Buying a Franchise Versus Starting a Business
Buying a Franchise Versus Starting a Business
Additionally, for those lacking the start-up capital to purchase or rent a location, you can start a business from home with little more than a computer with Internet access.
As attractive as this autonomy seems, however, starting a business from scratch is not without pitfalls.
For instance, there are high failure rates for new businesses. It takes time and effort to develop your business plan, secure financing, acquire the necessary licenses and get a clientele base. Indeed, it is wise for new business owners to have six months to one year of income set aside to subsist on while the business gets its footing. And, unless you have a wholly unique business idea, you will likely find yourself in competition with franchise businesses that enjoy vast brand awareness and customer loyalty.
This brand awareness is one of the major pros of buying a franchise business. You will be working within a proven system and enjoy instant brand awareness and credibility.
Additionally, a network of support is available to franchisees. This includes technical and managerial support from individuals who are knowledgeable about your specific business as well as the benefit of shared marketing.
And, if another franchisee in your area airs a commercial or sponsors an event, it stands to reason that your franchise location would share in the customers purchased by your neighbor’s advertising dollars.
All of these facts add up to a quicker return on your investment because your franchise business is recognized from the moment you open its doors for the first time. Also, should you find that you are enjoying great success with your franchise business; expansion is far easier with franchises than with a small business.
Finally, if it’s the food, hospitality or retail industry in which you’re interested, franchise businesses have a much greater success rate in all of these areas.
Despite all of these redeeming qualities, a new business owner should remember that a franchise business is not a guarantee for success, and the start-up can be quite costly. A franchise business requires the same initial investment as a new business where location, supplies, inventory and employees are concerned, but it has the added cost of a franchise fee which varies widely but can be as much as several hundred thousand dollars.
Franchise Red Flags
Entrepreneur.com lists five red flags that should alert a new business owner to a potentially poor franchise choice:
One is the franchise’s litigation history, which must be made available to prospective franchisees in the Uniform Franchise Offering Circular, or UFOC. A new business owner should look for how many cases the company has been involved in with franchisees. Anything greater than one or two cases per hundred franchisees is cause for concern.
Second, you’ll want to examine the turnover of units in the company, also available in the UFOC. How many franchisees have left the company and why? Was it due to failure or the sale of a successful unit to a new owner? The answer to this question can help determine—at least partially—how successful you might expect your unit to become.
Another factor that should disquiet a prospective franchisee is, after sincere research, an inability to come up with any substantial numbers concerning things like sales and profits. If it seems that this issue is skirted around, another franchise may be a better option.
Additionally, before buying a franchise business, you should ask around about the relative happiness of other franchisees. Talk to other franchise owners. Are they happy with the support provided to them by the company? Are they pleased with the success of their own units? A preponderance of unhappy franchisees suggests that you may be unhappy in this franchise as well.
Finally, although it seems simple enough, a brief look into whether your cultural and moral values mesh with those of the franchise might be easily overlooked. Is the franchise run by individuals whom you deem to be honest and that share your ethical guidelines? If not, it may be a difficult system in which to work.
Top Franchises of 2007
The Franchise 500® is a list compiled by Entrepreneur.com using the same criteria to judge each company, no matter what the size. These factors are “objective and quantifiable” and include, but are not limited to, the company’s financial strength and stability and the growth rate and size of a company.
Entrepreneur.com examines the start-up costs for each franchise, the length of time the company has been franchising, as well as some of the factors on their red flag list, particularly litigation and turn-over rates. They find out whether the company provides financing and use an independent CPA to audit its financial data. They insert all this data into an exclusive formula and assign each company a cumulative score. Then, the companies are simply ranked based on those scores.
Just a few of the franchises you’ll find on the Franchise 500® are: UPS Store/The Mail Boxes, Etc., Liberty Tax Service, Super Cuts, Two Men and a Truck, Golds Gym, Arby’s, Microtel, Beef O’Brady’s and Chem-Dry Carpet, Drapery and Upholstery Cleaning.
While the Franchise 500® can be a valuable resource for someone considering buying a franchise, Entrepreneur.com does not evaluate subjective criteria, and these areas—such as franchisee satisfaction—will need to be researched independently.
Buying a Franchise Versus Starting a Business - To learn more about this author, visit Candice Clem's Website.
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Starting a business can be an exceedingly rewarding endeavor. From its inception you have complete authority on all decisions big and small - something as imperative as planning a restaurant menu, for example, to choosing what color and style of blinds to hang in the windows, you control everything.
Additionally, for those lacking the start-up capital to purchase or rent a location, you can start a business from home with little more than a computer with Internet access.
As attractive as this autonomy seems, however, starting a business from scratch is not without pitfalls.
For instance, there are high failure rates for new businesses. It takes time and effort to develop your business plan, secure financing, acquire the necessary licenses and get a clientele base. Indeed, it is wise for new business owners to have six months to one year of income set aside to subsist on while the business gets its footing. And, unless you have a wholly unique business idea, you will likely find yourself in competition with franchise businesses that enjoy vast brand awareness and customer loyalty.
This brand awareness is one of the major pros of buying a franchise business. You will be working within a proven system and enjoy instant brand awareness and credibility.
Additionally, a network of support is available to franchisees. This includes technical and managerial support from individuals who are knowledgeable about your specific business as well as the benefit of shared marketing.
And, if another franchisee in your area airs a commercial or sponsors an event, it stands to reason that your franchise location would share in the customers purchased by your neighbor’s advertising dollars.
All of these facts add up to a quicker return on your investment because your franchise business is recognized from the moment you open its doors for the first time. Also, should you find that you are enjoying great success with your franchise business; expansion is far easier with franchises than with a small business.
Finally, if it’s the food, hospitality or retail industry in which you’re interested, franchise businesses have a much greater success rate in all of these areas.
Despite all of these redeeming qualities, a new business owner should remember that a franchise business is not a guarantee for success, and the start-up can be quite costly. A franchise business requires the same initial investment as a new business where location, supplies, inventory and employees are concerned, but it has the added cost of a franchise fee which varies widely but can be as much as several hundred thousand dollars.
Franchise Red Flags
Entrepreneur.com lists five red flags that should alert a new business owner to a potentially poor franchise choice:
One is the franchise’s litigation history, which must be made available to prospective franchisees in the Uniform Franchise Offering Circular, or UFOC. A new business owner should look for how many cases the company has been involved in with franchisees. Anything greater than one or two cases per hundred franchisees is cause for concern.
Second, you’ll want to examine the turnover of units in the company, also available in the UFOC. How many franchisees have left the company and why? Was it due to failure or the sale of a successful unit to a new owner? The answer to this question can help determine—at least partially—how successful you might expect your unit to become.
Another factor that should disquiet a prospective franchisee is, after sincere research, an inability to come up with any substantial numbers concerning things like sales and profits. If it seems that this issue is skirted around, another franchise may be a better option.
Additionally, before buying a franchise business, you should ask around about the relative happiness of other franchisees. Talk to other franchise owners. Are they happy with the support provided to them by the company? Are they pleased with the success of their own units? A preponderance of unhappy franchisees suggests that you may be unhappy in this franchise as well.
Finally, although it seems simple enough, a brief look into whether your cultural and moral values mesh with those of the franchise might be easily overlooked. Is the franchise run by individuals whom you deem to be honest and that share your ethical guidelines? If not, it may be a difficult system in which to work.
Top Franchises of 2007
The Franchise 500® is a list compiled by Entrepreneur.com using the same criteria to judge each company, no matter what the size. These factors are “objective and quantifiable” and include, but are not limited to, the company’s financial strength and stability and the growth rate and size of a company.
Entrepreneur.com examines the start-up costs for each franchise, the length of time the company has been franchising, as well as some of the factors on their red flag list, particularly litigation and turn-over rates. They find out whether the company provides financing and use an independent CPA to audit its financial data. They insert all this data into an exclusive formula and assign each company a cumulative score. Then, the companies are simply ranked based on those scores.
Just a few of the franchises you’ll find on the Franchise 500® are: UPS Store/The Mail Boxes, Etc., Liberty Tax Service, Super Cuts, Two Men and a Truck, Golds Gym, Arby’s, Microtel, Beef O’Brady’s and Chem-Dry Carpet, Drapery and Upholstery Cleaning.
While the Franchise 500® can be a valuable resource for someone considering buying a franchise, Entrepreneur.com does not evaluate subjective criteria, and these areas—such as franchisee satisfaction—will need to be researched independently.
Buying a Franchise Versus Starting a Business - To learn more about this author, visit Candice Clem's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Staging DivaDebra Gould, aka The Staging Diva®, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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