Tweet

FRANCHISE BUSINESS VS STARTING A NEW BUSINESS

Written by: Tony Hogan

Article Overview: As an entrepreneur, you may want to start your own business and make your own path to success. If the thought of starting out on your own without any training at all bothers you, perhaps you would be better off first trying your luck with a franchise

FRANCHISE BUSINESS VS STARTING A NEW BUSINESS

Here are some common beneficial features of a franchise business:

Well structured business plans usually in place.
Already known brand name recognition possibly.
Have training in place to decrease failure rate.
Ongoing support if you have questions or problems.
Proven successful already, no need for trial and error.
Easy to expand to multiple locations (all the same).
Collective Buying Power (Everyone buys from one source)
Location Research Assistance
Accounting Systems in place.
Many of these things are positive features that will help you succeed in business. You don't have to worry about whether or not what you are doing will work, because someone else has already tested it. As with everything, there are a few negative aspects of a franchise as well:

Lack of creativity or freedom to do what you want.
Often times you pay royalties to Franchisor (5% gross/year)
High start-up costs (many require tens of thousands of dollars.
Generally have a contract to stay with franchisor.
Pay for percentage of national advertising campaigns.
If you have never run a business before, franchises may be a great first step if you have some capital to work with. The knowledge and real world experience you can gain from owning a franchise can often greatly benefit you in future businesses you open.

Here are some common negative features of a starting a new biz:

Sketchy business plans at best.
Nobody has ever heard of you, so the trust is not there.
You can't buy things at a great discount typically.
Little Support or Training available.
A lot of trial and error to find what works and what doesn't.
No shoulder to cry on or people to blame but yourself.
Although these seems a bit harsh, starting a business is not all bad. In fact, many people who start a business on their own are more successful that those who own franchises. The reason is because you tend to learn more when you learn on your own. If someone is constantly telling you how to do things, you never really learn them. You know that all you have to do is go ask for help rather than digging to find the answer on your own. Here are some benefits of starting your own business:

Freedom to do whatever you want. If you want to sell widgets today and the widget market dries up, you can sell thingamabobs tomorrow.
What you make, you get to keep - no royalty fees.
Generally lower start-up costs.
You pay for only what you need, nothing else.
Much higher income possibility.
That is a quick outline of a new business idea vs a franchise. It is really up to you on what you feel is the best option for you. You can succeed with either option as long as you give it 110% effort.

Related Articles
  Questions to Ask Before Buying a Franchise
  Looking for Franchise Finance? You May Be Sitting On It Already
  Franchising Continues To be a Safe Way to Go in Troubled Economy
  The Advantages of Owning a Franchise
  Are You Ready to Start a Franchise?

Article Tags:



Related Forum Posts
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Definitely have a thorough and accurate business plan. In the US, you can get help at SCORE - their website is full of great information and you can check for local chapters. If you would like a book that has all kinds of great information about financing options - this one is very good --- HOW TO GET THE FINANCING FOR YOUR NEW SMALL BUSINESS: INNOVATIVE SOLUTIONS FROM THE EXPERTS WHO DO IT EVERY DAY—WITH CD-ROM This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book’s real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout. Item # 9780910627559 $39.95 Shri
Re: I want to make money online - First, I'd say definitely online. Your $3,000 will go a lot further online than offline. Second, I'd read Kevin's list and the linked article and make a BUSINESS decision what you want to do, what you can offer and who you can sell it to. Do some serious keyword search and find a hungry niche, and this is your start (free). Second step (free): Sign up for clickbank, paydotcom or some other affiliate exchange and find suitable products to promote. Third step (free): Get a free site somewhere, but make sure it's on something that looks like its own domain - yourname.wordpress.com or yourname.blogspot.com or some such. Write some nice things that promote your affiliate products and put your affiliate links on the page. Fourth step (free): Go on article directories like evancarmiahcel.com (if appropriate) or ezinearticles.com and write stuff that is interesting for your niche, using your niche keywords. Put a link to your new site in the resource box/bio. Keep doing this until you make money. My kids (18 and 12 at the time) sold stuff on clickbank. Anyone can do this. Good luck!
Are you Self Employed or a Business Woman? - Us women are especially vulnerable to thinking we can do EVERYTHING ourselves! I'm not immune to this way of thinking either. (It seems to go with the territory of having XX chromosomes and growing up in our North American culture.) Anyhow, this kind of thinking can actually trip us women up when it comes to business. I've heard it said that a true business is something you create that can eventually run by itself. A business is meant to give us freedom and not tie us down. A business works FOR YOU. If you are the one working FOR YOUR BUSINESS, then I invite you to open up to the possibility of using your entrepreneur skills to recreate a business that works for you. When I was first challenged on this concept, it was a huge AHA moment. I am grateful because I realized I was still a little stuck on working harder instead of working smarter. I've opened up to a whole new world of possibility and now I'm thinking MUCH BIGGER than before. I expect my income will be much bigger as well. In all honesty, I've realized that my coaching business has been a glorified job. I will still do coaching because I love to do it, but now I am in the process of developing multiple streams of income that use my time more efficiently and products that sell even while I'm on holidays. I'm also developing a retail store which will eventually mostly run itself. Then I will move on to my next project. It's liberating to be on the path of creating businesses that work FOR me. This is how I can run multiple companies without wearing out! In fact, I plan on having MORE time for me. So, what are you doing? Are you self employed or running a business?
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Information about doing franchise business in China - CHINA’S FRANCHISE LEGAL SYSTEM Introduction Franchises has a history of more than one hundred years in foreign countries, now it has developed to be a mature business mode, and it is widely used in many countries, especially the developed ones. Recently, franchises has been developing fast in China, covering more than sixty industries and trades such as catering, retailing, clothes-washing, indoor decorations and gym. However, the market order of franchises is chaotic in some industries and areas. There are also some illegal and criminal activities under the guise of franchises. Under such circumstances, several important laws have been promulgated to regulate the commercial franchising activities. Applicable Legislation The main legislative provisions governing the commercial franchising in the PRC are: the Measures on Administration of Commercial Franchises; and the Measures on Administration of Archival Filing of Commercial Franchises; and the Measures on Administration of Information Disclosure of Commercial Franchises Qualification for Franchisors According to the laws, the franchisors as those enterprises who own such business sources as registered trademarks, enterprise logos, patents and proprietary technology, and license these business sources to franchisees. Firstly, the franchisors shall be enterprises, excluding other economic organizations and individuals. Secondly, the trademarks which can be licensed to franchisees shall be registered trademarks. According to the Trademark Law, the trademarks, whether registered or not, are protected under the laws, though there is difference in the vigor and extents of protection. It seems that the Ministry of Commerce has restrictions in recognizing trademarks, since it only provides “own trademarks to be licensed to others” at large, which causes chaos in practice. In the cases relevant to franchising disputes which we provided legal service to, all of them involve the situation that the franchisors granted licenses of non-registered trademarks or the trademarks which were in application to others, and when there was infringement on trademarks, the franchisors were unable to prevent infringement on trademarks. Then the interests of the franchisees could not be realized. What’s more, franchising activities with non-registered trademarks also, to some extent, encourage commercial frauds. Thirdly, the logos, patents and proprietary technology of enterprises are included in the business sources to be licensed to others for the first time, which enlarges the application scope of franchises and will improve the development of franchises. Requirements to be Met in Carrying on Franchising Activities In addition to the condition that only the enterprises will be allowed to carry on franchising activities referred to above, the franchisors shall also have mature business modes, and are able to provide business guidance, technology support and training. The enterprises which copy the manuals, websites and enlisting documents of others, and have no service abilities for providing business guidance, technology support and training shall be excluded. What needs pointing out is that even these enterprises that are allowed to carry on business may face with the suits claiming them for unfair competition and infringements on intellectual properties. In addition, the Measures clearly request that the franchisors shall operate at least two directly operated shops, and the period of operation shall be more than 1 year, which aims to prevent frauds by the way of franchising. Information Disclosure Requirements and Regulation on Franchisors Information disclosure system is the core system of franchising. The laws provides that the franchisors shall establish and implement a perfect information disclosure system, and provide the relevant information and franchising contracts in written form, at least thirty days before execution of franchising contracts. It also sets out the specific provisions on the information which shall be provided by franchisors, including the basic conditions and commercial reputation records of the franchisors and their legal representatives, business sources owned by franchisors, abilities of franchisors to provide service to franchisees and management and supervision on business of franchisees, franchisee fees and the payments, and budgets for investment in franchising shops. To the franchisors that violate these provisions, the authorities in charge of commerce will order them to rectify, charge penalties and make public statements. Archival Filing and Public Announcement Systems To protect the franchisees’ lawful rights and interests, considering the asymmetric information between franchisors and franchisees, in addition to intensifying information disclosure requirements and regulating the activities of franchisors, the Measures also bring in the archival filing and public announcement systems. The Measures provides that the franchisors shall make a filing with the commerce administrative department within 15 days after the execution of franchising contracts for the first time. Anyone who intends to engage in any commercial franchise activities within a province, autonomous region, or municipality directly under the Central Government shall go through the archival filing formalities in the commerce administrative department of the people’s government of the province, autonomous region, or municipality directly under the Central Government where the franchisors are located. Anyone who intends to engage in any commercial franchise activities beyond a province, autonomous region, or municipality directly under the Central Government shall go through archival filing formalities in the commerce administrative department of the State Council. Any franchisor having been engaging in franchise activities before May 1, 2007 shall apply for archival filing at the commercial administrative department. The Ministry of Commerce has established the national network for archival filing work relating to commercial franchise. Any franchisor shall go through the archival formalities through the government website. The general public may obtain the following information through the government website of the Ministry of Commerce: (1)The registered trademark(s), enterprise mark(s), patent(s), know-how and other business resources of the franchisor; (2)The franchisor’s archival filing date; (3)The location of the legal business place, contact information and name of the legal representative of the franchisor; and (4)The location of the business place of the franchisee(s) within China. The authorities in charge of filing will cancel the archival filing if there is any following activities of franchisors, and make public announcement on the government website: (1) the business licenses of the franchisors have been withdrawn by the registration administrative authorities for illegal business; (2) the authorities in charge of filing receive judicial suggestion letter on cancellation of archival filing from the judiciary for illegal business by franchisors; (3) the franchisors conceal the relevant information or provide false information, which has been proved; (4) the franchisors carry on cancellation by themselves. In addition, the illegal activities of the franchisors will be announced to the public. By Erex Chen, a Chinese lawyer based in Shanghai.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Sales Training – Top Salespeople Are Not Dunces

An Intelligent Contact Sheet

Winning Market Share in a Tough Economy

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.