Tuesday, December 8th, 2009
You may be one of millions of Americans who want to own your own business and be your own boss. One of the best ways to do this is to purchase a reputable franchise. There are many to choose from and you will almost certainly find one that fits your own particular business goals. Buying a franchise requires some money, of course, but you may be surprised at how easy it is to become a franchise owner. An advantage about being a franchise owner is that you lessen your investment risk because you are associated with an established company.
One of the best things about a franchise is that it is usually recognizable by many people, often making you an instant celebrity in the neighborhood. Many franchises offer training and ongoing support for business owners just so they can maintain their established reputation. Of course, like any business, just owning a franchise does not mean that you will always be successful. It will take lots of hard work on your part and you probably will have to put in many, many labor-intensive hours building up your business clientele.
When you become a franchise owner, you have the right to operate that particular business. Initially, you pay a fee for a system developed by the franchisor and you can then use the franchisor’s name for a specific length of time. Sometimes the franchisor will give you additional support such as finding the best location for your business. Many franchisors also provide excellent training and educational resources to help you learn the ropes of the business. He or she is generally available to help you with any aspects of the business because your success means the franchisor’s success! Many franchisors offer free newsletters, periodic seminars, websites and special phone numbers that are available for their business owners.
The costs associated with buying a franchise involve a series of fees. Your initial payment might be quite high and is generally non-refundable. You also may have additional setup fees such as rental deposits, startup equipment, business licenses and initial inventory to buy. Then, you may have to pay the franchisor royalties that will be based on the income you receive from the business. Other costs that you might be faced with along the way are advertising fees that could be in some way connected to the company’s goal of obtaining new franchise owners.
Tags: advertising, Business, franchising, Investment, Money, Opportunities, United States, Website
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Tuesday, September 15th, 2009
There is little doubt that buying a business franchise involves a making a big commitment both financially and in terms of the amount of work that it involves. For this reason it is important that people thinking about investing in a franchise take their time in considering the options. If you are investigating a franchise opportunity these are some of the questions you should ask.
What type of franchise is being sold?
Since there are several different types of franchise systems in the UK the first question to ask is what type of franchise is being offered. Probably the most widely known kind of franchise is the business format franchise. Business format franchises involve a broad relationship between the franchise and franchiser. In this type of franchise the franchisee receives assistance with some or all aspects of running the business. Other types of franchise include manufacturing franchises and basic product franchises.
How many franchisees does the company have?
Before investing in a particular franchise it is useful to know how many franchisees the company currently has. A large number of franchisees indicate that the company is successful and well established. However this may not always be a positive factor. A high number of franchisees may mean that the market has become saturated and that there is a reduced opportunity for profit. Similarly prime market locations may already be occupied. Newer franchises that have not yet had time to become established may offer a better long term investment.
How high is the franchise fee?
Most if not all business franchises will require franchisees to contribute an initial investment fee. The size of this franchise fee will vary between companies. If you have a limited budget then the choice of available franchise opportunities will clearly be narrowed down to those you can afford. Many franchisees will take out a loan to help them with their investment.
How much support and training is provided?
Many franchisers will offer training and support to their franchisees to assist them with running their business. The actual amount and quality of support offered will vary between franchisers and so it is important that you investigate just what you will be getting for your money. If you have had little previous experience of managing a business then it is beneficial to choose a franchise that provides a lot of help to its franchisees.
Tags: Business, Company, Directories, franchise, franchising, Investment, Opportunities, UK
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Monday, September 14th, 2009
As every experienced businessperson knows, great business opportunities don’t come around every day, so when one does come along, the last thing anyone wants is to let it slip away for lack of funding. Because few of us have the cash-in-hand to up and purchase a good franchise when it comes along, however, the average entrepreneur has to resort to finding financial resources elsewhere. Here are some of the more common means of paying for that perfect franchise opportunity.
Commercial Banks
This is the most commonly used avenue for obtaining financing for a new franchise business, particularly for a home based business, and it’s a fine way to go. Generally, a person can get a loan from a bank for up to $100,000 on nothing more than personal credit, which is perfect, because home based businesses typically don’t reach prices in the $100,000+ range.
If, however, an entrepreneur were looking at starting a franchise that was over that pricing threshold, a commercial bank would still be more likely to finance him than they would his non-franchised small business counterpart. The simple fact is that far more franchise businesses see a successful 10-year lifespan than do independent business ventures, and banks know this. In fact, the difference in 10-year success rates is 92% to 20% in favor of franchises, making any bank’s choice of whom to finance a much easier decision.
Knowing that the franchisor has a successful track record and a solid business plan absolutely counts in the eyes of the bank. They take that business connection so seriously, in fact, that it’s often possible for the franchisee to use it to either whittle down the interest rate a little or obtain a larger total loan than he would have gotten without the franchise connection.
Private Investors
Whether they’re family and friends or only business partners, private investors can either be a great business advantage or a terrible trial in your career.
Just the same as any lending agency, a private investor contributes to the initial purchase and startup for your work at home franchise, helping it get off the ground. Then, as the business begins to see money come in, the investor gets a predetermined, and generally rather large, cut of the gross income each month until his initial investment is paid back. Then, depending on the contract terms, he still receives a certain cut of the income for the remaining life of the business.
This can be a great plan for all parties involved, but it can also be a headache if the investor is not as interested in the success of the business as he is in filling his wallet. Sometimes an investor will take such a large chunk of the growing business’ monthly gross income that there doesn’t even remain enough to adequately maintain operation.
It’s important to lay out a very clear contract at the beginning of the relationship with any investors, so that the person who got your business off the ground doesn’t also become the one who shoots it out of the sky.
The Franchisor
Knowing how hard it can be to amass the capital to start a franchise business, even for capable businessmen who would bring as much to the company as they would receive from it, many franchisors have begun lending franchise fees and startup capital to franchisees. This is becoming an increasingly popular means of obtaining financing for a franchise opportunity, in part because it’s so much easier for the franchisee than going to a third-party lender. However, there’s always a price for convenience, and in this case, it’s generally a higher interest rate.
Home Equity
For some people, this is the way to go. Home equity loans offer some of the best interest rates available, so for those who have a sure-fire work from home business plan and perhaps a home all to themselves, it could be a good option for getting business under way. However, the franchisee with a wife and kids has to stop and ask himself if risking the home equity is the wise move for the family as a whole.
Small Business Administration
As surprising as it may sound, the government is a great place to find the financing necessary for a franchise business, because they are genuinely interested in getting more small businesses up and running around the country. That is actually the sole reason for the existence of the US Small Business Administration.
Though they themselves don’t actually provide the capital to start and maintain businesses, the SBA does provide a 75% guarantee (up to $750,000) to private lenders on behalf of businesses that they feel have what it takes to succeed. Needless to say, this kind of support prompts most lending agencies to provide the loan.
The SBA does require some information though. What they most want, and reasonably so, is proof that the business is worth their backing. Potential business owners must provide a complete picture of the business, its plan and goals, a cost outlook, and a history of their own experience in similar business. In many cases, this process is accelerated for people buying franchises, because all that information has already been provided by the franchisor and recorded in the SBA’s franchise registry, which officially makes it a trusted and acceptable business for the SBA guarantee.
Weigh the Differences
The biggest difficulty in finding a financing source for your business is determining which is right for you and your situation. As you continue to learn more about the different ways that you can get the financing you need for your specific business endeavors, keep in mind that your situation is going to be different than everyone else’s, and therefore, so will your perfect lender.
Tags: Business, Business plan, Finance, franchising, Investment, Loan, Small Business, Small Business Administration
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