Have you ever considered owning your own business? You’re in good company.
According to the Small Business Administration, more than
500,000 small businesses are started in the U.S. each year. But before
most small business owners can concentrate on running their own businesses, they must often invent
their businesses. They must decide on a business name and a brand
identity. They must establish a line of products and/or services. They
must establish prices and procedures that will be accepted by customers
and profitable for them. They must establish billing and accounting
systems and procedures. They must create marketing programs to attract
new customers, and operational efficiencies that will keep them coming
back. There are a lot of critical decisions to make, and sometimes
making the wrong decisions – such as purchasing the wrong equipment,
choosing the wrong location, using the wrong suppliers, making illegal
hiring or firing procedures – can prove disasterous.
Focus on building – not inventing – your business.
What if a prospective business owner didn’t have to invent the
business, but could just focus on implementing an established, proven
and battle-tested business system from Day One. What if he or she could
also gain the buying power, marketing power and brand recognition made
possible by pooling resources with dozens, hundreds, or even thousands
of other small business owners ALSO using the same operational system
and brand identity?
That’s the idea behind franchising: to eliminate the need for
business owners to have to reinvent the wheel before they can get their
business rolling… to eliminate the inefficiency, even lunacy, of
hundreds of thousands of new start-up businesses across the country all
simultaneously making the same start-up mistakes in isolation.
The idea is that instead of you having to invent the sandwich (or
tax service, or consulting service, or travel agency, or pet grooming
service), you can gain the benefit of an established product line
that’s been proven successful in the marketplace. You can learn –
rather than invent – all of the operational techniques necessary to run
the business (all of which are documented in a series of manuals and
taught to you and your staff). You will have a tested marketing
strategy, professional materials and established marketing resources
and vendors. You will have a team of professionals who will train you,
guide you, support you and be there for you. You will be able to
purchase inventory and supplies not as a single unit, but as part of a
large network. And you will have a network of others like you to
exchange ideas, encouragement and support.
What do these advantages cost?
To gain these advantages, you will generally pay an upfront fee (called
a “franchise fee”) that often ranges from $10,000 to $35,000, a
percentage of your gross sales (called a royalty or ongoing service
fee), and contribute to a systemwide marketing fund (often 1% -3% of
gross sales). In addition, you must give up a certain amount of freedom
to do as you please, because you agree to follow the requirements and
policies put forth by the company offering the franchise program
(called the franchisor).
You (the “franchisee” or “franchise owner”) make the investment in
the location, the build-out, the equipment, fixtures, vehicles, etc.
required to open and operate the business. There are franchise
opportunities with initial investment requirements of less than
$10,000, and others that range into the millions. According to the International Franchise Association, the average franchise investment, excluding real estate, is between $350,000 and $400,000.
There’s no guarantee of success, and if you fail, you lose your
investment and may be on the line for commitments you made, just as if
you started your own business.
That’s a very simplified overview, and there are lots of variations.
But, in a nutshell, you gain a certain number of advantages, tools,
trademarks and programs in exchange for an upfront fee, a percentage of
your sales and the obligation to follow the system and agreement signed
with the franchisor company.
There’s no such thing as a risk-free investment. Even in franchising.
“Buying” a franchise is not a magic ticket to success, and not all
franchise opportunities are created equal. Many provide benefits that
far outweigh the fees paid and the freedom sacrificed… Many do not.
Likewise, many would-be entrepreneurs thrive in the structured,
implementation-oriented environment of a franchise, while others feel
stifled and repressed.
If you’re considering business ownership, it is definitely worth
looking hard at the many promising franchise opportunities emerging on
the scene. In the end, you’ve got to make the determination whether
franchising is the right path to your business and lifestyle goals, and
if so, which franchise opportunity and company are best.
In the weeks to come, I will be posting in-depth advice for finding
and evaluating promising franchise companies. Feel free to subscribe to
our feed, or download our free franchise guide (see button on top
page). Also, read 10 Criteria for Choosing a Franchise at FranBest.
What do you think? Leave a comment or question.
Sean Kelly is a 20 year veteran of the franchise industry, and founder
of the award-winning marketing firm IdeaFarm. In 2006, he founded the FranBest franchise networkbest franchise opportunities, the top new franchises, franchise marketing, franchise public relations and small business marketing. Contact him at seankelly[at]ideafarm.net.