Is A Franchise Business
Right For Your Family?
By
Shari Olefson, author of “Financial Fresh Start”
With
the economy still growing far slower than most of us would like, it seems that
minimal, if any, annual raises have become the new normal. Lots of folks are just grateful to have a
job. The problem is, just because our
incomes aren’t growing the way we always hoped for, does not mean our expenses
are standing still. The cost of living
continues to rise, especially for single moms.
The following is from Chapter 6 of author-lawyer-television commentator
Shari Olefson’s latest book “Financial Fresh Start: Your Five Step Plan for
ADAPTING and PROSPOERING in the New Economy” (AMACOM 2013) now available at
Amazon.com. Fresh Start breaks down all the new rules and reforms from
Washington into simple terms for you, what they man and why they matter. Olefson explains in easy steps how – no
matter what your financial situation is – you can easily adapt your family’s
banking and borrowing, credit and debt, saving and retirement, homeownership,
and spending and earning to prosper.
Among the many tips Olefson provides for families is an approach to
earning more that’s been around for awhile, but is growing in popularity like
never before thanks to the new economy:
the franchise business.
Small
businesses are the backbone of the American economy. If you’re thinking about
starting one and are comfortable doing so, good for you! But if you are like
other folks, who feel they will benefit from more guidance and structure when
it comes to opening a business, you may find your comfort level in opening a
franchise. In fact, franchising accounts for about 50 percent of all retail
sales in the United States, already employs over 15 million Americans, and
creates almost $2 trillion in revenue every year worldwide. With franchises,
you generally buy the right to operate the business for a certain amount of
time (typically five to thirty-five years with renewals) and within a certain
territory.
The
franchise concept can be traced all the way back to rickshaw routes in China as
early as 200 BC. Here in America, the Singer Sewing Machine Company couldn’t
afford salaried salesmen and began using the franchise model back in the 1850s.
General Motors and Ford couldn’t afford bricks-and-mortar showrooms and used
the franchise concept in the 1890s. In 1901, Coca-Cola franchised bottling
distribution (as opposed to selling its product only at soda fountains). The
concept grew again with Howard Johnson hotels in the 1920s and boomed in the
1950s as consumer use of America’s interstate highways expanded. In 1977 the
National Alliances of Franchisees (NAF) was formed in Washington, D.C. And in
1979, FTC Rule 438 was passed requiring Uniform Franchise Offering Circular
disclosures (among other things) no less than fourteen days before money
changes hands in connection with a franchise purchase.
In
the new economy, there is no end to the types of industries in which
franchising is available, including advertising and sales, automotives,
business services, child services, cleaning and maintenance services, coaching,
customer service, financial and tax services, food services, home services, pet
services, real estate, retail, senior care, sports and recreation, and travel
and hospitality. And the best news is that the cost to open a franchise can be
as little as a few thousand dollars.
Among
the benefits of franchise ownership are access to proven products or services,
brand name, training and support, operating and marketing methods, ongoing new
products, and industry insights and other synergies—all which of result in
economies of scale. This level of support can be particularly beneficial if
you’ve never owned a business before. In theory, buying a franchise is more
efficient than building your own brand and company from scratch. On the flip
side are the franchise cons, including the fact that a franchise is more of a
temporary business investment—you are essentially “leasing” the opportunity,
not buying the business, and you are bound by a franchisor compliance
agreement, often giving up certain rights.
The
bottom line is that there are risks in opening any business, franchise or not.
Historically, less than 5 percent of franchises close each year. That’s far
less than the failure rate for small businesses in general. Partially, this
success relates to the level of training and support available, but also
because good franchisors make sure that you’re qualified before they will
consider you as a franchise owner. They make more money if you succeed than if
you fail. Some questions to ask if you are considering opening a franchise as a
way to earn more with your fresh start strategy are included for you in the
sidebar.
Median
gross annual income from franchise businesses in America is in the $75,000 to
$124,000 range, with more than 30 percent of franchises earning over $150,000
per year. And the best part is, you are your own boss! Sure, there are plenty
of things to worry about when you own your own business, but at least a pink slip
isn’t one of them! For more information on franchises, check out the video clip
at www.askshario.com/franchising and sign up for Shari’s free weekly news
letter at www.shariolefson.com.
Fresh Start Questions:
Earning More With a Franchise
1.
How
would owning your own business fit in with your lifestyle?
2.
Are
you interested in a home-based or part-time business?
3.
Is
your long-term plan to own one franchise or several?
4.
In
what type of business interests will you feel confident, and is there a need
for that type of business in your area?
5.
How
much money do you have available to invest? Is financing available and, if so,
are you comfortable with that?
6.
Does
taking the risk make sense? Typically, there are start-up costs and ongoing
fees (such as royalties for using brand names) and monthly fees that may be
tied to a percentage of your gross sales.
7.
How
does the franchisor make its money? How much will it cost you, and are the
franchisor’s interests aligned with yours?
8.
What
are you getting in return for paying the franchise fee and other costs? What
are you giving up? Under what circumstances can the agreement be terminated? Is
there a non-compete agreement? Is your territory exclusive?
9.
How
does the franchise compare to doing this type of business on your own?
You can purchase Shari Olefson’s new
book Financial Fresh Start from: Amazon, Barnes and Noble , Shari’s website.
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