INVESTING IN FRANCHISES
Another way to get into an established business profile is to purchase a franchise. With pros and cons, purchasing a franchise can give you that extra leap needed to start a strong business profile and image. Franchising is an agreement between an interested franchisee and the owner of a trademark, brand name or advertising symbol. The franchisee must be prepared to relinquish their individual control or viewpoint of how the business should be run, agreeing to adopt systems, rules and regulations of the franchisor. “Don’t re-invent the wheel” is a common adage in the business world. The franchisor offers a role model of a proven track record of success. This is its greatest drawing point. Nine out of ten franchises reported profit in 2002. In considering whether to invest in a franchise opportunity, research which type of franchise is most suitable for you and what type of capital investment you are prepared to make. The ten top franchises in 2005 according to Entrepreneur.com were: Subway, Curves, Quizno’s Sub, Jackson Hewitt Tax, UPS Store, Sonic Drive, Jani-King, 7-Eleven, Inc., Dunkin’ Donuts and Remax, Inc. Nearly 400,000 franchises employ more than 9.8 million people, with a payroll of $230 billion. There is a new franchise opening in United States every 8 minutes. Approximately one out of every twelve retail outlets are franchises. As many baby boomers today reach retirement, they, as well as people who have severance packages, are looking to franchises as an investment. Other potential franchisees may be people who are downsizing, or simply dissatisfied with present conditions.
Franchises are turnkey systems of duplication. As an entrepreneur starts up a new business, it is beneficial to have a strong support team and training offered by franchisors. Franchisors often reassure the new franchisee by saying, “You are in business for yourself, but not by yourself. “ High start-up costs of franchises may be some of the primary concerns of getting started. However, financial institutions are more likely to lend money with the backing of franchisors. A successful pattern is for the franchisee to establish the first franchise, and then quickly build a second and third within the same geographical location. They are aided by reduced costs of goods from suppliers due to the volume of sales within the franchises and bulk purchasing results in savings to the franchisees. Be careful not to confuse the business credit image of the franchisor and yourself. Although it is a great way to get ahead, it isn’t nearly comparable to purchasing an existing business. Even though the image is purchased, business credit is still separate and you would essentially start from scratch as if opening a new business. The business stability follows the business entity that is created and, when purchasing a franchise, the business owner is not purchasing a part of that company.
Sincerely,
Ilya Bodner
Small Business Owner
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