How to spot a winning franchise brand

For more and more aspiring business owners, the long leap from employment to entrepreneurship will begin with a franchise. After all, a ready-made business that already has a product with proven appeal guarantees less start-up pains.

A sound franchise business comes with a number of systems already in place and which the franchisee merely needs to implement.

The more successful enterprises include manuals, each one spelling out the procedures to be followed in the key functional areas of operations, marketing, training and the like, according to Tess Ngan Tian, president and co-founder of Lots’A Pizza (LAP).

Tess points out that it was her husband Ed, Lots’A Pizza chair, who pushed that they create a pizza that would appeal to mid-income value seekers wishing to bring home something delicious and filling to their families on their way home from work.

What is a business franchise?

Franchise literally means right or privilege. Franchise is an authorization granted to someone to sell or distribute a company's goods or services in a certain area. There are great franchise opportunities and advantages for the new entrepreneurs who want to establish the business with all essential managerial prospects by training, supporting and mentoring all the financial issues of the franchisees.

Franchising is a business approach to expand a business fast wherein a "franchiser" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits.

Why get a franchise?

A franchise is one of the most popular forms for people interested in self-employment, as it provides them with the tools to run a new company but at a far lower personal risk. The reason is simple; by using an established and proven business model, with a recognized brand, the chance of success is significantly enhanced.

Most often, business to business franchises prove to be most successful, with design and print shops proving a strong market to be in as the US strengthens its recovery.

Financial aspects of franchising

When starting a franchise (example, a siomai business franchise), as with starting any other business, there is an initial investment needed. Alongside the right to used the business model, this covers the right to use the organization's name, brands, logos and all associated marketing information be it intellectual or material. Moreover, it also provides the training, support and with the best franchises, help in finding and securing premises.

The initial cost of a franchise is higher than with a regular start-up but, all additional fees are already taken care of, whilst an existing client base and reputation have largely been established.

Market share and position of the franchisee

The most successful franchise companies understand that to effectively gain market share, they need to target geographical areas sensibly. Therefore, the franchisee will get all the support needed to give the operation every chance of success. This will include advice and planning where to set up.

Despite central support, the franchisee maintains autonomy over key factors, allowing local response to business demands to be made.

Financing a Franchise

Another aspect which makes franchises so attractive to entrepreneurs is that they are far more likely to secure financing. Working to a proven business model, creates an environment much less likely to fail. Accordingly, banks and other lenders see business loans made to a franchise investor as a far preferable place to direct their funding, particularly in the present climate.

There is also a greater pool of lenders to choose from, with many other less traditional financial institutions willing to lend to franchisees investing in strongly positioned companies.

For a great many Americans, a franchise has allowed them to take control of their lives and build their family fortune no-end. It is important though, to know what is what. Is a franchise going to give you the life you have always dreamed of? Probably yes, but only if you put your investment in the right place, work hard and stay determined.

What you should know first hand before buying a franchise

Having  your own business is a great step for many people. People with savings and capital to invest are beginning to find real success with franchise business. You could, for example, franchise McDonalds, or Seven Eleven or a gasoline station, and other businesses that have franchise framework. However, before buying a franchise, there are information you must know first and before hand before going into a franchise business. So, before asking, how can I get a franchise?  Know these important information before getting involve in a franchise business.

1. What's my upfront cost going to be? This is the most obvious initial financial question. But immediate out-of-pocket costs are only one consideration in franchising.

2. What other fees should I plan on? You may be required to lease property or equipment from the franchisor. You may also have to pay the franchisor a percentage of your annual sales. Those numbers must be cranked into your own equations when you're trying to figure out if a franchise deal makes sense.

3. How is the franchisor making money? Franchisors may make money by owning their own establishments, by providing services to franchisors, by simply collecting initial franchise fees from people like you or by some other combination. It's tough to make a blanket statement about whether one model is better than another, but surely you want to know where the franchisor's own interests lie.

4. What restrictions do I have on suppliers? Are you going to be required to purchase certain goods or services from particular vendors and/or from the franchisor? If certain purchases are required, are they going to cost you more than you would otherwise have to pay if there were no restriction on where you could buy them?

5. What kind of regional protection am I getting? Do you have any guarantees that the franchisor isn't going to sell other franchises or open up its own outlets in your geographic area? If so, how long are those guarantees good for?

6. What kind of empire-building opportunities do I have? The flip side of the previous question: Do you get first dibs on new franchises in or near the same area as your first franchise? Some of the most successful franchisees are those who own multiple outlets in the same area and are able to develop their own economies of scale.

7. How many franchisees fail in a year? You'd want to find out how many (or what percentage of) franchisees close their doors within the first year or two years, and how many or what percentage of all franchisees close annually.

8. How many franchisees sell out in a year? A franchisee that gets out of the business by selling to someone else isn't necessarily included in the statistics of "failures." Indeed, he or she may be selling a successful venture. But you still need some idea of the turnover rate of franchisees.

9. What's the value of a re-sold franchise? Another way of looking at the prospects for franchisees is to look at what happens to those who sell their establishments. What did they get for the re-sold franchise relative to what they put into it? Was it a profitable investment, or were they simply looking to get out and cut their losses?

10. How do I get out of this deal, if necessary? Put another way, would you be allowed to sell your franchise? Can you sell to anyone, or do you have to deal with the franchisor? Would the company charge you something to sell your franchise or otherwise restrict your ability to pull out of the business?

Source: Joseph Anthony,http://www.microsoft.com/business

Ways To Boost Profits Quickly

"Too often in business we get trapped into equating sales with profits. Yet there are many other ways you can dramatically impact your profitability!"

 
Underpricing Kills Profits!
 
Many small businesses have thinner profit margins than larger firms do because they tend to underprice their products or services. So why not just raise prices? I know the feeling--you're scared that your competition might swoop in like a bird of prey and your customer base might shrivel overnight!
For years we credited much of the success of our best-selling resume book, Resumes That Knock 'em Dead, to its relatively low $7.95 price. But my sales manager insisted we could charge more, so when we brought out a new edition, I nervously increased the price by 25 percent to $9.95. What happened to sales? Unit sales surged over 20 percent. Total revenue soared 50 percent, and profits skyrocketed!
Still unsure about raising prices? Remember, you can always cut them back. A Chinese restaurant I eat at has rolled the price of its lunch buffet back and forth like a Ping-Pong ball, between $5.95 and $6.25, four times over the last two years.
 
Is The Marketing Working?
 
You've probably heard the familiar maxim: "Twenty percent of my advertising brings in 80 percent of my business, but I don't know which 20 percent!" Well, I bet that in your business there is at least one marketing expense that you have a strong suspicion isn't carrying its weight--so cut it and see what happens!
One year I tried cutting three-quarters of the promotional budget for my leading book. What happened? The sales continued to creep upward, and the profit margin of the entire company jumped markedly higher.
It's often by eliminating the marketing expenses previously considered most sacred that you gain the most. For example, in the book industry many of the leading publishers have recently stopped participating in the annual national trade show--it simply was costing them too much money for too little return.
 
The Easiest Way To Profits
 
Let's say your overall profit margin is 5 percent--not an uncommon level for many smaller firms. But if you can cut your costs by just 5 percent, your profit will double. On the other hand, to get the same increase by boosting sales, you would have to increase sales by 100 percent. Chances are that cutting costs just a little bit would be a lot easier.
To attack your costs take a look at every single expense item starting with the biggest items! Get competitive bids for every product and every service that you buy!
Remember, despite what they may teach you at business school, there is no such thing as fixed costs! Often lease rates, mortgage rates, and utility rates can be negotiated downward, especially if the market has shifted.
 
Review Your Product Mix!
 
A seasoned banker once told me about a firm with several highly profitable divisions and one marginally profitable division. The company sold the marginally profitable division, and suddenly the performance of the remaining divisions dramatically improved!
I've tried this! It works! When the economy around Boston hit rock bottom in the late 1980s, I closed my job-advertising newspaper-which was 50 percent of our revenue the previous year. By being able to put all of my energy into the other part of my business-book publishing-it took off, and revenue doubled, more than making up for the newspaper closing.
Even a marginal business or product line that isn't losing money is draining resources-time and focus. Close it and move on!
 
Outsource Judiciously
 
One of the battle cries in business today is to determine the one thing that your business does best, become even better at it, and outsource absolutely everything else. There is certainly a lot to be said for taking a careful look at every function in your business and asking yourself if you should outsource it. But take a hard look at the numbers before you decide to jump on the outsource bandwagon!
For example, we hoped that by outsourcing the warehousing of our books to our printer in the Midwest we could save lots of money in freight costs. But a careful analysis showed that we would save almost nothing in freight costs and that outsourcing would have nearly doubled our warehouse and handling costs.

How to make your sari-sari store profitable

In a neighborhood where there are many other sari-sari stores, the important thing is for your store to be different from the others. Study how you can make it stand above the rest by answering the following questions:

•     Who are your most likely customers?
•     What time do the other stores open and close?
•     What items do you sell at the moment, and which ones provide the biggest profit?
•     Can you lay down some ground rules, like a “no credit” policy?

In a neighborhood of many competitors, the trick is to make your sari-sari store different from the rest.

Q: After selling our passenger jeepney, my Mother used our garage for a sari-sari store which she opened six months ago. This is the latest addition to the six in our vicinity. I don’t think it’s making that much, and I want to help. What can I do?

A: How different is your mom’s sari-sari store from the rest? We presume not much. So let’s start with your neighborhood. Since you know this better than we do, answer the following:
    

Who are the most likely customers? Are they mostly children, teenagers, college students, or professionals who are bed spacers? What are their usual needs? Stationery? Cooked food for dinner? Baon for school? Non-prescription drugs for fever or headache? If no one carries these, you might want to suggest these to your mom.
    

What time do the other stores open or close? Perhaps your mom can open earlier or close later than these do.
    

What items does your mom sell at the moment? Spend some time on this. You may find out that only 20 percent of her merchandise provides 80 percent of the profit. Remember, you only realize profits when goods are sold, not when they’re kept in inventory. So, what do you do with items that don’t sell?
    

Can your mom get these “20 percent” at bigger volumes so she can get price discounts? This way she can increase her profits. And who knows, she may even be the supplier of the other stores for specific items like cigarettes.
    

Additionally, can your mom easily replenish these so she doesn’t experience stock-outs? Remember, if she doesn’t have the item being sought by the customer, she has lost a sale.
    

Can you agree on some ground rules, like a “no credit” policy? This is to ensure that your mom’s store has enough cash to pay for necessary purchases. Or, like a listahan for anything that is bought and sold? Even those items (or even cash) taken by you and your family for personal use? This way, you’ll know which items are fast- or slow-moving and how much the store has sold for each day. And this way, your family does not treat the store’s kitty as a personal piggy bank.
    

Can you and the rest of your family pitch in during their free time so your mom can do other things?

We hope you find some of these pointers useful. The important thing is for your Mom’s sari-sari store to be different from the others.
 

Source: eyp.ph