of franchise brokers utilize personality profiles to help narrow the type of industry that a franchisee should be checking and reviewing.  Aside from this, the brokers must be able to gather enough information regarding the various companies that belong to the franchisee’s selected industry.  This can help franchisees narrow the search thus saving ample time.

However, a franchisee should not expect that franchise brokers are experts in all the brands included in their portfolio.  Thus when it comes to the final decision of whether to acquire or buy a business franchise or not, the decision still falls in the hands of the franchisee and not with the brokers.  Franchise brokers can only help by gathering enough information to narrow the search for the perfect franchise product or brand.  Once a franchise is selected, the franchisee must now create a list plan on what to ask the franchisor before the meet-up for the one-on-one talk and discussion.

Using the service of a franchise broker can help save time and effort when gathering information on hundreds of franchises such as automotive franchises, garment franchises etc.  With help from a broker, a franchisee will not have a hard time getting through the first few steps in acquiring a franchise, which involve the search and selection process.

Successful Franchise: How to Achieve It

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Learning the various ways on how to successfully franchise a certain business is not easy.  For the business to be easily duplicated and to garner high sales in various locations, being proficient in all of its aspects is very important.

Franchisors must be responsible when it comes to the product, the planning, the marketing techniques used, and the types and number of trainings needed.  Whether they are food franchises, automotive franchises, beauty products franchises, or even retailing businesses, franchisors need to make sure that each aspect of the franchise or business are dealt with responsibly and skillfully.  Documenting and outlining the business or franchise will make it easier for franchisees to understand everything about the business that they plan to franchise in the future.

Product:

A business franchise is impossible without a product or idea.  What types of products can attract more customers and establish an interest among them?  Products or ideas do not need to be brand new.  As long as they come with innovative and interesting elements, then they can encourage potential customers to take a look and can eventually establish the interest needed for the customers to try the products/ideas.  Examples are the various food franchises in the market.  These franchises may be selling the same product or service however each has its own unique and fresh element that makes them different and a hit, enough to attract more customers and compete with other franchises.

Plan:

An idea or product is not enough to create a franchise.  A business plan is the next vital aspect to take into consideration.  The plan needs to be feasible enough to work.  With a doable plan, franchisees can easily reproduce the plan to make their franchises succeed.  An effective business plan should include the product line, employee guidelines, management structure, legal obligations and a number of instructions on how to manage a franchised shop or store.  Having a detailed business plan will make things easier.

Marketing Techniques:

To promote a franchise, effective marketing techniques are a must.  Franchisors need to set up and provide franchisees the essential marketing techniques and materials.  Sharing advertising and marketing templates for promotion and preparing information regarding customer demographics are some of the techniques that can help franchisees a lot.

Training:

Franchisors should also prepare employee training packets.  Franchise systems operated in a similar manner can have more success.  The use of operation manual and employee handbook makes it easy for franchisors to assist franchisees on a step-by-step level, ensuring effective application of the franchise techniques needed to achieve success.

Interested in automotive franchises?  Clothes/accessories franchises?  Or food franchises?  How about retailing businesses?  Most individuals may find franchising a complicated type of business operation however with careful planning coupled with innovative products, effective trainings, and excellent marketing techniques, success is achievable.

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.

 

Investigating before You Invest

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Investors who are interested in putting money into automotive franchises should first obtain a copy of the disclosure document of the franchisor. There is a franchise rule that is implemented by the FTC that states that the document must be given to the investor at least fourteen days prior to paying or signing a contract. It is the investor’s right to ask for this document before agreeing to anything. All retailing businesses have this document and the investor must read through the whole document beforehand. Sections that are usually included in a disclosure document consist of the following below:

• A franchisor’s background that states the period of time the franchise has been in business, along with competition, as well as other special laws related to the business, such as permit or license requirements.

• A business background that includes the heads of the franchise as well as a description of the experiences they have.

• A litigation history that states past litigation. It also discusses information on whether franchisees have been sued by franchisors in the past. For instance, if a franchisor sues a franchisee for not being able to pay royalties, this may very well be a sign that the franchise is not successful seeing as the franchisee is unable to make such payments.

• A bankruptcy section that indicates if the franchisor or its leaders have been a part of a bankruptcy, along with data that allows the investor to see the financial state of the franchisor.

• A section on ongoing and initial costs that explains the expenses involved in opening and running a franchise.

• A part on restrictions that indicates the limits, which could possibly minimize the investors say in operating the business.

• A portion on terminations that states the conditions that the franchisor may terminate a franchise based on the contract rules.

• A training section that dictates the assistance and training program of the franchisor and an advertising part that has details on advertising costs.

• A portion regarding former and current automotive franchises and also information on associations of retailing businesses or franchises that run similar establishments.

• A section on the sample size as well as the percentage and number of franchisees who showed earnings at the amount the franchisor has claimed.

• A financials section that includes average income, which actually doesn’t say very much on how separate franchisees perform. It also states gross sales that don’t say a lot regarding the actual profits or costs of automotive franchises. There is also information on net profits.

• A part on geographic relevance, as income varies with geography.

• A portion on the backgrounds of the franchisees of the other retailing businesses.

• A section regarding dependence on earnings claims wherein franchisors may ask investors to sign a document regarding receipt of financial representations while purchasing a franchise.

• Lastly, a financial history portion that provides details on the financial status of the company, as well as audited financial statements.