Franchising

If you're seriously considering franchising, perhaps you have a plan of surfing the net or reading some popular franchise magazines in order to find the one best suited for you. Or maybe you try to make this analogy: "I buy everything else on the internet these days, so I'm sure I can locate the franchise of my dreams there, too". Sure, the web is clearly a wealth of information on every topic imaginable. But while it's a great place to shop for a pair of gold earrings or a new cardigan sweater, it's a lousy place to conduct an effective franchise search.  Trying to find your ideal franchise using this strategy will, at best, completely overwhelm and frustrate you.

Most franchise seekers have absolutely no idea of what is involved in carrying out a thorough franchise investigation on their own. Aside from the financial investment, there is a substantial time commitment to consider. Try conducting this search alone and you'll see what I mean. 

An experienced franchise consultant can effectively and efficiently streamline the entire search process for you, sparing you all the aggravation and headaches mentioned above. 

A franchise consultant is a recruiter for the franchise industry and a trusted source of solid business opportunities. He helps to clearly identify an appropriate franchise vehicle through the process of effective qualifying, matching, and presenting. 

There are several major advantages and benefits to using the services of a seasoned franchise consultant. Here are just 5:

The entire service is free to you, the candidate. The consultant is paid by the franchisor for referring a qualified individual, both financially and professionally, who ultimately purchases a franchise.

The consultant has pre-screened hundreds of top franchises for you. Only the ones that meet the highest of standards will be presented to you. Top new and established opportunities are added regularly.

A complete professional and personal profile is designed. Your consultant pinpoints the perfect opportunity for you based on your interests, talents, background, and goals. 

Professional introduction to the franchisor. After you are presented with an opportunity that excites you and that you want to pursue, your consultant 'takes you to the front of the line' and makes the introduction between you, the candidate, and the franchisor. The franchisor will respect you immediately, knowing that you, the candidate, are both qualified and ready to move forward.

One of the most annoying aspects the franchisor deals with is tire kickers. They despise having to answer phone calls from less than serious, under-qualified people asking stupid questions about their franchise model. It is very welcoming to have a top-notch candidate referred to them by a franchise consultant who asks intelligent, engaging questions.

Thorough education provided on investment options and types of ownership. Most franchise seekers aren't aware of the costs involved in purchasing a specific franchise, and the consultant offers vast insight into the various types of franchises and their investment requirements. He can also suggest financing options that were never considered.

As you can clearly see, all three parties-the franchise seeker, the franchisor, and the consultant-win in this very productive business relationship. Unless you are absolutely positive about the specific franchise you wish to pursue (and are fully qualified in every way), it would be a big mistake to not utilize the free services of an experienced franchise consultant.

Register for your Free Franchise Consultation  The Franchising Authority will help you find your perfect franchise!

If you are considering buying a franchise, especially an internet business model, you should make yourself aware of the disadvantages of a franchise as well the advantages. There are many business models you can choose from, ranging from a traditional internet home business (if anything on the internet could be described as 'traditional') to a full blown website design model that may be expensive, but can be a genuine business opportunity.

Buying a Franchise is attractive to many who are starting their own business for the first time because the branding has already been achieved, and the marketing is frequently taken out of your hands. Much depends upon the type of franchise you take on, since some handle all of the marketing, while others operate more like an affiliateship rather than a franchise and leave you to carry out your own advertising.

The more famous franchises, such as McDonalds and Starbucks not only offer their famous products for you to market, but also advertise them nationally for you. You have no need for local advertising, and you are provided with all the training, product and stock control systems that you need to run your business. However, such offline franchises can cost over a million to set up, of which you will be expected to provide around 20 - 25%.

That is one reason why internet franchises are becoming more popular and also it is possible to start up your own business with very little initial outlay. With a franchise you are purchasing the right to trade under your principal's name and will generally be provided with all the training and support needed to run your business. If yours is an offline franchise, you will be assigned an area in which you can operate, which could or could not be an exclusive agreement for that area.

However, some internet franchises do not have such restrictions, and now is the time to become involved since it won't be long before the more popular businesses are over-subscribed. Such internet franchises are involved in a lot more than just providing PC services, but also include such businesses as video rental, share trading and Forex, and real estate. If you are web savvy, you can also become involved in internet and website consultancy on a franchise basis and sell equipment and web hosting services.

The advantages of choosing a franchise are:

o An established brand that is recognizable in its specialized area, so that customers are quickly attracted to the name without the need for excessive advertising.

o With some franchises you have the benefit of national advertising supplied for you - this is paid for from your fee or revenue-related payment to the franchisor.

o Support in start-up, and less risk due to a business model being available to you immediately.

o Product supply is guaranteed and you have little need to chase up suppliers.

o Start-up finance is generally easier to get than if yours was a non-franchise business.

o Traditionally, franchises have a higher success rate than normal online business start-ups.

These are pretty impressive advantages, but there is a downside to buying a franchise business that you must be aware of. Much depends on the individual, but these are the major problems that could be significant to you:

o The franchise fees to be paid before you start can be high. However, not as high as fast food chains that can charge up to $500,000 or more for a start-up. The average is around $20,000 - $40,000 with a 'royalty' fee charged at a percentage of the takings.

o The franchise agreement might restrict your ingenuity with its strict rules on how the business should be operated.

o The more money you make, the higher your royalty fee.

o The national advertising might seem fantastic, but you will likely be charged for it in your marketing levy.

However, if you are cool with all of this, then there is no reason why you shouldn't go ahead. For a newcomer to the internet, buying a franchise could be a very good business model for entry into web marketing, and there are many online companies that operate franchises nationally and internationally.

An internet search using Google or one of the other major search engines should provide you with a good selection of options. It is not always easy to find a good online business model, but if you are really interested, try to find a website that can provide you with more detailed information on how to evaluate a franchise before you approach the companies themselves.

Business franchising has a long history of successful business companies expanding their businesses through franchises. The earliest of franchising ventures take us as long ago as the 1850s when Isaac Singer expanded his line of sewing machines. Some of the veterans of business franchises that need mention include Coca Cola which started franchising at a time when no one else was doing it. The modern day franchising of food chains started in the USA with a company called A&W Root Beer, which started the trend of quick serving food stores, in the 1930s. Franchising includes business systems that involve a "franchisor" who sells a certain business rights to the "franchisee" who purchases these rights in order to conduct the business that may include original terms of the franchisor.

Franchising helps a business to achieve lateral growth, which means the increased sales of its products through these various franchise outlets. The advantages of business franchising are many, including a quick launch pad to aspiring entrepreneurs, and growth of the parent company. Relatively less training and skill levels are required for the franchisee in order to operate the business franchise, therefore, the parent company ends up spending less time and money behind a single franchise outlet. Franchising leads to the expansion of the mother company, and this is probably the biggest payoff to the same.

On the downside of franchising, there are concerns for the parent company regarding the control and profit making of a single franchise unit. Epistemological origin of the word "franchise" includes the French root words of "honesty", but it is difficult for the franchisor to take this for granted. Individual franchising units may lead to problems of pricing and profitability concerns, as the rights allotted to the franchisee cannot always be regulated by the franchisor. Adding to the equation of the franchisor and the franchisee are other issues of control, use of raw materials, shipping of materials and other regional problems that crop up with the individual franchise unit. Legal terms are binding to the franchisee, and the violation of this result in the poor working of the franchise system, which leads to the loss in money.

The legal aspects of business franchising are significant to the proper functioning of the franchise. The legalities of franchising include involving the franchisee and the franchisor in trust based cooperation, and if this is tampered with, there is a risk of hampering the business franchise. Several countries have individual franchise regulations and rules which should be followed by all the legal business franchising units in the country. Recognized franchising units can only allowed to function if they practice the norms that are laid out by the country. This is applicable to countries like India, and China, where the governmental regulations are vital for the franchising company. There are some countries which do not have any such specific franchising laws, which include countries like the United Kingdom.

The world of business franchising has a lot to do with mutual cooperation between the franchisor and the franchisee, and this ensures profit for both.

Many Americans dream of owning their own business and being in control of their destiny. The only issue is that very few folks will actually dive in and take the risk to become their own boss. The reason for this holdback: it's the fear of failing.

The rate of failures on startup businesses varies from person to person. However, Scott Shane of Case Western Reserve University often has his data cited. He states that failure rates in one year are about 25 percent and 10-year failure is about 71 percent. What do these numbers mean? If four businesses begin in one year, one business is bound to fail in that first year. 71 percent of businesses currently open will be shut down in 10 years.

Understanding Entrepreneurship In Franchising

Since failure rates are high, it's of no surprise that very few people will try their hand at it. Many people don't know that a way to become a business owner is to start a franchise. Franchises have less of a chance of failing and are actually do well monetarily. Using the same 10-year study from above, nearly 62 percent of franchises are still in business, an extremely high figure.

Why Franchises Stay In Business

Why is it that franchises stay in businesses longer than a startup company? Franchises have a large quantity of advantages that novice entrepreneurs don't have, which means the venture is less risky.

Five Advantages of Franchises

Advantage 1 - Training and Support

Franchise businesses will give new franchise owners plenty of training and support in the beginning. Franchisers get a fraction of the profits so it's in the best interest to ensure that the spin-off franchises do well. Smaller franchises offer people consequential support.

Advantage 2 - Purchase Company Model, Not Just Name

The big reason franchises tend to last and thrive is that the business model is already working. It's not just about the name or the brand; it's the model itself that helps to make this franchise successful.

Advantage 3 - Bargaining Power

When you have a franchise, you have some bargaining power with your suppliers. Independent, new business owners don't have this kind of power or luxury and must earn it, unlike a franchise.

Advantage 4 - Expert Support

When you get involved with a franchise, your business is not alone. If you ever have problems or questions then you seek out some advice. Whatever business franchise you go into, you're bound to have hundreds of people you can turn to that would love to give you advice so that you succeed. Many larger franchises will also give individual training and support.

Advantage 5 - Well Capitalized

Most franchises are well capitalized, which makes them have a high survival rate. Most startup businesses don't have this luxury. People who want to get involved with franchises usually have just enough requirements to buy into the business.

Five Disadvantages of Franchises

The disadvantages of franchises are pretty clear-cut. Make sure to understand them before you decide to that the franchise business is right for you.

Disadvantage 1- Loss/Lack Of Control

Independent franchises often have to follow the guidelines set forth by the franchise including what kinds of tables to use, wallpapers and more. If you don't want to give up that control, this won't be the business for you.

Disadvantage 2 - Less Long-Term Profits

Franchises are a big business but making it rich isn't always there. You'll earn a decent income but nothing like Microsoft or any other Fortune 500 company.

Disadvantage 3 - Hard To Sell

When you have a franchise, it's harder to get out from underneath it especially if it seems the parent company is having problems.

Disadvantage 4 - Possibility Of Parent Company Going Out Of Business

It doesn't matter if your business is doing good or not; if the parent company goes under, so will you. Make sure you choose a company that's been doing well, both in good times and in bad.

Disadvantage 5 - Possibility Of Getting A Bad Name

When a franchise fails to do well, you could be indirectly affected by it. Your reputation will be tarnished just because of the name.

Does the notion of being self-employed and entering the business world with an already well-established business sound appealing to those entrepreneurial ears? If so, then a franchise pursuit might just be what you're looking for. Starting your own self-sufficient, soon to be booming and successful business is literally right around the corner, you just have to take that first initial step in that direction. But, before taking such a forward franchising motion, there's much to absorb and consider concerning the various franchising avenues available. Factor in your prior business background, estimated investment costs and overall personal requirements and you'll be surprised with how much there is to consider in terms of determining if franchising is in your best interest.

Know beforehand that franchises are dualistic in nature. The possibility of lucrative and diminutive outcomes are there - gaining big and losing big are both quite possible. Financial success through a franchise is only ever certain when owners are adept enough and steadfast in their business approach. This said and getting it out of the way, it's time to outline what you need to do before jumping into a decision. The key is to research and weigh your franchising options.

It All Boils Down To Investment Amounts - Are You Willing or Able?

It's clear you're willing to put out money to start a franchise since you're reading this article. But know this - there are hefty costs involved here. Be expected to pay an initial one time -usually non-refundable- franchise fee to gain rights to open a franchise. There are different types of fees: startups, insurances, licensing, inventory, royalties and marketing. And of course, there are varying fee totals for the different types of franchises out there. This said, consider which franchising options are most appealing to you, then look into the attached fees.

Take your financial capability into mind. After calculating fee totals for various franchises you're leaning toward, see which ones best match your initial budget. Do not venture into opening a franchise beyond your initial means. Stick to realistic franchise options, first and foremost.

Have A Background In Business? This Matters

Beyond financial considerations, take in your prior business experience. Do you have any? If not, your vision of operating and pushing forth a moneymaking franchise might end up falling backward and hitting the floor of failure quite abruptly. To avoid this, be certain you have previous experience in the realm of your desired franchise.

Say you want to open a brand name franchise, specifically a restaurant. It would be ideal if you worked in the restaurant business a few years beforehand. During that time period, you've most likely gained all the ins and outs knowledge, the fundamentals as to how such a business is successfully and professional conducted. If this is the case, take such knowledge and position it toward focusing on your desired restaurant brand name franchise.

On the other hand, if your business background is grounded elsewhere, say in the travel or banking industry, then pursuing franchising options paralleling with those two would be your best fit.

Going With That Best Franchise Fit

Think of choosing a franchise like you would a new pair of shoes - the fit has to be there. Moreover, you know ahead of time, before shopping for new shoes, just exactly what you're looking for and what you'll be willing and able to spend. You'll keep an eye out for types of shoes you're most familiar and accustomed to. And the selling factor for you concerning a franchise, just as with purchasing a new pair of snazzy shoes, is mainly a feeling of comfort. This is not to say that selecting a prospective franchise is comparable to picking a pair of boots. Yet, it does involve some similar aspects, ones in which you should put toward determining which franchise is your best fit.

Use your personal tastes and preferences toward purchasing a specific franchise. Doing this, along with considering the above financial and business background factors will without a doubt make your franchise pursuit sure-footed, targeted and, dare you conceive it, monumentally successful.

When choosing a new franchise to invest in it is vitally important that you read through each part of the disclosure document and particular the section on current and former franchises. In this document section about other franchises that have been bought, it is key to establish which franchises are in operation and making a success of their new franchise and which are not.

Look at how many people have bought a franchise in your locality as this will increase the competition and make it more difficult for you to generate business. It is also key to find out which franchises have been terminated, if this number is high then this may indicate problems with the business model and you should not buy a franchise with this company. Some companies try to hide the failed outlets by buying these failed outlets and putting them under the companies name as a current franchise opportunity.

If the new franchise, that is offered to you in your location, is an existing outlet then check how many previous owners have occupied it and over what period of time. If the number of owners is high over a short period of time then the franchise opportunity for this outlet is not good or the franchisor has not supported the area sufficiently.

When looking over the disclosure document in this section it should list all of the franchisees that own a current a franchise and all the franchisees that left the franchise over the previous year. You must contact these franchises to establish that the franchisor is reliable and true to their word before you buy a franchise from them. This is the most reliable way of verifying the franchise and making sure you are investing in the right franchise opportunity. Try to visit as many of the new franchise owners as possible to ask them questions about the running of the business and how it is working for them. You must see for yourself the type of business and clients they are bringing in to give you a better understanding of how a new franchise operates.

Here are a few questions to ask the current and previous franchisees to make a judgement if you are going to buy a franchise.

1. How long has the franchisee been operating the franchise?
2. How much did the franchisee pay for the new franchise?
3. Were there any hidden costs involved with the start up of the franchise?
4. How long did it take the franchisee to start making a profit?
5. Is the franchisee happy with the product or service they are offering?
6. What background did the franchisee have before deciding to buy a franchise?
7. Was the franchise training adequate for the role?
8. Is the franchise advertising your product, service and area?
9. Has the franchise fulfilled their contract obligations?
10. Would the franchisee recommend the franchise opportunity?

Some franchises may give you a list of selected franchises that are doing well and they also may be paying them a set amount of money for every referral, so be careful to talk to the right franchises. Take into account all of the answers to the above questions and you will be able to make a judgement whether the franchise opportunity is right for you.

Franchising has been in the Philippines for 94 years. With the entry of Singer Sewing Machine in 1910 which introduced product distributorship. Numerous companies embraced this concept as their vehicle for business expansion over the years. From 1910 to 1965, businesses staked their flags in the Philippine economy through PRODUCT DISTRIBUTORSHIP. Some of these multinationals were tire and pharmaceutical companies.

The take off was slow in the early years as the succeeding companies like A&W Restaurant known for its root beer entered in 1965. The first outlet was established on Highway 54 (now popularly and historically known as Epifanio Delo Santos Avenue or EDSA) near the Big Dome-Araneta Coliseum. The concept was a drive-through where women food attendants garbed in mini-skirts, black stockings and in roller skates would serve customers inside the comfort of their cars. Trays clamped by the side of the door and mugs with cold refreshing root beer partnered with foot long hotdogs were served. Its set-up was exactly the same as found in the US branches during those years. What this company brought was another form of franchising, which is known as Business Format. From then onwards most entrants into the market embraced this concept, in fact, so widely used not only in the Philippines, but all worldwide.

Product Distributorship

This is a form of franchising where owners of products allow other parties to sell or distribute their products or even use their trademark as a dealer. There is minimal or no control of operations. The relationship is centered on the quality of products sold.

Business Format

A form of franchising used by 90% of companies involved in franchising. This is the reason why franchising is considered the most successful way of expansion worldwide.

In business format, the franchisor, more than his registered trademark and products, has developed a business system that is made available for use to franchisees. Compliance to the business system is the core and essential element of their contractual relationship embodied in a franchise agreement.

The first survey of franchising in the Philippines done in 1995 revealed that there were a total of 50 operating foreign franchisors at that time. The success rate of foreign franchisees is 97%. In 2003, there were 315 foreign franchisors in the country with 87% success rate.

Philippine Based (Home-Grown) Franchises

Earliest recorded homegrown company that used business format franchising was PANCAKE HOUSE. It was franchising since 1978. PANCAKE HOUSE is still active in franchising and has transferred ownership a few years back.

In 1996, there were 94 companies using franchising as their route to expansion and the number has substantially increased to 481 in 2003. The success rate is a good 90%.

Philippine Franchise Scenario

Franchising in the country evolved from the US Franchise System. There are, however, no laws that regulate franchising. Companies and franchise developers use international franchise practices as reference and as a guide to pursuing this type of business. The increasing number of homegrown companies using franchising in their expansion can be attributed to the presence and increasing number of foreign franchisors. They served as motivators and inspiration for the local entrepreneurs.

Franchising for years has been the monopoly of food sector. It was only in mid-1990's that service and retail entrepreneurs used franchising.

There was an absence of franchise education in the country for decades. Franchise Conference and Seminars started only in the mid-90's. Franchise Associations were also formed with the vision of professionalizing and standardizing the franchising as well as police their own ranks.

The decision to start a franchise should not be taken lightly, but it can prove to be very financially and emotionally rewarding. I'm going to discuss some of the steps you should consider to ensure your franchise succeeds.

Step 1: Understand What a Franchise Is

Before you begin, you need to understand the meaning of the word franchise. The term signifies a legal arrangement in which one party called the franchisor grants the rights to market products or services using the trademark of their business to an individual or group of people called the franchisee. The franchisee can then market the products or services using the methods specified by the franchiser. In return, the franchisee must pay the franchiser specified royalties and fees to use these rights. Rather than an actual business or industry, franchising is a method businesses use to market and distribute their products or services. Both parties share an interest in ensuring the company succeeds.

Step 2: Review the Benefits of Franchising

Another step before you actually decide to franchise your business is to list all the advantages. Consider that you will be able to expand much more quickly and less expensively by franchising. Another advantage is the fact that the more franchises that exist, the greater your purchasing power. If you are considering purchase a franchise, you can fulfil your dream of becoming self-employed and start running your business more quickly. As a franchisee, you will normally gain valuable ongoing support, training and advice from the franchiser. Raising finance to purchase a franchise is also much easier than raising the money to start your own business.

Step 3: Consider the Disadvantages of Franchising

Like any business venture, starting a franchise has its disadvantages. As a franchiser, you will lose a significant amount of control over your business. As a franchisee, you will lose creative freedom as you need to follow the requirements established by the franchise owner. You also have to pay a certain percentage of your profits to the franchiser.

Step 4: Requirements to Set Up a Franchise

You need to investigate the particular requirements to start a franchise in your country. The legal requirements vary greatly, depending on where you live. For example, the British Franchise Association requires that all franchisers possess at least one year of experience running a business before they can franchise. If you are a franchisee, you should consider a pilot operation that has an audited set of accounts. This makes it easier to evaluate if the business is going to be profitable.

Step 5: Intellectual Property Rights

At the beginning of the franchise agreement, the franchisee will obtain a package outlining all the intellectual property rights. It's important to ensure that the franchiser's rights are protected. The intellectual property may consist of a trademark, patent, registered design or copyright. The franchise agreement will specify exactly which licenses will be awarded to the franchisee and how they can be used.

Step 6: Operating Manuals

If you are planning to start a franchise, you need to obtain a detailed operating manual. This document will outline the essential information the franchiser has gathered while operating the pilot scheme. The manual will disclose any relevant information necessary to run the franchise successfully, including sales, reporting, equipment, marketing and accounting requirements. This document contains valuable information about the business. Hence, the franchise agreement will normally specify that the contents remain confidential and are never shared with any third parties.

Step 7: The Premises of the Franchise

You need to determine if the franchise you are planning to start is mobile or property-based. Some franchises may be run from your own home, whereas others are operated with customised vans. The location of the business may be crucial in the development of the franchise network. Hence, the franchiser may choose to retain control of the premises.

Step 8: Establishing a Franchise Agreement

If you are considering offering franchises, you have to prepare a franchise agreement. This document will permit the franchisee to run the business according to the specified legal obligation and intellectual property rights. The agreement must meet local law requirements, and it should protect the franchiser and present a workable document to the franchisee.

Step 9: Determining Franchise Fees

Before starting a franchise, you need to determine the fees involved. As a franchisee, you will be required to pay an initial fee to the franchiser for the privilege of joining the franchise network. Franchisees may also pay management fees, although they are sometimes included in the wholesale price of the product. Lastly, the franchiser usually receives ongoing royalty fees that represent a specified percentage of the profits.

Step 10: Understanding the Obligations of Both Parties

As a franchiser, you are obligated to provide support, training, a detailed operating manual and a franchise agreement to the franchisee. You also agree to promote the brand and to avoid competing by not granting other franchises in the same area.

As a franchisee, you must run the franchise business according to the guidelines established in the manual and the rights specified in the franchise agreement. You are responsible for keeping proper records, obtaining insurance, ensuring confidentiality, complying with intellectual property rights and maintaining the franchise premises.

Like all things in life, there are always list of the top this or that. Franchises are no different and can be put in list like most popular, range of cost and ease of purchase. Business brokers also have their own favorites to show prospective clients.

If a potential franchise buyer is thinking about buying a franchise, then looking at rankings by various categories makes sense, as it will let them learn a great deal by comparing different franchises. The Internet is a great place to learn a lot from these list in a short amount of time.

Types of franchises

There are many different franchises besides the fast food ones that most people are aware of like the hamburger chains, the chicken franchises and the seafood places. There are many different retail type franchises, service franchises, trade type franchises and tax prepares. In fact almost any business type you can think of has a franchise competitor. Some of these franchises have a very high rate of success. Some may depend mainly on the individual that buys it such as a service business. If the owner is good at prospecting and selling their service they will be successful. It they are not good at it they may not make it, as the franchise is not well enough known to bring in enough customers. This accounts for the lower ranking of many of the franchises a person has never heard of and had no idea they even existed.

Ratings by cost of the franchise

A person can buy a franchise for as low as a couple of thousand dollars and the price goes up from there to well over a million dollars for some of the name restaurants. The low cost franchises seem to be home based and a single person operation. What many of them offer is just a business plan on how to do the business. This can be a steep cost for a plan with no other support or help.

At the high end you get training, on going support, a serious edge on being successful as these franchises have a very high percentage of success.

Popularity of these high end cost franchises also accounts for the fact that they sell at the upper end of the range. The success rate is high so they are popular.

Their popularity means the franchise company can get more money for them than the lower cost franchises. It is all about future success to the new owner and getting his investment back via profits.

Ease of purchase ratings

Low cost franchises are higher in the ratings since it takes less money to buy. Higher cost franchises may be more difficult to buy unless the buyer can arrange financing privately or through the franchise people. An investor group or a very well off private party usually buys the really high price franchises. Low cost franchises will sell on terms as they have little further cost in the franchise. The higher priced one will help a great deal in finding the money for a buyer they feel will do well with the franchise. They have over time developed all kinds of finance help from lenders to investor groups. They are really interested in selling to people they think will be good franchise owners. They want to have networks of successful franchises.

Business brokers have a selection of businesses to choose from Businesses brokers usually represent sellers who have an existing business they wish to sell. Their lists are varied among all of the types of businesses at a range of selling prices. When a buyer comes to them they can show buyers businesses that are in trouble and ones that are prime examples of a successful operation. They also have all types of businesses for sale, so the buyer is presented a choice of business types. This could be advantageous as the buyer may see something in the list that they have not thought of or even considered.

The business broker if experienced will have a very good idea of the real worth of the businesses that he represents. It is very likely professional evaluators arrived at the selling price. The prices have some fudge factor built in, but they are closer to the real value than a guess.

The great many choices these brokers are able to show prospective buyers should work to the buyer's benefit. The choices are many and of all types of businesses that could be considered for purchase. This ability to look at all types of businesses at the same time and compare prices and potential investment return is one of the reasons that all buyers should at least have a discussion with a business broker or two.

These conversations will cost nothing, but they can help the buyer make better choices between a startup franchise and an existing business.

Talk with other franchise owners

If you have narrowed the businesses to certain franchises, it would be wise to speak with owners of other similar franchises. The information they will provide will help you make a better decision When you find out what they like and don't like about the franchise, this is excellent material to think about. There is nothing like being warned about areas of contention and possible discontent in running a franchise. At least it will give you areas to question with the franchise people. After the sale is not the time to find out about problems you were not aware of and it certainly is not the time to be surprised. You may also find that there is room for some negotiation on the franchise price that was supposedly set in stone. Nothing is always locked in stone. Something that is claimed to be company policy is just that. It is an arbitrative decision and was not handed down from on high. Policies are changed all the time within companies. If you really do not like the policy walk away and find a different deal.

Conclusion

Looking at the ratings of franchises by different criteria will give the buyer many ways to look at different franchise opportunities. Comparisons by different means help the buyer get a perspective on the business they may get no other way. Looking at price ranges and understanding what they really mean is an eye opener to the buyer of a franchise. The fluff in the price can be guessed at by comparing different franchises. Also popularity and success seem to have some degree of predictability.

Taking the time to discuss what the business broker may have in his client list may be more than worthwhile. There may be a business on the list that the buyer never considered that would be better suited to the buyer's needs and pocketbook. You will not know unless you look.

Use the Internet for comparing the different franchises. This is the fastest and easiest way to do the comparisons. Any information you want on the franchise business can be found on the net. This is a superb source for franchise information, stats and ratings. The net makes finding any information you want available by searching for it through a search engine.

It is inevitable that starting and successfully operating any small business today is always going to generate an ever evolving list of complaints and disappointments for most owners. Entrepreneurs that choose franchising as the means to open a small business will have many of the same complaints as independent owners do along with a few unique ones because they are ultimately bound to a long term relationship with their franchiser. Here are a few of the most common complaints I hear from franchise owners regarding their relationship and experiences with their franchiser.

My Franchiser Is My Competitor:

This is one the most common, and in my opinion most valid complaints I hear from some franchise owners. It is the nature of small business that you are going to have competitors, but when your franchiser is creating the competition and diluting your market share by opening multiple locations uncomfortably close to yours that is a tough pill to swallow. Before signing any franchise agreement make sure you thoroughly investigate and understand the rights and restrictions for your specific franchise territory. This would include speaking to other current franchisees in your target territory and asking them to share their experiences with competition from other franchisees.

Those Monthly Royalty Fees:

I have found that many new franchisees are so excited about getting there location open that they often defer any concerns about paying monthly royalty fees. However, once the initial excitement wears off, and they are involved full time in the hard work it takes to become successful those royalty fees become a much more tangible reality and commitment. The biggest complaint I hear from some franchisees regarding paying royalty fees is that they feel the franchiser does very little or nothing in return for them. Whether that is true are not (I have no doubt that it is in some cases) unfortunately at the end of the day it is ultimately the responsibility of the franchisee to adhere to the terms of the franchise agreement they signed. Before signing any franchise agreement make sure during the disclosure process you speak to as many current franchisees possible and ask them if they feel they are getting real value from the royalty fees they pay.

Too Many Restrictions:

I often hear complaints from some franchise owners regarding the number of operating restrictions placed on them by their franchiser. Many complain that the franchiser exerts onerous control on how the business can be operated and are often frustrated that they are unable to react independently to local market realities and demands. I am sure a lot of these complaints are valid, but I guess I am a little less sympathetic to these types of complaints for the simple fact that the franchisee chose to buy into a franchise system with known controls and restrictions. Many of which have been proven to given the franchisee a greater chance of success- which is the essence of the franchising. That being said, I would advise before buying any franchise business you honestly ask yourself if you have the right personality to follow a pre-determined franchise business system and all its inherent operating rules and restrictions.

Oversold Potential:

As a Business Broker I have heard a number of new and established franchise owners complain that they felt they were oversold on the potential earning power of their franchise business. This is a tough complaint to validate because it is generally a known fact that most franchisers do not disclose their earnings and are generally very careful about discussing earnings potential for a typical franchise location. That being said in my experience sometimes the franchiser (or their sales people) along with existing franchisees can sometimes paint an overly optimistic picture about how soon and well a typical franchise location will perform. Your best bet to mitigate this potential disappointment is to speak candidly with current and former franchise owners and ask them if your expectations are overly ambitious.

Summary:

Please keep in mind that all prospective business buyers should thoroughly investigate any franchise or business, obtain all appropriate disclosure documents available, and seek expert consultation prior to making any investment decisions.

As a franchise sales consultant I am often asked what are the advantages of the master franchising business model and buying a master franchise. Master franchising, some times referred to as sub-franchising, is a form of franchising that allows an individual to buy the rights from a franchise company (The Franchiser) to sub-franchise their business concept in a specific territory or large geographical area. In general the individual or master franchisee's goal is to sell and open a pre-determined amount of franchise units in his or her specific territory. The master franchisee benefits from populating his territory with new franchise locations by receiving a share of the franchise fees and royalty fees generated by each unit opening and operating in their designated territory. 

The reason master franchising works is that it creates a "win win" scenario for both franchiser and the master franchisee. By allowing its concept to be sub-franchised and developed by qualified individuals broken down by territories, the franchiser can often grow its system much faster and more efficiently than trying to sell single units itself. The master franchisee in return can also benefit in numerous and significant ways from this arrangement including the following below.
 
Residual Income: The ability to develop a residual income stream is in my opinion the most attractive benefit and number 1 reason to buy a master franchise. Although all franchise agreements are slightly different, typically the master franchisee and franchise will split the royalty fees (typically 5 to 7%) generated by the units opened in the master franchisees territory. Imagine getting a nice fat royalty check every month based on the gross sales from all the franchise units in your territory you sold. This is a personal income stream that can potentially last a lifetime!  
 
Franchise Fees: With most master franchising agreements when you sell a franchise unit in your territory you typically receive a franchise fee or commission from the franchiser for your efforts. These fees tend to range anywhere between $15,000 to $30,000 and generally most franchise agreements allow you to keep all or most of it!
 
Low Overhead: Because being a master franchisee at the end of the day is a "sales job", there is no real need to rent or lease a retail office space. You can in most cases easily start out in a home based office and accrue all the benefits and flexibility that option offers including low overhead, no commute, generous tax deductions, more personal freedom, and a better lifestyle.
 
Few Employees: Most master franchisees typically start out as a 1 person owner operated business. Once the business reaches a certain critical mass regarding number of units sold or operating, you may in some cases find it advantageous to hire some support staff such as an administrative assistant or sales assistant to keep the business growing and running smoothly. In general however, most master franchisees don't have a lot of employees and all the headaches and costs associated with having a large staff.
 
High Success Rate: As with all franchise businesses, master franchises generally enjoy a very high success rate. Keep in mind however that not all master franchising opportunities are alike.  It's important to make sure that you adequately investigate and research any franchise opportunity before moving forward. As part of your due diligence I would ask the franchiser if you could speak with an existing master franchisee in their system to get some feedback on their experiences.

If you want to save yourself the hassle of a commute and desire a flexible schedule, your own business and, if applicable, the ability to be a stay-at-home parent, home based franchises will give you a world of possibilities.

You can choose from a wide variety of options in every franchise industry, and benefit from a tried and tested operation, giving you more earning potential and less risk than going it on your own. These opportunities allow you to be part of a recognised brand name, and provide you with the training, support and launch assistance necessary to run a successful business. You will also benefit from a network of franchisees with whom you can exchange advice on how to best run your home based franchise.

Some examples of home based franchises are listed below. Many of these require simply a computer, an Internet connection and a telephone.

o Internet Franchises: This includes web portal franchises, which allow the franchisee to work from a home office and source advertisers for their website. There are also other online businesses and Internet services franchises that allow you to work from home. These may involve finding clients for websites or offering various services online.
o Magazine Franchises: These franchises are either actual print publications or online magazines, which focus on the local community. You work from home to find local businesses to advertise in your publication.
o Business Consulting Franchises: You can assist business with important tasks like business improvement, training, financial management and development from your home.
o Dating Franchises: By planning events from home, you can play matchmaker to singles. Occasionally, you will also need to leave the house to attend the singles events you plan.
o Travel Franchises: You can sell travel and vacation packages with a home based travel franchise.
o Children's Franchises: A variety of options are available for home based children's franchises, including children's party, educational, drama and fitness franchises. Some franchises may require you to hold events and classes outside of your home.
o Cleaning Franchises: Commercial and domestic cleaning management franchises offer you the ability to run a home based small business. You won't be doing the cleaning - you'll be working on the sales and management side of the operation, trying to get new clients to sign on from home. Then, you will recruit cleaners to fill these contracts.
o Computer Franchises: By providing clients with IT support and computer troubleshooting assistance, you can operate from your home. However, this option may require you to go to the client's home or office to provide services as well.
o Automotive Franchises: This includes car valeting franchises, which are often van-based operations that give people the convenience of getting their car washed whilst running errands. There are also many auto repair franchises, including dent removal and wheel specialists that are home based, although they require mobility. This would not be an ideal option for the stay at home parent.

It is important to research all your options before settling on a franchise, as you want to find the one that best suits your interests and fits your reasons for pursuing a home based franchise opportunity.

Before agreeing to invest, make sure to talk to people in the head office, current franchisees and even a franchise consultant. Ask important questions about earning potential, if the franchise is really "home based," and what's included in the franchise package. Make sure to find out whether or not you can run a home based business in your area. Check for regulations on using your home as a workplace.

Also, make sure to ask yourself whether or not a home based opportunity would be for you. After all, you need to be motivated, disciplined and highly organised to run a business that offers so much freedom and flexibility. Make sure you can set your own schedule, and separate your work and home life comfortably.

Beware of home based opportunities that are simply schemes to take your money. These scams will often be unwilling to disclose the exact amount of money you need to invest to be a franchisee and may be unwilling to put all the terms you have agreed upon in writing.

The 21st century, in its first decade, is looking like it will be the century of the franchise. It's impossible to drive to any of the thousands of shopping centers and malls anywhere in the world, or down the main thoroughfares of any major suburban areas, and not pass franchise after franchise, ranging from restaurants, to dollar stores, to cellular providers, to fitness centers.

A huge number of people both recognize and patronize the franchise giants. But not nearly as many realize that there are hundreds, if not thousands, of other franchises offering marketable products or services without commanding huge franchising fees. It is the relative anonymity of these franchises, in fact, which makes them ideal opportunities for someone who understands the ins and outs of the franchising business.

A franchise sale is one way the franchising company has of helping sway those who are still on the fence to commit to starting their own franchise. Smaller franchisors are always on the lookout for prospective clients, and will use every means possible to generate a franchise sale.

The Franchise Trade Show

The Internet has opened up the franchise market to millions of people who would otherwise have had no idea how to enter it. There are even estimates that seven out of ten franchise sales leads come from the Internet, with direct mail, word-of-mouth, and print ads accounting for the rest. But many small franchisors still rely on the tried-and-true expos and trade fairs for each franchise sale.

The most important franchise show is the International Franchise Expo, and unlike industry trade shows, it is designed strictly to bring together a franchisor and prospective franchisee in the hope of generating a franchise sale. Most of them are held on weekends, and one way in which a franchisor can increases its chances of making a franchise sale is to stay in the area for a couple of days after the trade show.

Following Up And Making The Deal

To accelerate the franchise sale process, franchisors may arrange follow-up seminars to their most promising sales prospects. Some of them will even offer discounted franchise sale prices as a way to seal the deal before they leave the area.

By allowing buyers a chance to get in the door at a lower than normal cost, the franchisors are giving the investors the chance to get their franchises on a paying basis much more quickly than would otherwise be the case, and that can often be the deal-maker.

What is required for a company to become a franchise system? Legally the Federal Trade Commission is the federal organization that oversees franchise sales and growth. The industry has grown a great deal over the past fifty years, along with growth and popularity come regulations and rules for doing business in the franchise world. In the end, it is a very good thing to have tightly knit rules covering the process of franchising a business. Franchise regulations came into place initially to protect the buyer and have since evolved somewhat namely over the past 20 years in franchising. The buyer must be given full disclosure for what type of relationship they are entering into, the full terms of the relationship, what they will receive in conjunction for the fees they pay and who are they getting into business with.

The main franchise contract is the Uniform Franchise Disclosure Document, it is a very similarly structured agreement to that of Securities rules when adhering to SEC Blue Sky Laws when a company goes to raise investor capital. Have you ever heard the phrase, "Good Fences help make Good Neighbors?" For a franchise relationship to be effective and manageable, the franchisor needs to have the appropriate and well defined relationship in place within the franchise agreement. The documents are broken into two pieces, the bulk of this contract is made up of the Franchise Offering Circular, this piece is consists of 23 points of disclosure. Step by step the document walks the potential franchisee through a description of their total investment in the business, the training processes, backgrounds and bios on the owners/managers within the franchisor organization. Everything is disclosed up front to the buyer so no one is potentially "duped" into a franchise purchase. Good franchise sales processes will carefully walk buyers through these sections and explain each part in detail. A Uniform Franchise Disclosure document is intimidating and probably more importantly extremely boring to read. UFDD's have never and will never help with a franchise sale! It is up to the franchisor to explain and make sure that the buyers have an exquisite level of understanding for every part of the Offering Circular.

Once the Offering Circular has been put together and organized, the franchise agreement should legally cement the terms of the contract under which a franchisee is compliant in the franchise relationship. Franchise rules and regulations are all about compliance and disclosure, good drafters and legal counsel can help a new franchisor understand what is necessary and what is not within the franchise agreement. We want to disclose everything that should be given to the buyer under the guidelines of the FTC and nothing more. There have been several updates to the rules over the past year by the Federal Trade Commission, most of which are very good for the franchise industry in general. Before any legal work is drafted or put together, it is my recommendation to work with a franchise consulting firm or franchise consultant to have a business plan and financial analysis done for the franchise to be offered in order to put the documents together efficiently. Franchise rules and regulations are a good thing for franchising, both the franchisor and the franchisee can benefit greatly from well advised franchise companies and solid franchise agreements.

Difference in Objectives:

Unlike the franchisor whose objective is to sell you his franchise if you qualify, the franchise consultant should have no bias toward any specific franchisor or franchise type. Rather, his sole objective should be to assist the franchise business buyer in making and executing the best decision to satisfy his or her requirements and qualifications.

Franchise Consulting Services

As a fundamental step, a franchise consultant should help you determine if running a franchise business is really right for you. For example, some consultants provide a test that profiles your aptitude and commitment against those of other highly successful entrepreneurs.

The franchise consultant should then guide you through an objective self analysis to help you determine your financial, lifestyle, and business objectives.

That information should serve as the basis for pointing you to the best franchises that meet your requirements out of the thousands of options available, and he should assist in your selection process.

He should guide you through a thorough due diligence process, covering all the potential snags such as local licensing requirements with which the franchisor may not be familiar. He should assist in formulating the right questions to ask both the franchisor as well as other franchise owners.

If financing is an issue, the consultant should direct you to potential sources. He also should help you find well qualified legal and financial advisors who understand the nuances of owning and running a franchise business.

He should be there to support you and to serve as your mentor until the franchise deal is closed.

Benefits of Using a Franchise Consultant

In summary, engaging a reputable franchise consultant can save you big time in several ways.

1. First, by establishing a clear process and guiding you through the maze, you can save weeks if not months in completing the selection, evaluation, due diligence, financing, and closing process.

2. The anxiety associated with fear, uncertainty, and doubt about making the right decision is eliminated.

3. By objectively guiding you to the best decision and execution, you can avoid costly mistakes.

The franchise consultant's primary objective should be to help you become the owner of the best and most cost effective franchise business that meets your objectives.

And the great thing about using a franchise consulting service is that the service may be totally free to the franchise buyer. Because the service provided is of great value to both the franchisor as well as the franchisee, most franchisors are happy to pay franchise consultant's expenses.

The value of engaging a professional franchise consultant is one of the things you need to know before you buy a franchise business.