Franchising Overseas
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Franchising Overseas



FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3 choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of our ...

FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3 choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of our first consultation. Guaranteed.



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    Franchising Overseas Franchising Overseas Document Transcript

    • ==== ====FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of ourfirst consultation. Guaranteed. ====If youre looking for the safest way to expand or diversify a business, its franchising.Now if thats true, why do so many people fear franchising?Since its beginning in the late 1800s, and with its post World War II expansion especially in theUnited States, franchising has developed one of the greatest business success stories of all time.Main Street America is populated by franchise outlets. From restaurants to specialty food shops,bookstores to clothing stores, beauty shops to postal centers, and a plethora of service providers,including carpet cleaners, auto shops and home remodelers, franchising is everywhere. Franchisebusinesses take in 40 percent of all retail sales in the United States.There are some 2,000+ franchise companies supporting more than 900,000 franchised outlets inAmerica. Countless people have become wealthy through franchising, and there are no financialor educational barriers to keep anyone from using this concept successfully. Governments aroundthe world, and especially in the United States, have made it possible for the average person toinvestigate franchising and predict the outcome of a franchise investment. University studies,government statistics, and even polls by the Gallop Organization support the success offranchising.So whats to fear about franchising?Critics say there are plenty of things to scare you away from the concept. Listen to the critics-someof whom failed in franchising and therefore believe they have the "credentials" to be critics--andtheyll tell you all the horror stories about franchising. Of course, there are horror stories aboutbusinesses of all kinds, yet only a misinformed person would say that owning a business is bad.Anyone who is willing to believe franchise critics, without doing their own homework, is probablybetter off fearing franchising. Theyd also be better off not owning a business of any kind!Fear is normal among business owners. Few people succeed without at least some fear. Peoplelike a little fear-they find it motivating. The greater the fear, the harder they work! Fear is only aproblem when it stops you dead in your tracks. If you were so fearful of franchising that youcouldnt make a decision to buy one, that could be a mistake. However, thats not to say thatfranchising is for everyone. Its not. In fact, it may not be for you. But how will you know unless youmove beyond your fear?Lets look at a few of the objections posed by franchise critics. Their information is not all wrong.Its just not entirely accurate. And much of it decries simple common sense. They want people to
    • believe that franchising is evil when, in fact, countless people will tell you that franchising helpedthem climb to greater levels of satisfaction and profit through their businesses. Franchising inAmerica has helped tens of thousands of business owners become more successful.Of all the franchise companies operating in the United States, some are better than others, butthey are not all bad. Of all the franchisees in the United States, some are more profitable thanothers, but they are not all struggling for survival or even at odds with their franchisor, as somecritics would have you believe. A little bit of investigation will show anyone whos interested thattheres more good than evil in franchising.Critics of franchising--including some misinformed legislators, educators, attorneys, accountants,reporters, and others who may have personal agendas-frequently miss the point about thesuccess of franchising. Heres the first complaint from many of them:"The franchisor will make you pay a fee--upfront."Thats true. And let me quickly point out that these fees are sometimes hefty, up to $50,000(though many cost less than $20,000). Critics say these fees are inflated and often unnecessary.Theyll have you think you can start a business independent of a franchisor without paying anupfront fee. And perhaps you can.So why do franchisors charge franchise fees? If they didnt have to, they wouldnt! It would be a loteasier to sell franchises without an upfront fee. But franchise fees are necessary for several goodreasons.First, the franchise fee helps the franchisor recover money invested to start-up and maintain thefranchise network. A franchise start-up can easily cost millions of dollars, and the ongoing legal,administrative, and operational costs can be staggering. A well-advised franchisor understandsthat break-even may be years away, requiring a specific number of franchises to be sold andsupported. Theres a cost to franchising, just as there is to any product or service thats sold.Surely its easy to understand that a franchisor has a right to recover this money.Ah, but does it have to be paid upfront? Thats the rub for many critics, as well as for many would-be investors. Yes, it has to be paid upfront, and for another good reason. Lets say youre asked toreveal all your trade secrets plus train someone how to operate your business. Are you willing todo that without a financial guarantee? Before you spill your beans, youll want some moneyupfront. So does a franchisor.Think for a moment about the value of paying an upfront franchise fee. Whats it worth if afranchisor hands you an established business system, one that you can use to churn out a profityear after year? You dont have to invent the system, or even test it. Its already a proven, workingsystem! What would it have cost you to invent this system, assuming that you could? Whats itworth if the franchisor not only gives you the system, but spends a couple of weeks or moretraining you to use it?Now, if you already know how to build and expand a business you probably dont need afranchisor. But what if you dont know? Do you have the franchisors experience of site selection,personnel recruiting and development, training, sales and production, marketing, advertising,
    • operations, and all other factors relative to a thriving business? Do you have the benefit of groupbuying power and name recognition? If not, then the franchisors business system alone-withoutthe training and support-may very well justify the upfront franchise fee. Go out and ask people whofailed as independent business owners if they wouldnt have preferred to buy a franchisorsexpertise and guidance. Ask someone who has spent 60 to 80 hours a week in the same businessfor 25 years, struggling most of the time, if it wouldnt have been worth it-years earlier-to pay afranchisor to show them how to accomplish success faster and bigger. What would that have donefor their quality of life?Yes, success does come with a price and its called a franchise fee, and it will be required upfront.Keep in mind, not all franchises are created equal. Some are better than others. Some haveinflated their franchise fees and they do not deliver on what they promise. But with a littlehomework-asking questions of existing franchisees, for example-you can easily determine whichfranchises are worth an upfront fee.Critics say: "Youll have to pay the franchisor a royalty. Forever!"Yes, you will. Not forever, but for as long as you remain a franchisee. Franchisors generally collecta weekly or monthly percentage of a franchisees gross sales. Thats their royalty. The percentagewill range from several points to double digits. Generally, royalties are higher than 5% and lessthan 10%.While franchise fees help franchisors recover dollars invested in the business system, royaltiessupplement the franchisors ongoing operating costs, and provide a profit. Accountants andlawyers, who are not necessarily critics of franchising, have advised clients not to buy franchisesbecause they thought the royalty fee was unnecessary, or too high, or it would prevent the clientfrom turning a profit. Lets look at the facts.Support is a primary reason for the success of franchised businesses. Why do so many non-franchised businesses go out of business? Its not for lack of capital, even though under-capitalization is often an issue. However, there are many instances where the business owner hadplenty of money. But he or she ran out of money trying to figure out how to turn a profit.Franchisees usually dont face that issue. First, they are licensed to use a proven businesssystem. Second, they get ongoing support from a coach-their franchisor. Just like athletes whobenefit from a coach giving them encouragement as well as helping them improve their style andperformance, business owners can also benefit from ongoing coaching. You might already bepretty good at running your business, but imagine what might happen if you had someone whocould help you improve just a notch or two! Thats what good franchisors provide to franchisees.Of course, good franchisors are well staffed. Operating a franchisors home office is a hugefinancial undertaking. Making the payroll for 30, 50 or more than 100 people requires cash flow.Where does the franchisor get the money? Royalties! Successful franchisees recognize the valueof the franchisors training and field operations staffs. They come to appreciate the research anddevelopment people, the technical, financial, legal and media experts employed by the franchisor.Successful franchisees dont quibble about paying a franchisor a percentage of their gross salesbecause they know its a good investment in their business. Again, not all franchisors are createdequal. Some provide more value than others. Before you invest in a franchise, find out if yourfranchisor of choice delivers what you will need to be successful.
    • Critics say: "Owning a franchise is just like having a job. Youve got to take orders from thefranchisor. Youre not really in business for yourself. Youre like an indentured servant."Entrepreneurial people are difficult to train as franchisees. We value our right to make decisions.We cherish freedom. We do not like following orders. We want the right to do things our way, evenif its the wrong way. If you dont want to march to a franchisors drumbeat, do yourself andfranchising a favor and do not buy a franchise. You may never become as successful as you hadhoped, but buying a franchise wont get you there, either.Believe it or not, like it or not, consumers prefer the same old same old. Think about it for amoment. If youve patronized a particular business in the past-a restaurant, a beauty shop, a homedecorator, the auto repair shop-and you were pleased with the results, would you return to thatsame business again and again? Of course you would. If you moved to another state and neededa particular service or product, would you patronize a business you never heard of, or look for onethat you recognize? Once again, its an easy answer. You like knowing what youre going to getbefore you buy it. You like familiarity, and franchisors and franchisees know that familiarity breedsmore business.Familiarity is one of the reasons franchised businesses succeed. Each one thats successfulfollows a system. The system has been crafted to meet the needs of consumers and ultimately toproduce a profit for the person who implements the system. Thats called franchising. Whenfranchisees refuse or fail to implement the system, their business under-performs and mayeventually fail. Requiring franchisees to follow a system makes good sense!Most small business owners, including franchisees, have little expertise in running a business.They may have perfected a skill or a craft, but thats not the same as running a business. Tosucceed in business, an operator needs a system-even more than money-to survive and succeed.The system is one of the primary reasons for investing in a franchise. You may not like afranchisors system, or parts of the system. You might not like the way the franchisor advertises,markets and sells its products and services. You might not like the franchisors dress code, ordecorating scheme, or hours of operation. But you best not minimize or ignore the franchisorssystem, and you are required to implement it to a T. If you dont follow the system, the franchisorhas the right to disenfranchise you, and for the sake of the franchise network, the sooner thebetter. A renegade franchisee can destroy an entire company. Franchised businesses workbecause they are systematized.If you dont like that, or you dont like systems, or you dont want to follow anothers system, do notinvest in a franchise! Its not for you.Dont believe the argument that in every instance franchising is buying yourself a job. Do you knowanyone who sold their job after they quit, or retired? You cant sell a job, but you surely can sellyour franchise business. And just imagine how valuable it may be. With a franchisors brand nameand goodwill, the operating system, as well as marketing and sales systems, plus research anddevelopment and ongoing training and coaching, your business is likely to attract an enviablesales price. With a good franchise, youll have an asset than many people may want to buy.And one more point about the nonsense of buying a job. Franchisors do not make all the decisions
    • for franchisees. A franchisor doesnt show up in a franchisees office or store every morning tomotivate the staff, or even to hire and train the staff. Personnel decisions almost always belong tothe franchisees. Customer and vendor relationships also remain the domain of franchisees.Franchisors provide instruction and coaching, but they do not do the work of the franchisee.Ultimately, its your hard work that builds a successful business. Even so, a good franchisorprovides its franchisees with many opportunities to voice their opinions and to help shape thefranchise business.So if youve lost some of the fear you might have had about franchising, how would you go aboutfinding a good franchise opportunity? There are many online resources that you can consultbeginning with the International Franchise Associations (IFA) site at There areseminars produced by the International Franchise Expo--see theresplenty of good reading material.Perhaps the best resource is the franchisors disclosure document, which is required by federallaw. Franchisors must give it to you free before you can invest in their franchise. Be sure to ask forit! Its critical reading. The disclosure document is written in a laymans language so its reasonablyeasy to understand. Almost everything you need to evaluate a franchise opportunity can be foundin the disclosure document.The document includes a description of the franchise, a list of all fees required, the franchiseesobligations, the franchisors obligations, information about territory, restrictions on what thefranchisee may sell, financial statements for the franchisor and even the franchisors litigation andbankruptcy history, if any. However, the single most important section of the disclosure documentmay be the list of the franchise outlets. There you will find contact information for existing as wellas previous franchisees.Armed with this information, get on the telephone and start doing some research. Call as many ofthe existing franchisees as you want-theres no limit. Ask them whatever you want. For example,"Would you buy the franchise all over again, knowing what you know now?" . . . "Does thefranchisor deliver on its promises?" . . . "How has the franchisors system helped you advance thegrowth and profit of your business?"Critics will tell you that existing franchisees will lie to you because the franchisor pays them. Butyou should know that if the franchisor pays them for helping to sell a franchise, that informationhas to be disclosed. If you call a dozen to 20 or more franchisees, youll likely hear somenegatives as well as positives about the business and the franchisor. Call enough franchisees toget a fair sampling. Stop calling when you feel you have enough information to evaluate thefranchise opportunity.Along with this research, you should also consult with a franchise attorney and an accountant thatunderstands franchising. Rely on the IFA to lead you to good sources. You may need toinvestigate several franchises before you find a good one, and one thats a right fit for you.Ray Kroc, the founder of McDonalds, coined the phrase: Franchising is going into business foryourself, but not by yourself. That says it all. When you accept franchising for what it is, you acceptthe worlds most powerful system for building and expanding a business. If you explore whatfranchising offers, and thoroughly investigate the franchise opportunities of your choice before you
    • invest, you can expect to succeed as a franchisee.Will you succeed without fear? No. Youll be afraid from time to time. But you ought to be scared todeath to go into business without franchising!John P. Hayes, Ph.D., author and speaker, has written the Franchise Pre-Investment Checklist tohelp you thoroughly research franchise opportunities. The FPIC makes it easy to understand howto search for and evaluate franchises. Read about this new e-Book athttp://www.profitablefranchiseowner.comArticle Source: ====FREE Franchise Consultation: Using our customized model for research, we’ll present you with 3choices of franchise concepts to suit your tastes. This meeting will take place within 30 days of ourfirst consultation. Guaranteed. ====