Franchise Money Maker

Franchise Money Maker is a Free Information Website written by industry veterans and experts in various disciplines of business and dedicated to Entrepreneurs.

You will find information on everything from choosing the business that fits you best, to financing, to human resources, to marketing and accounting.

In addition Franchise Money Maker offers Podcasts featuring in depth interviews with Business Leaders, successful Entrepreneurs and both Franchisors and Franchisees.

A must visit for anyone in business or thinking about starting their own business. Franchise Money Maker is also an excellent resource for business students or anyone researching small business topics. See the legal disclaimer. Contact Us with any questions - info@franchisemoneymaker.com

One of the questions you will ask yourself when considering becoming a franchisee is how similar it will be to starting up aconventional business. You may well wonder whether the benefits of a standard start-up transfer to the world of franchising.

It’s worth remembering that a franchise is a hybrid between entrepreneurship and working for established corporation. Therefore, aspects of both will be evident in the running of your franchise company.

We compare each aspect of running a franchise and a company:

Raising finance

Although a franchisor will take much of the financial burden away from you compared with a conventional start-up, there are still significant initial costs to running a franchise.

The various fees and running costs amount to an average of £32,000 for UK franchises – a figure that means that three in five franchisees have to borrow money to finance their venture.

Of course, compared to starting up your own business, this kind of burden is relatively light. You are paying for a part of an established company’s brand – effectively ensuring a head start on someone starting from scratch.

Depending on the franchise, all stock and equipment is likely to be supplied to you, along with premises and help with accounting and insurance. There will be fewer commitments to soak up your money, allowing you to concentrate on improving the business.

As for investment sources, you will rarely need to look further than your bank. With franchising being such a low-risk option, banks are generally very happy to lend money to franchisees, safe in the knowledge they will, at the very worst, have a parent company to chase if things go awry.

Therefore, finding finance should be easier for a franchisee than a standard entrepreneur.

Support

Being a conventional entrepreneur means you have to live very much on your wits. There are arguably very few degrees that will teach you what the reality of running a business is like – if you haven’t done it before, you will be taking a trip into the unknown.

Also, the ‘safety net’ beneath entrepreneurs can vary greatly or not exist at all. Many people plough their entire savings behind a business that subsequently fails, leaving them with nothing when the debts mount up.

While friends and family can provide assistance with funding and advice, invariably your most important relationship will be with your bank manager.

Compared to a standard company, a franchise is a different story altogether. Almost all franchisors provide comprehensive training for their franchisees. Before taking on a territory, you should be given a full run-down of the market you’ll be working in, advice on any equipment you’ll be using and some help on business basics such as accounting, stocktaking and turnover projections.

Having been trained to run a fully-equipped business, the support doesn’t end there. Most franchise companies offer their franchisees on-going help in the early days of the business and often put newcomers in touch with more experienced franchises owners for advice.

When you consider the support franchisees enjoy compared with their start-up counterparts, it’s easy to see why the sector has such a low failure rate.

Marketing and PR

As a start-up company, it’s imperative that you get your message out there to the right audience. Through carefully targeted newspaper, online or radio advertising, you should be able to reach enough people to get some customers through your door.

Next comes the ongoing process of building and maintaining a reputation. Get this right and you will begin to thrive from positive recommendations from satisfied punters.

It can be a long, time-consuming process and a costly one too – advertising isn’t cheap and entrepreneurs often have to think up innovative, quirky ways in which to publicise themselves.

As a franchisee, you’ll have the clout of a large, often well-known, brand behind you. You’ll be given all the marketing tools you need to spread the word about your business and will benefit from advertising, sometimes on a national level.

A large franchise company will have dedicated marketing departments that will be able to provide you with all the advice and materials required.

Freedom

Franchising provides you with plenty of support, but it isn’t exactly the business equivalent of a blank canvas, unlike the experience of normal entrepreneurs. Franchisors have their own criteria on how each of their outlets should look and operate.

However much it feels like you’re the ultimate boss on a day-to-day basis, you will always be working to someone else’s vision, not your own. The amount of freedom afforded to franchisees varies, but you will almost certainly be briefed on how the company wants to be represented, from the uniforms of staff to what suppliers to use.

Also, should a franchisor change ownership or fail, the future of your franchise will be thrown into doubt. Likewise, the actions of your fellow franchisees will have an impact upon your image and, therefore, sales.

It’s important that you are comfortable with these circumstances before you purchase the franchise, or you could become extremely frustrated.

Making a profit

Franchising holds the upper hand here – with one significant drawback. A franchise company will demand a percentage of the profits you achieve. They will also ask you to pay periodical fees to retain the franchise license, allowing you continue trading.

That said, your franchise will provide you with an ideal platform to make profits in the first place. You will be operating a proven business concept that has a solid reputation and a history of making money.

You will be trained to run a business that is fully equipped, with most of the work done for you in terms of marketing and PR, meaning that many of the time and money consuming aspects of starting up a business will not be a factor when running a franchise.

Moreover, it’s likely the franchisor will have projections of how your business should grow, with practical advice on how to achieve profitability.

Do you need expert legal advice concerning a franchise? Garden City-based attorney, Harold Kestenbaum, has represented over 100 franchisors both nationally and internationally since 1977.

BIOGRAPHY OF HAROLD L. KESTENBAUM

Attorney Harold L.Kestenbaum received his Bachelor of Arts Degree in 1971 from Queens College, Queens, New York and earned his Juris Doctor Degree from the University of Richmond School of Law, Richmond, Virginia, in 1975, where he was a member of Law Review. From May 1982 until September 1986, Mr. Kestenbaum served as general counsel to Sbarro, Inc., the national franchisor of over 900 family-style Italian restaurants and has been a director of Sbarro since March 1985. From September 1983 to October 1989, he served as President and Chairman of the Board of FranchiseIt Corporation,which he co-founded. FranchiseIt was the first publicly traded company specializing in franchise marketing, consulting services, and equity financing to emerging franchise companies.

Currently Mr. Kestenbaum is engaged in the independent practice of franchise law, representing both start-up and established franchisors exclusively. He has published many articles and frequently lectures numerous organizations and law schools concerning franchising.

Mr. Kestenbaum is a member of the following organizations:

• American Bar Association’s Antitrust Section
• Antitrust Section’s Forum Committee on Franchising
• Subcommittee on Franchising of the American Bar Association’s Corporation Banking and Business Law Section
• Founding member and current Chairman of the New York State Bar Association’s Franchise, Distribution and Licensing Law Section, currently serving as Chairman for its Education and Seminar Subcommittee (he Chaired statewide seminar programs for New York State attorneys in 1997, 2000 and in 2002).

He is listed in “Who’s Who in American Law”, “The Best Lawyers in America” (Franchising), and is on the Martindale-Hubbell Bar Register of Preeminent Lawyers.

Mr. Kestenbaum has been franchise counsel to regional, national and international franchise companies in many diverse industries. Some of these include:

Sbarro, Boulder Creek Steaks & Saloon, Nathan’s Famous, Bagel Boss, Manhattan Bagel, New World Coffee, Chesapeake Bagels, Between Rounds, Fratelli Ravioli, The Spare Rib, Cascarino’s Pasta and Pizza, Dallas BBQ, Yogurteria, Hot & Crusty Bakery, Zaro’s Bake Shoppes, Java’s Brewin, Sylvia’s Soul Food Restaurant, Crescent City Beignets, Arthur Treacher’s Fish & Chips, Five Guys Burgers, Buttercup Bake Shops, Frats, San Francisco Oven, Sedutto Ice Cream, Yogurt & Such, Wall Street Deli, Original Ray’s Pizza, Fasta Pasta, New York Subs & Sandwich, The Pizza Professor, Ranch*1, Desert Moon Café, Pudgie’s Famous Chicken, New York Burrito, CoolBrands International (Tropicana, Swensen’s, Bresler’s, I Can’t Believe It’s Yogurt, Golden Swirl and Yogen Fruz), Eskimo Pie Stores, Gator’s Dockside Restaurants, Camille’s Sidewalk Café, Kudu Restaurants, Famous Famiglia, JRECK Subs, Jersey Mike’s, Sobiks, The Famous Manhattan Soup Chef, Sago Tea Café, Zyng International, Packaging Plus Services, Stephane Kelian Shoes, Wicks ‘N Sticks, Marad Fine Art, Handyman Network, BevMax International, America’s Cutting Edge Instant Appraisals, Hometown Threads, Marsha Scott’s Hair Loss Clinic for Women, Lemon Tree, Island Inkjet Systems, The Discount Party Warehouse, King Bear Auto Service Centers, GarageTek, Blasting Juices, Global Travel Network, ReCeil-It, Herman’s World of Sports, FastTrain Computer Learning Centers, Uniforce Temporary Services, Dashing Diva, Spectank, DCAP Insurance, Re-Bath, Gibraltar Transmissions, Shapes, Inches Off for Women, RezConnect, Crown Trophy, Autowraps Franchise, Inc., Foliage Design Systems, Ice Magic, GumBusters of New York, Sea Tow Services International and Flexscan.

Mr. Kestenbaum’s expertise in franchise law is buttressed by his practical experience serving as the Chief Executive Officer of a national franchisor. He also sits on the Board of Directors of RezConnect Technologies, Inc., Ultimate Franchise Systems, Desert Moon Café Franchise Corp., GarageTek, Inc. and Wall Street Deli Systems, Inc. These experiences are rare and unique in the area of franchise law.

If you are looking for the best expert legal counsel related to franchising, then contact Harold L. Kestenbaum to represent you!

EAB Plaza, West Tower -14 th Floor

Uniondale, New York 115 56

hkestenbaum@farrellfritz.com

Website: franchiseatty.com

Tel: (516) 745-0099

Fax: (516) 745-0293

Tips for picking the right Franchise for you.

Buying a franchise and going into business for yourself is a life altering decision. This article along with the companion Podcast will help you avoid mistakes when making the decision regarding which franchise to purchase.

First of all you must do thorough research so you don’t end up buying the wrong franchise. There are very definite steps that need to be taken I order to avoid some very common mistakes. Start by evaluating your self, your likes, dislikes, your background, prior career, how much you can afford. These questions need to be answered first. They have nothing to do with any franchise company and everything to do with you, and after all being in your own business is about you.

Next take the path of least resistance by eliminating the franchise concepts and opportunities that don’t fit your criteria. Some concepts are so wrong for you that it’s easy to cross them off the list.

When you get to the opportunities that fit your personal criteria, you’ll know that these are the companies to investigate further, what’s called “due diligence.”

So let review the steps you need to take in the self-evaluation process and then how to investigate and evaluate the franchise company that is right for you.

STEP 1
Remember before you begin looking at franchise concepts, start by evaluating yourself, your likes, dislikes, your background, prior career, how much you can afford.– The real you.

1. Consider your past jobs, current career and determine what you liked best and least about them.
2. Make a list of your strengths and weaknesses.
3. Do you see yourself managing others or do you prefer to work alone?
4. What experience, skills and interests do you have?
5. Where do you want to work?
6. Are you willing to relocate?
7. How much money can you invest and how much would you like to make?
8. How do you feel about selling and the sales process?
9. How many hours are you willing to work while the business gets off the ground?
10. What sacrifices are you willing to make to your current life style? What expectations do you have before and after the business is well established?

Be honest, write your list, and focus on the companies that match your needs and will meet your goals.

STEP 2
Stay focused on your personal criteria but keep an open mind. Keep all your options open when considering a franchise.

An unprepared person may approach the process by thinking, “Well, I love sandwiches so I’ll buy a sandwich shop. Only to find out after spending days or weeks of research on Subway or Panera Bread and others, that the required capital is too high, the territory is not available, you’ll have to give up weekends if you want to own a food franchise.

Another ineffective way to start your research is to edit your criteria list down so narrow that you lock yourself in to one or two concepts. If you think, “I’ll only look at auto repair shops or gas station franchises,” you may miss finding the concept that would match perfectly with your needs.

With so many franchise concepts available, keeping an open mind is the best strategy you can use to perhaps get on the ground floor of that new, hot concept or to find something that will really take off in your market.

STEP 3
Let’s assume you now have narrowed your search down to the franchise concepts you believe will best match your criteria. What do you do next?

You will want to thoroughly view their web site. Contact the franchisors and request information about their company. You will most likely need to give them some upfront information in order for the company to take you seriously and send you information. Don’t be shy; leave them all your contact information so they can get back to you for that first & all important telephone interview and qualifying conversation. Review all the initial information, brochures and any videos they send you. Within a few days you will probably get a call from someone in the franchise department who will ask you several questions in order to determine your qualifications, your interest and advise you if the territory you seek is available.

Remember this is a two way street. They will be investigating you the same way you are investigating them. Most franchisors take the position that they “award” you a franchise, not that you are a buyer and can “get in” simply because you can write a check. I’ve always told my clients, if a franchise salesperson doesn’t give you a thorough and professional telephone interview, stay away. If the franchisor values its brand and system they will most likely ask you more questions then you may ask them. Don’t be discouraged. This is a good sign, after all they have their criteria also and they want a good fit, just like you. For the franchise relationship to work both sides need to be happy with the decision.

Ask yourself a few questions at this point. Have your initial questions and concerns been answered to your satisfaction? Was the call courteous and professional? Was the caller friendly and knowledgeable? Are the materials up-to-date?

How the process is handled at this point may be an indication of how you will be serviced once you are awarded the franchise and begin your business relationship with the franchisor.

STEP 4

Fill out and submit your application. Pay close attention to the financial informational they ask for. If you are serious, be prepared to disclose everything. Some applicants try to hide past credit problems or feel offended and won’t give proper financial information. THIS IS A BIG MISTAKE. If you’re serious, be honest, candid and through. After all, you expect the same from the franchisor. Many franchisors will not schedule a discovery day or send you their UFOC (Uniform Franchise Offering Circular), a document every franchise in the United States is required to provide, without complete and accurate information from you. The UFOC is full of information about the franchise and it clearly explains the responsibilities of the franchisee (you) and the franchisor.

Your next step is to schedule your discovery day at the franchisors office. In some cases the franchisor may send your their UFOC in advance, others will give it to you at the first personal meeting to discuss the franchisee. In either event you are required to sign a receipt acknowledging that you received the UFOC on a particular day. Once again, if you are reluctant to sign the receipt, you should consider the process over. The UFOC receipt is required by the franchisor and most will not circumvent legal compliance. If they send you the UFOC in advance, read it. From this document you will learn the history of the company, the training and marketing programs, and what costs, royalties and fees you will be required to pay. Your UFOC review and understanding is a very important part of the research process. Every UFOC is structured the same way covering 23 items of disclosure required by the FTC (Federal Trade Commission). By paying attention to what you discover in a company’s UFOC, you can eliminate franchise companies that just don’t measure up.

Many companies may also do a credit and background check before they proceed. Many franchisors get hundreds of inquires a year and they want to spend time with applicants who are ready, willing and able.

The UFOC document will become the basis for your questions. Make a list of questions and bring it with you to your discovery day meeting. Ask plenty of questions.

STEP 5
I consider what I am about to tell you the most important step in the entire process; CALL EXISTING FRANCHISEES!

Operating franchisees are your best source of information for investigating what really happens in day-to-day grind of the business. You can ask about their relationship with the franchisor, the service the company provides, what they like and dislike about the business. If you build some rapport with the franchisee you may even get a feel for the type of earnings a franchise makes.

Speak with several franchisees because you will most likely get a variety of opinions. Don’t feel shy to discuss your findings with the franchisor. You don’t need to name the franchisees (if any) that gave you negative comments, but you should address the franchisor for an explanation. Do not make a decision without completing this step. I urge you!

STEP 6

Now that you’ve narrowed it down and selected a company that you believe is a good fit, it’s time for an attorney to review the franchise contracts, the UFOC and any other paperwork you will be asked to sign.

I suggest you engage a Franchise Attorney. You can find attorneys specialized in this area on the internet or contact the IFA (International Franchise Association) they may be able to point you towards a law firm that can advise you on the paperwork.

Step 7

Now, it’s time to make the final decision, execute the franchise agreement and begin the process of developing your franchise. I remind clients; they are in business the minute they sign the franchise document. The set-up process to opening your business to the public is part of the business. So remember you’re in business when you sign the agreement, not when you open your store.

Simply put, you’re decision will be filled with anticipation, excitement and a healthy fear. Those are very normal feelings, if you’re not feeling any emotion about starting a business, perhaps this is not for you.

However, if you’ve done your “due diligence” and followed these simple steps, you should be very comfortable with your decision.

Quick review:

1. Evaluate yourself
2. Keep an open mind; find some companies that meet your criteria.
3. Contact the franchisor and request information
4. Review UFOC/meet Franchisor
5. Talk with existing franchisees
6. Legal review of the Franchise Agreement
7. Make your decision, you’re in business!

There are two Franchise Money Maker Podcasts that you may find of additional interest - Industry Basics, Choosing the Right Category and the Investors Due Diligence ChecklistHow to start a franchised business of your own.

The content and links presented on this page are for informational purposes only, and should not be construed as medical, legal, financial or any other type of advice. Any articles or content presented here are the opinions of the author and have not been reviewed for accuracy. We assume no responsibility for the use of this page or the information and links contained herein.

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