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Franchise & Business Opportunity News

Research Shows How to Earn Big Dollars with a Franchise

Written on September 25th, 2007 by Joseph in Franchise Industry.

Try envisaging opening 10 new business locations without having to go to great pains with real estate and development costs or taking on any of the risk. Then, once all of them are built, imagine finding managers to run all these locations so you don’t have to!

Sound implausible? Well, not if you go the franchising route. Experts say and research has proven that franchising is one of the fastest ways to grow a small business without breaking the bank account!

Franchise attorneys reported that franchising is a way for companies to expand and grow, using other people’s capital and human resources.

How did they get that right? It’s because it is the franchisees that have to pay the expense of securing a location, renovating it, equipping it, stocking and staffing it, not the franchisor. Basically, these franchisees become the stakeholders who have a vested interest in making the business work.

Of course, as the franchisor, you are responsible for providing the necessary training to get these franchisees started, as well as any follow-up training and support they may need including marketing support. These start-up costs would be covered by an initial franchise fee that you would collect from the franchisee. In addition, you would be paid a weekly or monthly royalty fee, typically ranging from 4-6 % of a franchisee’s gross sales.

Sounds like a great deal does it not? Yet, research and well known franchise attorneys say that franchising can be a sweet deal, providing that your business is franchisable.

Not every business is franchisable. A franchisable business is a business that has proven reliable systems that can be duplicated. The business has to be teachable, or franchising just will not work.

In addition, research has shown that a franchisable business should be able to demonstrate its ability to capture market share in the face of competition.

Your franchisees must be able to get a return on their investment, preferably a 25-30 % annual return. Therefore, if your business is not making enough money to pay the bills, then do not even consider franchising.

Experts say that having a proven track record is also beneficial.

Franchising news has shown how some businesses were in business for many years before they started franchising whereas others where only in business for 1 year before they began franchising due to huge success. Successful franchisors say that it helps when the concept is unique and teachable.

Successful franchisors suggest that those interested in franchising their business should obtain experienced legal counsel to help them establish the framework and walk them through all the paperwork. And there’s a lot of paperwork!

One of the major documents you will have to file is the Uniform Franchise Offering Circular. The UFOC is basically a disclosure statement that outlines the franchisor’s entire operations including its franchise fee structure, history, finance as well as management.

Experts say that in addition to consulting a franchise lawyer, one should also consult with an accounting firm, preferably one that has dealt with franchisors before.

Research has shown that more and more people are looking to franchising as a way to expand their business. Interestingly, experts tell us that 50 cents of every retail or service dollar spent by a consumer is spent in a franchised business. So get your share of the deal now!