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Start Your Own Independent or Buy A Franchise?

Independent

Franchised

You’re visiting a new city, on a time table and you’re watching your weight and want something grilled not fried and a salad, the kids only will eat chicken nuggets, and you want the kids to have some vegetables and you have a toddler that will only eat macaroni but not nuggets. You want a reasonable price point with sit down options, clean bathrooms and free parking. Which one will you choose? Chances are KFC because you know what to expect.

A person can come up with an idea and open a business on their own, doing business under a name they dreamed up. Problem is that there is often no business plan and they have no idea of how much capital they need, as the business owners figure they will boot strap their operations from their income from “their other job” or savings. Too often these boot strapped independents fail due to lack of appropriate business planning and lack of adequate capital.

Or a person can research and buy into a franchise. As part of their due diligence, the franchisor will be providing them with a uniform franchise disclosure document (FDD) which details all aspects of the business, including the investment range from low to high that their most recent franchisees have found so you can better understand your capital needs. This FDD will also include a copy of the franchisor’s financials as well as a list of their franchisees and contact information, both present and past, so you can speak with not only the franchisor but also their franchisees before you make a final decision. When buying a franchise, there is a business plan, operating manual, and all the marketing, systems, technology, vendors and other items needed for you to easily start your business in addition to training and support. As a franchisee, you as the owner are not distracted by trying to put into place the “foundation” but instead can begin to focus on your customers from day 1. Even those franchises in the early stages of their development have a format, brand, trade name and system. Other franchisors are well established. And sometimes, a franchise that is not well established in your area is a great opportunity as you can obtain rights to multiple units or for area development.

Some of the better known franchise brands include McDonalds, Subway, KFC, Wendy’s, Marriott, Choice Hotels, AAMCO, Great Clips, among a long list of other established brands. There are also a host of service, mobile and home-based businesses in every segment from auto, advertising, arts and crafts, business services, cleaning (both residential and commercial), maintenance and home related, computer, cell and other technology related, convenient, educational, health and fitness, medical, personnel and staffing, sports and recreational, travel and cruise, vending, and other smaller specialty niche retail from coffees, to clothing, to scrapbooking to cell phone repair.

The question is “Does a known brand or independent store have the better chance of success?”

Franchising is when someone like a Ray Kroc (McDonald’s founder) takes his proven and successful business, perfected over time and then duplicates it. McDonalds, the franchisor, licenses its name and trademarks and franchises its operational system by granting others the right to use its name, mark and system. Usually both parties sign long term contracts (which can vary from 5 – 20 years depending upon the nature of the franchise, level of investment, and industry segment) with a franchise fee paid up front. In the agreement, the franchisor promises to help its new franchisees launch, train, and support their businesses so they too can become successful business owners as they roll out the franchisor’s brand in local markets throughout the United States.

The new franchisees promise to follow the franchisor’s proven systems. For all of the training, support, ongoing research and development, group buying power with selected vendors, the franchisor will also be paid a small royalty (generally based upon gross revenues, although some are a fixed fee; and some have minimums) and maybe fees for advertising, training, technology, call center support and other items as more specifically described in each franchisor’s uniform franchise disclosure document (FDD). Most franchisors are really only successful if its franchisees are successful.

The goal of the franchisor is to make the franchisees wealthy and very successful. If they can enable their franchisees to generate great sales and thereby make a great income for themselves, the franchisor receives a higher royalty because generally the royalties are based on sales. Thus everyone builds greater equity and all parties benefit.

A person can start their own business and try to learn everything from scratch, or they can buy a franchise with proven systems. Study after study has shown that only 8-14% of independent businesses are still operational 5 years later (depending upon which study) while 86-92% of franchises are still in business 5 years later. Let me ask you, which is the smarter move?

Some fear they need to stay in a job they feel that does not reward them or one that takes them away from their family due to the high demands or extensive travel. Some fear they can’t afford to even look at franchising or business ownership. The reality is that no matter what your background or interest or situation, there is a business or franchise that might be appropriate with investment levels ranging from a few thousand dollars to several thousand dollars. And some even offer internal financing and some help their franchisees find financing. However, you will need some cash for seed money (initial franchise fee) and working capital, and you will also need to cover your personal living expenses during the ramp up period.

Some who are laid off find they can’t get financing to start their own businesses and cling to their 401ks rather than realizing there are programs that allow them to invest their 401k money in their own business, without tax penalty if done correctly. If you find yourself wondering if business ownership might make sense for you, take advantage of the free consultation offered by eAdvantage4u consultants. Why not get the facts so that if you don’t have the seed money now, at least you can develop a plan to move towards business ownership in the future?

Read more about the advantages offered by eAdvantage4u consultants and how to select the right consultant. Learn how an eAdvantage4u consultant can help you quickly assess your skills sets, help you determine your goals and give you direction and guidance.

Buying a franchise or starting a business of any kind is a big financial investment. Evaluate not only the costs to get in but also evaluate the profit potential versus the risk you have to take. There is greater risk for many by doing nothing or continuing to do more of the same. There is “no doubt” if you start an independent business and you are closed in one year or even five years, it was NOT a good investment. If you know that you need to build sizable wealth over a period of time to retire securely, and you just take a job that may cover your income needs but doesn’t provide you the equity growth, you may find you have to keep working and can’t retire. Others are concerned about investing some retirement allocated dollars in a business but the reality is that they should really explore how they might earn versus what gains they might make in their current portfolio when they invest in themselves and their own company.

It has been reported that total sales by franchised businesses are projected to reach over $2.2 trillion this year. One out of every eight businesses is a franchised business. A new franchised business is opened every 8 minutes of every business day. Franchises account for 42% of all retail sales, a number expected to grow to 50% in the next decade. Many industry segments have been fragmented which offers great opportunities for franchising. Franchising continues to have double digit growth, even during the past few years. There is great opportunity not only to increase your nest egg, but to also have control over your time and future while finding something that you enjoy and that makes a positive impact in your community.

Why is franchising so popular and helped so many become wealthy? Because with the hand holding and help of the franchisor, a person can have the best chance of success if they follow the systems.

What fear is holding you back from exploring all of your options? Why not get the facts? Why not learn more so you can make an informed decision?

People that get ahead, act. Call today or sign up for your free consultation.