Is Buying an Existing Franchise a Good Idea?

Is buying an existing franchise a good idea?

Is it a good idea to buy an existing business or franchise?
The short answer to this question is it depends. There are many things to consider and you must do your research and homework in order to determine if it makes sense for your own personal situation.
One of the big disadvantages of buying a new start-up location is the time required to build your business into one that is profitable and will generate enough income to meet your needs. It can sometimes take several years before the franchise owner is realizing consistent profits.
Another obstacle with a new franchise is it can take several months from the time you choose the franchise to invest in and when you actually open your doors. Finding the right location can take time and then you must negotiate your lease and build out your location. If you choose a service franchise you can usually open more quickly, but you still need to spend time cultivating your customer base.
It would be ideal if you could skip all of the waiting and the hard work of building your sales and just purchase an existing franchise that is already profitable. Unfortunately, it’s not always easy to find a resale that makes sense.
First you must find an owner that is willing to sell. The next thing you, the potential buyer, needs to do is to investigate the franchise company in order to make sure it is a company you are comfortable partnering with for the next several years. You want to make sure you agree with the business model and the basic philosophy of the parent company. If you don’t agree with the direction the parent company is taking or if there are other factors you do not agree with, then it wouldn’t make sense to purchase an existing unit no matter how attractive the opportunity might seem.
You will need to thoroughly understand the company’s Franchise Disclosure Document, whichexplains in detail all of the terms of the franchise agreement. You will need to talk to several existing franchise owners to validate how they feel about the system you are considering investing in. If you like what you hear after talking to several existing franchise owners, then it is time to meet with the owner that is selling their business.
When you meet with the current owner you will want to learn several important things. The most important question to ask the owner is why they are selling their business. The owner may be ready to retire, may have health issues that prevent them from operating the business or there may be other reasons. You will need to discover what the true motivation is before moving forward. There may be problems with the location, the lease terms may be unfavorable or there may be problems with excessive competition in the area. Whatever it is, you want to become a detective and find the answers before investing your hard-earned savings.
Assuming you still like what you see and want to move to the next step, you will need to verify the income and expenses of the business. You will need to examine tax returns and other paperwork in order to confirm that the business is doing what the seller says it is doing. You may want to have an accountant or financial adviser review the financial statements for accuracy and reliability.
The final step in the process is to agree on the price and terms. This is when many potential deals fall apart due to unrealistic expectations from both buyers and sellers. The seller wants to sell at the highest possible price and the buyer wants to buy at the lowest possible price. In order for the sale to take place, it must be a good deal for both parties. If the negotiation goes too far in either direction the sale will most likely never move forward.
In most cases, existing businesses will sell for a multiple of two to four times the available “owner cashflow” or annual profits. Those businesses that have a high predictability of future profits will sell for more and those that have a less certain future profitability will sell for less.
When all is said and done, it may make sense to buy a resale if you can find the right situation at the right price. Otherwise, you may be better off to open a new location that will usually require a much lower initial investment.
Lee Thomas, Placing People in the RIGHT Franchise for Their SUCCESS
Franchise Paths to Success
888 701-6413 lee@myfpts.com
www.franchisepathstosuccess.com

Is a homebased business for you?

It seems not a day goes by that I don’t have at least one email drop into my inbox promising a new way to make money from home. Not surprisingly the attraction is obvious:-

  1. Appeals to those with home commitments such as young families or family members that need constant care.
  2. Work from the comfort of your own from home.
  3. Administer your own time. You can work daytime, evening, night, whatever suits your lifestyle.
  4. Every penny you earn is yours to keep (not withstanding costs and taxes of course!).

No surprise then that home based business opportunities are rife on the internet, simply because they draw us to a more desirable life-style. Of course, not all of the ‘opportunities’ will be kosher. So the challenge is, how can you know what will make a good work from home opportunity?

Well, if you understand that working hard is a major factor to making a business work, then there are some decent internet based opportunities to be found within franchising. Most of these franchises fall into 2  categories and are targeted for the most part at commercial buyers:-

Web Marketing Franchise opportunities

These are ultimately providing web site marketing services to businesses for example web site design or search engine optimization.

Business Directory Franchises

With more and more people online, the web is becoming an ever more important element to local businesses in order to be seen in their community.  Web based business directories provide advertising to local businesses via a high profile website within their local area. Purchasers consequently are mainly the local business owners.

The good thing about looking for a franchise opportunity when compared side by side with other business start-ups are that they should be based upon a proven business concept. The franchise owner has proven the business idea can work and can be profitable. All that remains is for you to commit yourself to that franchise system in the same way the franchise owner did with their original businesses. On top of that, a franchise ordinarily carries support and training so that you are fully clued up with how the franchise business is intended to operate.

The work from home factor of an Internet franchise opportunity can provide a great deal of overall flexibility. Should you have a young family it could allow you to deal with your time and business at the time it most closely fits your schedule. Running costs can be kept low as there is no necessity to rent dedicated trade space. Naturally you have to consider the operating times of your potential clients when considering the best times to carry out your work.

After you have thought through what time of work will suit you best to enable you to work from home, remember that it takes a good deal of hard work to succeed in running any business. With the most suitable home based franchise together with your hard work and dedication, you could well be running a successful internet franchise opportunity from your own home.

Lee Thomas, Franchise Paths to Success

“Placing people in the RIGHT franchise for their SUCCESS”

888 701 6413, www.franchisepathstosuccess.com

Franchising is a Business Strategy not a Business

In order to truly understand the concept of Franchising, an exploration of the basic concepts of business is required. There is no magic in that. It just makes sense in order to provide clarity about the Franchising strategy.

Franchising is not a business in itself. It is a business strategy. It’s a business system. That’s a significant distinction that isn’t always clear. McDonalds is in the fast food business, although many people feel they are really in the real estate business, while others think they’re in the entertainment business. Regardless of that discussion, they are not in the business of Franchising. Schooley Mitchell Telecom Consultants is in the business of telecom consulting. Ramada is in the business of operating properties. Snap-On Tools is in the business of selling tools.

If someone says to you that they’re in the business of Franchising, they don’t really get what they’re doing. It’s all about the customer, and if the focus is not on the customer and their needs, then something is awry. Customers don’t need a Franchise. They need hamburgers, telecom consulting, hotel rooms and tools. So therefore Franchisors are not in the business of Franchising.

At Schooley Mitchell, we have a credo that says that “Good is the Enemy of Great”. It’s not absolutely original, but we hope our approach is just that. First of all, if greatness is to be achieved, focus must be completely on the customer. We have to continue to strive to have our customers clamor for our services. If we’re satisfied with being good at it, we’ll never be great. I want to be great. We want to be great. Our focus must be entirely on the customer to achieve that goal.

Purpose of Business

O.K, so let’s look at the purposes and objectives of business, regardless of whether the goal is to be good, or great. I don’t think anyone has a goal to be bad, so we’ll leave that one out. First of all, the basic purpose of business is to make money. It is not about your way to give back to humanity. That’s a charity. People that wish to be in business for themselves are doing so in order to make money. That shouldn’t be a surprise to anyone.

So how do all businesses make money? As stated above, they focus on the customer. Therefore, the purpose of daily activities, the objectives of business, are to get new customers, satisfy those customers, keep the customers, and grow business, either with, or through those customers.

Get, satisfy, keep, and grow. There you have it. These are the purposes of business. They form the first set of four in a concept we have developed at Schooley Mitchell called our 4 By 4 Concept. The other four will be discussed at a later point. You can’t think of a transaction that happens in business that isn’t aimed at one of these four things. The key is to understand that they are four distinct things, and they each require distinct strategies designed to achieve excellence in all four areas if greatness is to be achieved.

Get

Most people “get” this one. This is sales and marketing. Peter Drucker said there are only two things that create value in business – sales and innovation. The rest are costs.

I would suggest that many companies tend to become happy with their existing suite of customers. Or they land the “big one” and all is good. I would also suggest that if there are not constant strategies put in place to continue to get new customers, to get new blood, then stagnation will follow. Landing the “big one” can actually put the business in a very precarious position. It’s called over-trading. If the business relies too heavily on one source for its revenues it can be in big trouble if something goes wrong with that customer.

The solution to over-trading, and to keep generating a steady stream of new customers in order to keep any business vibrant and moving forward, is to implement great “get” strategies. And never quit. That’s certainly not rocket science, but it is a basic tenet of long term survival.

General Motors should have been trying to figure out how to “get” Japanese customers in the 1970s. That would have led them to understand how to “keep” North American customers. Enough said.

Satisfy

A lot of people really miss the boat on this one. I actually saw a truck drive by me recently that had a slogan on the side in proud, bold letters that said “We Deliver Satisfied Customers”. They seemed to be quite proud of the fact that they actually provided what they sell. All customers for all businesses expect to be satisfied or they wouldn’t complete the business transaction in the first place. Boasting that customers are satisfied is like saying, “we don’t rip you off”. Well, big deal and thank you.

Satisfaction must be a given. It is required for survival. It is certainly one of the four main purposes or objectives of business, but it is so often misunderstood. Satisfaction is what people buy, so they expect it to be delivered. Michael Vickers , one of our Sales & Marketing instructors at Schooley Mitchell, says that “Whatever company, in whatever industry, sets the standard in customer service, moves the bar up for all of us.” It’s a great message. We must constantly be wary of what customers expect in order to be satisfied, and it’s an ever-increasing standard. However, it’s nothing to brag about. It’s just what you sell.

In a book called “If It Ain’t broke, Break It!, Robert Kreigel wrote, “Embrace the unexpected. The only thing that won’t change is that everything will keep changing. Today’s skills, knowledge, and products live fast, get old before their time, and die young. The overnight letter, which was the innovation of the 1980s, is now used only when you’re not in a hurry.” He wrote that message 15 years ago! It’s a clear, and still valid, indication that we need to continually re-tool to meet customer satisfaction goals.

Keep

If satisfaction is a constantly moving target, and satisfaction requires ever-increasing effort and commitment, then to keep customers requires more than just satisfaction. Customers expect satisfaction. They buy satisfaction. People will copy satisfaction. If that’s all that is provided, then it comes down to price, and that’s a losing game no matter what business is at hand. Therefore, strategies are required to provide more than what the customer buys, in order to maintain long-term trusting relationships. Michael Vickers says to “take a standard service offering and up-level it.” That defines the “keep” strategies that a business must employ. Ignoring this one will again create stagnation or denigration.

Grow

Most of us have heard that it is less expensive to do more business with existing customers than to obtain new ones. It is my belief that you must do both.

In order to do more business with existing customers, there have to be consistent strategies in place to educate them about new products and services. In addition, you must understand their business, particularly as it changes, so that it becomes apparent when your products and services can be provided. You must also put practices in play to ask for more business. Complacency is too often the norm when opportunities are in front of us. Companies that implement processes to ensure these things are managed will continue to grow business via the grow strategies.

The grow strategies also include asking existing customers to support you in your business growth through others. It’s surprising how many people would be willing to help if they are requested to do so. Things like referrals, testimonial letters, agreeing to act as a reference, and introductions to their association are all offshoots of this strategy.

So there you have it. These are the four basic objectives of any business. Business needs strategies and formulas to continually get new customers, satisfy them, which is an allusive and demanding standard, keep them, which requires more than delivering what you get paid for, and grow business with them or with their help. These are the basic concepts of business, and they must be at the heart of every good business, and every good Franchise system. Evaluating a Franchise system should include an assessment of how well the Franchisor understands these concepts, and how well they execute strategies to make them happen.

Lee Thomas, Placing People in the RIGHT Business/Franchise for Their SUCCESS

Franchise Paths to Success

888 701-6413

www.franchisepathstosuccess.com

FRANCHISE: PERFECT FOR WORKING MOMS

Balancing a career and a family has proved to be a unique challenge for women. Returning to the office after maternity leave or longer sojourns raising children can prove difficult for many women, as the demands of both environments continue to weigh heavily on their minds.
As a result, an increasing number of business-minded women have sought to invest in a franchise opportunity. According to Franchising magazine, franchises offer ambitious women a supportive environment to start their own small business.
Additionally, it points out that women are uniquely qualified for this role due to their meticulous attitudes and attention to detail, especially as mothers.
“Investing in a franchise means you have a tried, tested and reputable business, which you can enjoy growing from day one, with exactly the right type of support and network around you.
This makes it not only more financially secure and successful but also a lot more fun. Franchising can be perfect for women who want to achieve that all important work/life balance,” Sarah Cresswell, founder of the Creation Station, told the magazine.
“A franchise system shortcuts learning, making the time invested more productive”, sites Jay Contreras, Liberty Tax Area Developer. “And for those who need flexibility a seasonal business like tax preparation allows the franchisee to work hard for a defined amount of time, 14 weeks in the tax business, and live a very flexible schedule the remainder of the year,” adds Contreras.
“This provides a great benefit for working mothers.”
Moira Holden, Web editor for www.workingmums.co.uk, explains that mothers are used to running after children and managing various activities, which requires not only a very organized lifestyle, but the ability to prioritize every minute of the day, the magazine writes.
Furthermore, they are used to working not on a 9-to-5 schedule, but also adhering to children’s schedules. Mothers work at all hours, night and day, which will provide particularly useful during a franchise unit’s startup phase.
Cresswell started her own franchise from the bottom up, while still raising three children. She told the magazine that understanding the challenges women face in starting a business during this time makes the supportive atmosphere of franchising so appealing.
“What I love about the franchise model is that, if you find the right one for you, it can make the dream of running your own business a secure reality. You know what the outgoings are from the start and all the research and development costs are covered at the head office level – this can save you a fortune,” she said.
“More than anything though, I believe the true value of investing in the right franchise is in being part of a team who really understand you and your business, and who will support you through each step of your business growth and development,” Cresswell added.
Lee Thomas, Franchise Paths to Success
“Placing people in the RIGHT franchise for their SUCCESS”
888 701 6413, www.franchisepathstosuccess.com

FRANCHISE IS A FAMILY AFFAIR

FRANCHISE IS A FAMILY AFFAIR

The number of franchisees opening to help safeguard their children in the future has increased in the past few years. But franchisees say it was a combination of that mixed with just good business sense.
“The main reason for us is it was kind of a hedge against the mortgage market,” said Rex Duffin, part owner of four Jamba Juice franchises, including ones in Gilbert, Mesa and Chandler. “Our main business is in the mortgage market. This last four or five years we’ve seen that come to fruition as far as the mortgage market being thrown on its heels.”
Duffin said when they were searching for a franchise to open they wanted some place their kids could work as they got older, but also a place that was going to make them money.
“The idea of them sitting around and doing video games was not too attractive and not really knowing what the job market might be like for them, we decided to open up a franchise,” Duffin said. “It’s a double-edge sword when you have your kids work for you, but overall it has been great.”
FranNet says starting a new business in today’s economy is becoming akin to opening up a small family business for many parents. Several owners are opening up a franchise and relying on a branded name to give their kids a better future.
“I know several franchisees who purchased the business for their children’s future financial security,” Fred Bobel, area director of Liberty Tax, a retail tax preparation company, said in a written statement. “Many have experienced the recession’s effect on their careers and retirement savings and they want to spare their family from the same experience.”
Sunny Arora, who recently started his fifth Quiznos franchise, said he opened a franchise because the recognized brand helps keep the business afloat in a difficult economy. He’s really only seen older people, headed for retirement, buying franchises as a safety net for their children.
“Recently, I sold one of my Quiznos locations to a man who was close to 60 years of age,” Arora said. “He bought it because he has children and grandchildren and he wanted to work a little bit for himself and pass it on to his children so they have a living and a good life.”
Rod Ticknor, owner of two Native New Yorker locations in Ahwatukee, said he decided to franchise to get out of the corporate world.
Ticknor said he traveled too much and wanted to put more time and effort into his own business. He found that Native New Yorker encourages owners to make Native their own.
“We talk about what we’re doing in the local community and we do some sharing of ideas of what works in different parts of the community,” Ticknor said. “We promote the fact that we’re all a little bit different when it comes to decor, but with the same food.”
Duffin says for his family they may not be the typical family-owned business but, because all of their kids have worked in the store as they’ve grown up, they feel proud to call it their own.
“We have enough stores that it might not quite be the mom and pop store you think of as a family business but we consider it a family business even though it’s a national franchised brand,” Duffin said. “We’re absentee owners so we don’t work in the stores but by going into the stores and meeting the workers and getting to know them and getting to know the customers, saying hi to them and talking to them a bit we keep it feeling small.”
Scott Timmons, district manager, has been working for Jamba Juice for 13 years and recently became a part owner. He says for him it feels like a family business.
“Our franchise, Blend Serve LLC, is definitely a family business,” Timmons said. “I think our family values guide our hiring and giving back to the community. Something that is not always there with corporations, but more so with family-owned businesses and franchises. Jamba may not be our original idea but I have been with them 13 years and Blend Serve has been a franchisee since ’97. We have helped develop a lot of great fundraising programs that are our original ideas.”
Lee Thomas, Franchise Paths to Success
“Placing people in the RIGHT franchise for their SUCCESS”
888 701 6413, www.franchisepathstosuccess.com