Evaluating Your Business As A Franchise
Evaluating Your Business As A Franchise
By Ed Teixeira
The first step in the franchising process is to determine if your concept can be successfully franchised. The word “successfully” is key because just about any business can be franchised. However, it’s important that the business concept that is franchised “works” for both the franchisor and franchisee. The first step in this process is to complete a feasibility study for franchising your business concept.
I have encountered a number of new franchisors that did either a very simplistic evaluation of their business or none at all. Some business owners are lured into franchising after having conversations with franchise consultants and or to save money they skip the feasibility process altogether.
This article will show you how to do your own feasibility study. You’ll learn the key steps in the process and the pitfalls and key factors to look for. If you still have some doubts about franchising when you’re finished at least you’ll have gathered enough information to present to your franchise consultant or business consultant and you’ll not have to spend a large amount of money. In fact, the information you gather as part of this process will have application for your business regardless of whether or not you choose to franchise.
The following represents key items to consider:
POSITIVE ATTRIBUTES
1. Business Traits-must have a certain uniqueness whereby its different in terms of products, services, markets, investment level
2. Operational Simplicity- the business should be such that a franchisee can learn how to operate it in a fairly short period of time
3. Adaptability and Demand- the franchise concept should work well and adapt to numerous locations and markets. There should be a strong demand for the products and services
4. ROI- there needs to be a good return on investment and profit after the initial franchise fee and royalties
5. Strong Management Team- the franchisor needs to represent by a strong management team. It will take more than one person to lead a franchise operation.
6. Business Credibility- the company should have a good track record and successful history
7. The Business Must be Teachable- there needs to be systems and procedures in place. There should be documentation
NEGATIVE ATTRIBUTES
1. The product or service has a short life span. It’s a fad or short-lived concept
2. The gross margins are too low to support a business with a royalty and other fees
3. The skills to operate the business are complex and/or take a significant period of time to learn to operate
4. A business type, which relies on repeat customers and a special service. Professional services like legal and accounting are examples
5. Unique market characteristics, which are not easily found. The location for the business has very special requirements
6. The business has very complex and detailed audit requirements
7. A company or business which is failing or marginally successful
Based upon the above factors, the first step is to critically review your business and its key components, including its performance, operation and the opportunities available in the marketplace.
Additionally, competitors, especially those offering a franchise opportunity in the same industry, need to be reviewed and evaluated.
The feasibility of franchising a business or concept should focus on four (4) key areas:
Business Operations Analysis
Franchise financial model
Competition
Market Factors
Business Operations Analysis
You need to conduct an analysis of your business from an operational standpoint. This will help you to develop a profile of your business, which will be a key aspect of the feasibility study. Look at your business from a franchise perspective. This will help you to be more objective.
· Is your business profitable?
· Do you have a good reputation in your market place?
· What is the cash flow generated by the business?
· What are the sales trends?
· Removing owner perks or using a recast financial statement determine pre-tax profit dollars and income as per-cent of sales.
· How many locations do you have? More than one location is an advantage.
· Evaluate the quality of your management team.
· Are you so critical to the operation that you can’t leave the business for a week?
· Do you have any staff that could do the training?
· Can a member of your staff operate the business when you start up and launch the franchise?
· How difficult is your business to operate?
· Can it be easily taught?
· Can your business be set into key processes or steps?
· Do you have an outline or manual, which documents your business operations?
· Do you use special software in your business?
· Is the software an integral part of your business operation?
· What does it cost to establish a new location or unit for your business?
· Some businesses are so complex they don’t lend themselves to being franchised.
· Are there similar businesses, which are franchised or operate as a chain? This is an important question since it will enable you to identify and compare similar business concepts. On the other hand, you may have a concept that is quite unique but still lends itself to franchising.
Evaluating Your Business As A Franchise - To learn more about this author, visit Ed Teixeira's Website.
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EVALUATING YOUR BUSINESS AS A FRANCHISE
By Ed Teixeira
The first step in the franchising process is to determine if your concept can be successfully franchised. The word “successfully” is key because just about any business can be franchised. However, it’s important that the business concept that is franchised “works” for both the franchisor and franchisee. The first step in this process is to complete a feasibility study for franchising your business concept.
I have encountered a number of new franchisors that did either a very simplistic evaluation of their business or none at all. Some business owners are lured into franchising after having conversations with franchise consultants and or to save money they skip the feasibility process altogether.
This article will show you how to do your own feasibility study. You’ll learn the key steps in the process and the pitfalls and key factors to look for. If you still have some doubts about franchising when you’re finished at least you’ll have gathered enough information to present to your franchise consultant or business consultant and you’ll not have to spend a large amount of money. In fact, the information you gather as part of this process will have application for your business regardless of whether or not you choose to franchise.
The following represents key items to consider:
POSITIVE ATTRIBUTES
1. Business Traits-must have a certain uniqueness whereby its different in terms of products, services, markets, investment level
2. Operational Simplicity- the business should be such that a franchisee can learn how to operate it in a fairly short period of time
3. Adaptability and Demand- the franchise concept should work well and adapt to numerous locations and markets. There should be a strong demand for the products and services
4. ROI- there needs to be a good return on investment and profit after the initial franchise fee and royalties
5. Strong Management Team- the franchisor needs to represent by a strong management team. It will take more than one person to lead a franchise operation.
6. Business Credibility- the company should have a good track record and successful history
7. The Business Must be Teachable- there needs to be systems and procedures in place. There should be documentation
NEGATIVE ATTRIBUTES
1. The product or service has a short life span. It’s a fad or short-lived concept
2. The gross margins are too low to support a business with a royalty and other fees
3. The skills to operate the business are complex and/or take a significant period of time to learn to operate
4. A business type, which relies on repeat customers and a special service. Professional services like legal and accounting are examples
5. Unique market characteristics, which are not easily found. The location for the business has very special requirements
6. The business has very complex and detailed audit requirements
7. A company or business which is failing or marginally successful
Based upon the above factors, the first step is to critically review your business and its key components, including its performance, operation and the opportunities available in the marketplace.
Additionally, competitors, especially those offering a franchise opportunity in the same industry, need to be reviewed and evaluated.
The feasibility of franchising a business or concept should focus on four (4) key areas:
Business Operations Analysis
Franchise financial model
Competition
Market Factors
Business Operations Analysis
You need to conduct an analysis of your business from an operational standpoint. This will help you to develop a profile of your business, which will be a key aspect of the feasibility study. Look at your business from a franchise perspective. This will help you to be more objective.
· Is your business profitable?
· Do you have a good reputation in your market place?
· What is the cash flow generated by the business?
· What are the sales trends?
· Removing owner perks or using a recast financial statement determine pre-tax profit dollars and income as per-cent of sales.
· How many locations do you have? More than one location is an advantage.
· Evaluate the quality of your management team.
· Are you so critical to the operation that you can’t leave the business for a week?
· Do you have any staff that could do the training?
· Can a member of your staff operate the business when you start up and launch the franchise?
· How difficult is your business to operate?
· Can it be easily taught?
· Can your business be set into key processes or steps?
· Do you have an outline or manual, which documents your business operations?
· Do you use special software in your business?
· Is the software an integral part of your business operation?
· What does it cost to establish a new location or unit for your business?
· Some businesses are so complex they don’t lend themselves to being franchised.
· Are there similar businesses, which are franchised or operate as a chain? This is an important question since it will enable you to identify and compare similar business concepts. On the other hand, you may have a concept that is quite unique but still lends itself to franchising.
Evaluating Your Business As A Franchise - To learn more about this author, visit Ed Teixeira'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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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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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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