Benefits of Buying a Franchise versus Independent Business

As we mentioned in the previous post on myths and realities of franchising franchising model helps those who want to get into small business; but do not have prior experience or do not want to start from scratch. These people like the fact that buying a franchise versus independent business will reduce the risk of failure. At the same time, they also question the value provided by franchisor for the amount of money they have to pay to them in terms of initial franchise fee as well as ongoing royalty.
As with any business transaction, it is important that you understand what you are getting in return for the money paid to the franchisor. While franchisor does provide benefits in exchange for the fees they receive; not all of them are equal. In addition, different franchises provide value in different areas depending on their strengths and strategy. You should know why you are buying one franchise over others and set proper expectations before making decision.
In our experience, franchises provide value in 4 categories listed below:
[Read more…]

Understand Operating Requirements of Franchise before Joining


How franchisees operate their stores is probably the most contentious issue that raises friction between the franchisor and the franchisees. We have come across number of franchises where the franchisee and the franchisor are at odds with regard to how the store should be operated – the franchisor wants franchisees to keep the stores open late to improve sales; while the franchisees only look at it as increasing their labor expense without adding much to the sales.
In our opinion, there needs to be a balance between the needs of the franchisor and the franchisees. However, in real life, the balance is usually tilted in franchisor’s favor. The district supervisors and inspectors hold a lot of sway in dictating how franchisees run their businesses and can even impose penalties and other restrictions in many cases. In one example, the inspector asked the franchisee of a fast-food restaurant to replace the oven because it was not showing proper temperature. It could have been repaired for $1,000; but the franchisee ended up spending $20,000 for new oven simply because the inspector insisted on it.
How can you ensure that you understand whether franchisor runs the operations in a pragmatic or dictatorial fashion and avoid getting into a franchise where you have constant fights?
[Read more…]

10 Questions You Must Ask Franchise before Joining

As we mentioned in the previous post the franchising model provides a springboard to many would-be entrepreneurs who dream of owning their business; but do not have experience or time needed to take care of myriad aspects of running a small business.
While franchising does provide the needed support and tools for running the business; many people wrongly believe that because they are going in the franchising business they can operate the business without much effort on their part. Nothing could be further from truth. It is imperative that you do your homework before signing the franchise agreement and hand over the check for franchise transfer fee.
[Read more…]

5 Common Myths and Realities of Franchising


The franchising model provides a springboard to many would-be entrepreneurs who dream of owning their business; but do not have experience or time needed to take care of myriad aspects of running a small business.
While franchising does provide the needed support and tools for running the business; many people wrongly believe that because they are going in the franchising business they can operate the business without much effort on their part. After all, the franchise is supposed to take care of everything in exchange for getting the monthly royalty payments, right? Nothing could be further from truth.
In this post, we aim to dispel this and other myths held by entrepreneurs. You should also look at previous blog posts that discuss qualities to look for in a good franchise as well as signs that show the franchise will be successful.
[Read more…]

10 Questions to Ask Business Seller in the First Meeting


So, you have come across this promising business you want to buy. You have started the due diligence process and looked at the financial statements. The business shows good potential. You have a pretty good idea of what it will take to get acceptable return on your investment.
What should be your next step? How can you convince yourself that you are not buying a lemon?
[Read more…]

How to Evaluate Business Before Buying


For many would-be small business entrepreneurs the path to business ownership starts with purchasing an existing business. While you will be paying a premium for the existing business in terms of goodwill, it gives you peace of mind knowing that the business is already established.
While this is true to some extent; we believe that you still have to be extra careful when purchasing an existing business. Just because the business has been operating for several years does not mean that it is running well. There is no guarantee that you will make a good return on your investment. We have come across several situations where the buyers, particularly the first-time buyers, were blindsided by the realities of the business AFTER they had signed closing papers. That is why it is very important to spend extra time in performing due diligence before signing on that dotted line.
[Read more…]

How to Ensure the Business Launch Date Stays on Target


If we have to bet on one thing when it comes to opening a business on schedule; we’d say it WILL NOT. No matter how well you plan, it seems things always go wrong somewhere resulting in delays.
Not being able to open the business on-time can hurt you on multiple fronts –you not only lose sales for every day that the business is not open, while your expense clock is already ticking; but also you end up throwing more money on tasks that are running late.
[Read more…]

How to Start a Business with Little Money


In most budding small business owners’ mind, the important thing needed to start a business is money. We think that this is really a misconception. Because of this misconception many good, passionate entrepreneurs are discouraged because they don’t have enough cash to start a business. In fact, we are working with one such individual who is passionate about music and wants to start a music themed coffee shop; but is struggling to find money to do it.
The good news is you can start a business with little money. There are ways by which you can get started as long as you have passion to put everything you have in it. The key is to start small and not go for a big bang as well as have a well-thought plan to achieve your grand vision even while taking baby steps.
[Read more…]

How to Succeed in Starting a Business while Holding Full-time Job


Contrary to beliefs held by some people it is possible to start a business while still working on your job. Many people want to hold onto their current job for as long as possible for reasons cited in this post ; while they are starting business.
While it is not easy to start a business while still working on full-time job; there are ways by which you can succeed as long as you know what you are getting into and take care of important issues that will inevitably surface. In our view, the key to success is making sure you have laid proper groundwork to operate the business in your absence; while still keep a watchful eye on it.
Below we have highlighted several suggestions you can follow to be successful.
[Read more…]

Challenges of Starting a Business while Holding onto Current Job


While it is tempting to hold onto current job while you are starting a small business; it may prove to be quite challenging.
As we mentioned in the previous blog post many of our friends, colleagues and aspiring businessmen want to jump into small business out of frustration resulting from jobs (or lack thereof) in this difficult economic environment. However, they still want to hold onto their current job to ensure they have a fall back place in case things don’t work out with new business and several other reasons.
While it is certainly understandable that people would want to play it safe and keep the current job while business is getting established you should not underestimate the challenges of operating in this fashion. Below we have highlighted many of the challenges you will face when working at your job and starting a business at the same time. We hope that by understanding these challenges you will make informed decision and understand what to expect if you do decide to go forward.
[Read more…]