Tag Archive: franchising

Entrepreneurs: Is It Right For You?

Entrepreneurs: Is It Right For You?
Business ownership can be one of life’s most rewarding experiences – under the right circumstances and at the right time! It’s not necessarily “better” than having a job – it’s just different. For some, self-employment is the ideal career solution. How about you?

The exercises below are designed to help you ask the “tough questions,” and quickly discover whether self-employment would be right for you or not. So, take out paper and pen – or get comfortable in front of your computer – because you’re about to do some important “homework!”

If you’re seriously considering the self-employment option, there are two main questions to ask yourself:

1. Is self-employment potentially right for you?

2. If so, which of the four paths to business ownership would be most appropriate for you?

Let’s address both of these important questions.

In the world of work, you have two main career paths: Self-Employment and “Getting a Job.” You’ve probably already gone the “getting a job” route. If you’re reading this article, chances are that you’ve found your jobs unsatisfying. So, now you’re probably asking yourself, “Could self-employment be right for me?”

The following three questions will provide some direction:

1. Why are you exploring entrepreneurial alternatives at this time?

2. Rate your desire/motivation/commitment to have your own business, 1 to 10 (10 being the highest)?

3. If you could land the ideal job OR start your ideal business, which would you choose TODAY?

Focus now on the first of these three questions, because you must first understand your core motivators:

– What’s your WHY? (Lifestyle, income, image/prestige, leave a legacy, control, build equity, self-expression, independence, make a difference, passionate interest, etc.??) Unless you identify and hold onto your deepest need and desire, you will not have a strong likelihood of succeeding. So, spend some time writing about your WHY!

———————————-

There are Four Paths to Business Ownership:

1. Become a Consultant

2. Buy an Existing Business

3. Start a New Business

4. Buy a Franchise

Below, you will see the “unique considerations” for each of these entrepreneurial pathways. Take some time to answer all the questions in the four categories.

BECOME A CONSULTANT – UNIQUE CONSIDERATIONS

– What markets will you serve?

– What services will you offer?

– Who will be your competition?

– How will you price your services?

– How will you market and sell your services?

BUY AN EXISTING BUSINESS – UNIQUE CONSIDERATIONS

– What type of business do you want to buy?

– How do you envision your own role?

– How will you finance the purchase?

– What will you expect of the seller?

START A NEW BUSINESS – UNIQUE CONSIDERATIONS

– What markets will the business serve?

– What products or services will you offer?

– Who will be your competition?

– How will you market and sell your products or services?

– How will you finance the business?

BUY A FRANCHISE – UNIQUE CONSIDERATIONS

– What type of business do you want to be in?

– How do you envision your own role?

– What will you expect from the Franchisor?

– How will you finance the purchase?

Go back now, and review all your answers. Then address the questions below, as thoroughly as you can.

What are your “Pros and Cons” for each entrepreneurial option?

1. Become a Consultant

Pros:

Cons:

2. Buy an Existing Business

Pros:

Cons:

3. Start a New Business

Pros:

Cons:

4. Buy a Franchise

Pros:

Cons:

In reviewing this brief list of “Pros and Cons” for each of the four business options, which choice seems best for you right now? Why?

Another way to determine if self-employment could work for you is to consider your own qualifications and preferences. Many people THINK they could successfully own and manage a business – but in reality, this takes a particular kind of person with a specific set of skills. This section will help you do an honest self-assessment.

YOUR QUALIFICATIONS FOR OWNING A BUSINESS

The main categories of ability include:

– Marketing and Sales

– Financial Management

– Operations and Administration

– Human Resources

– General Management

For each category above, answer these questions:

– What results will the business require each year to become and remain successful?

– What education, training or experience do you have to indicate that you will be capable of producing desired results?

– Are you personally interested in, and willing to do, the required tasks?

– If you do not plan to lead specific parts of the business, who will manage them, and how much will you need to pay those people?

Every business has its challenges, but some of the biggest challenges of self-employment often come from “the inside.” Here are some of the most common personal issues faced by new entrepreneurs.

PREDICTABLE CHALLENGES

– Do you feel certain or doubtful about becoming self-employed?

– What are the major challenges or obstacles you will face?

– What are your biggest concerns or fears?

– What questions or issues do you still have?

There are definitely answers to your questions, and there is help to get you through the transition effectively!

Here are five more questions for you to consider:

1. Two years from now, the qualities that you want most in your work/career are:

2. Will you have those qualities in your work if you continue doing what you’ve been doing?

3. If not, what changes must you make in order to make these qualities a reality?

4. Could business ownership or franchising help you create these desired qualities in your work/career? How?

5. If you’re still interested in business ownership, what are the next steps you will take (include approximate dates for completion):

If these exercises have made you decide that self-employment is NOT for you, that’s actually a positive outcome. Think of all the time, frustration and money you’ll save by not going into business! On the other hand, if the questions above have crystallized and clarified your intention to own a business, then nothing should hold you back from the great entrepreneurial adventure.

May you achieve success greater than your dreams!

Locating Qualified Buyers to Buy Your Small Business

Locating Qualified Buyers to Buy Your Small Business
You’ve worked hard to grow your business into a successful venture.  Now you want to sell it and reap the benefits of all those years of hard work.  There are many questions involved with selling a business, but the most important is: How do you find qualified buyers?

Some people say the quantity of buyers that are interested in buying your business is most important.  Others say the quality of buyers is most important, regardless of quantity.  But the correct answer is both are very important.  Here’s why:

If you have 50 buyers interested in your business, then you have plenty of quantity.  But if you are selling a $1,000,000 manufacturing business and these buyers can only afford a business that costs less than $300,000, or if they all prefer a service business, then this “quantity” of buyers is a waste of time.  You will spend hours talking to unqualified buyers about your business when they have no interest in actually buying it.

Conversely, say you only have 2 buyers interested in your business and they are looking to spend at least $1,000,000 on a manufacturing business.  You have good buyer “quality” but not enough quantity.  On average, you need at least 10 or more qualified buyers to look at your business before you can reasonably expect to sell it.  And the more buyers you have looking at your business, the higher the sales price typically is.

In a nutshell, the more qualified buyers you have looking at your business, the faster you will sell your business and the more money you will make on the sale.  But how do you get both quantity and quality of buyers interested in your business?  The key is to employ several methods of effective advertising that don’t cost you a fortune.

Word of Mouth Advertising

This method of advertising is very spotty and should not be considered a core form of advertising.  Due to its nature, your business is exposed to a very limited number of buyers that probably aren’t qualified.  As a result, this method of advertising provides neither quantity nor quality, which makes it very ineffective at helping you sell your business.

Classified ads in the local newspaper

The old-fashioned method of advertising a business for sale was to place a classified ad in one or more newspapers and hope enough qualified buyers would stumble upon it.  This method is not very effective because you only have a few short lines of text to tell your entire story and attract interest in your business.  This not only reduces the overall quantity of buyers, but you also end up wasting time on a lot of unqualified buyers.  As a result, classifieds are not very effective at generating a high quality or quantity of buyers.

Business Brokers

Business brokers are typically very professional and knowledgeable in the art of buying and selling a business.  Plus they are skilled at helping sellers sell their business.  They will prepare your business for sale and handle all discussions with buyers on your behalf.

In addition, brokers will help generate interest in your business from buyers through their relationships with other brokers, as well as listing your business for sale on their website.

However, to get maximum quality and quantity of buyers interested in your business it is best to complement a broker’s services with additional advertising efforts.  You can do this either in conjunction with the broker’s efforts, or on your own.

Online marketplaces

Currently the most effective method of getting both the highest quantity and quality of buyers interested in your business is by advertising on an online business-for-sale marketplace.  These marketplaces are searched by hundreds of thousands of buyers each month, and can generate a staggering amount of interest in your business.

There are many online marketplaces to choose from, but they are far from equal.  Some have inadequate search functions, which mean your quality of buyers will decrease.  The better the search functions the site offers, the more precisely buyers can search for what they want.  And when a buyer finds your business, you know they are highly qualified.

Other business-for-sale marketplaces are just interested in collecting listing fees from you, regardless of whether or not they help you find a buyer.  These sites charge a monthly listing fee that is not tied to performance of any kind.  As a result, they may or may not bring you any qualified buyers, and they really don’t have any incentive to do so.

The most effective business-for-sale marketplaces put their money where their mouth is and only charge sellers on a pay-for-performance basis.  With these sites, you list your business for sale on the site and it appears in buyers’ search results when they search for a business that meets your criteria.  But you are only charged a small fee if the buyer actually clicks on your listing and views its details.  And you can set your own budget to determine the quantity of buyers you want.

Performance-based marketplaces are very efficient and highly effective because you get exposure to the maximum number of highest quality buyers, but you don’t pay if you don’t have any qualified buyers view your listing.

Self-Employment: Is It The Right Choice

Self-Employment: Is It The Right Choice!
Business ownership can be one of life’s most rewarding experiences – under the right circumstances and at the right time! It’s not necessarily “better” than having a job – it’s just different. For some, self-employment is the ideal career solution. How about you?

The exercises below are designed to help you ask the “tough questions,” and quickly discover whether self-employment would be right for you or not. So, take out paper and pen – or get comfortable in front of your computer – because you’re about to do some important “homework!” Self-Employment: Is It The Right Choice!

If you’re seriously considering the self-employment option, there are two main questions to ask yourself:

1. Is self-employment potentially right for you?

2. If so, which of the four paths to business ownership would be most appropriate for you?

Let’s address both of these important questions.

In the world of work, you have two main career paths: Self-Employment and “Getting a Job.” You’ve probably already gone the “getting a job” route. If you’re reading this article, chances are that you’ve found your jobs unsatisfying. So, now you’re probably asking yourself, “Could self-employment be right for me?” Self-Employment: Is It The Right Choice!

The following three questions will provide some direction:

1. Why are you exploring entrepreneurial alternatives at this time?

2. Rate your desire/motivation/commitment to have your own business, 1 to 10 (10 being the highest)?

3. If you could land the ideal job OR start your ideal business, which would you choose TODAY?

Focus now on the first of these three questions, because you must first understand your core motivators:

– What’s your WHY? (Lifestyle, income, image/prestige, leave a legacy, control, build equity, self-expression, independence, make a difference, passionate interest, etc.??) Unless you identify and hold onto your deepest need and desire, you will not have a strong likelihood of succeeding. So, spend some time writing about your WHY! Self-Employment: Is It The Right Choice!
———————————-
There are Four Paths to Business Ownership:

1. Become a Consultant

2. Buy an Existing Business

3. Start a New Business

4. Buy a Franchise

Below, you will see the “unique considerations” for each of these entrepreneurial pathways. Take some time to answer all the questions in the four categories. Self-Employment: Is It The Right Choice!
BECOME A CONSULTANT – UNIQUE CONSIDERATIONS

– What markets will you serve?

– What services will you offer?

– Who will be your competition?

– How will you price your services?

– How will you market and sell your services?
BUY AN EXISTING BUSINESS – UNIQUE CONSIDERATIONS

– What type of business do you want to buy?

– How do you envision your own role?

– How will you finance the purchase?

– What will you expect of the seller?
START A NEW BUSINESS – UNIQUE CONSIDERATIONS

– What markets will the business serve?

– What products or services will you offer?

– Who will be your competition?

– How will you market and sell your products or services?

– How will you finance the business?
BUY A FRANCHISE – UNIQUE CONSIDERATIONS

– What type of business do you want to be in?

– How do you envision your own role?

– What will you expect from the Franchisor?

– How will you finance the purchase?
Go back now, and review all your answers. Then address the questions below, as thoroughly as you can. Self-Employment: Is It The Right Choice!

What are your “Pros and Cons” for each entrepreneurial option?

1. Become a Consultant

Pros:
Cons:
2. Buy an Existing Business

Pros:
Cons:
3. Start a New Business

Pros:
Cons:
4. Buy a Franchise

Pros:
Cons:
In reviewing this brief list of “Pros and Cons” for each of the four business options, which choice seems best for you right now? Why?

Another way to determine if self-employment could work for you is to consider your own qualifications and preferences. Many people THINK they could successfully own and manage a business – but in reality, this takes a particular kind of person with a specific set of skills. This section will help you do an honest self-assessment. Self-Employment: Is It The Right Choice!
YOUR QUALIFICATIONS FOR OWNING A BUSINESS

The main categories of ability include:

– Marketing and Sales

– Financial Management

– Operations and Administration

– Human Resources

– General Management
For each category above, answer these questions:

– What results will the business require each year to become and remain successful?

– What education, training or experience do you have to indicate that you will be capable of producing desired results?

– Are you personally interested in, and willing to do, the required tasks?

– If you do not plan to lead specific parts of the business, who will manage them, and how much will you need to pay those people?

Every business has its challenges, but some of the biggest challenges of self-employment often come from “the inside.” Here are some of the most common personal issues faced by new entrepreneurs. Self-Employment: Is It The Right Choice!
PREDICTABLE CHALLENGES

– Do you feel certain or doubtful about becoming self-employed?

– What are the major challenges or obstacles you will face?

– What are your biggest concerns or fears?

– What questions or issues do you still have?
There are definitely answers to your questions, and there is help to get you through the transition effectively!
Here are five more questions for you to consider:

1. Two years from now, the qualities that you want most in your work/career are:

2. Will you have those qualities in your work if you continue doing what you’ve been doing?

3. If not, what changes must you make in order to make these qualities a reality?

4. Could business ownership or franchising help you create these desired qualities in your work/career? How?

5. If you’re still interested in business ownership, what are the next steps you will take (include approximate dates for completion):

If these exercises have made you decide that self-employment is NOT for you, that’s actually a positive outcome. Think of all the time, frustration and money you’ll save by not going into business! On the other hand, if the questions above have crystallized and clarified your intention to own a business, then nothing should hold you back from the great entrepreneurial adventure.

May you achieve success greater than your dreams! Self-Employment: Is It The Right Choice!

 

 

5 Common Issues That Small Business Owners Face

5 Common Issues That Small Business Owners Face
Posted by Steve Strauss in General Business on Sep 25, 2012 9:03:57 AM

In the 1950s, Ray Kroc was just a milkshake mixer salesman, when one day while making the rounds he came across a restaurant owned by Richard and Maurice McDonald. Kroc was not only amazed by how few items the restaurant sold and how clean it Steve-Strauss–in-article-Medium.pngwas, but also by how efficiently it was run. He convinced the brothers to make him their agent for the restaurant and within a few years, he bought them out completely and had the dream of taking the concept coast-to-coast.

Here, though, Kroc ran into a problem. He needed a way to make it possible for the restaurant to stay successful even when operating in another place, where the support and resources available might be different or even nonexistent. His solution? Turn the business into a franchise. That is, replicate exactly how the brothers had run their successful restaurant and make the same support and resources available to the entire line of businesses.

Kroc coined a phrase to explain the concept: “In business for yourself, but not by yourself.” The idea is that with franchising, you not only are buying a system and brand, but also a built-in team to help you so that you don’t have to do everything alone. Ray Kroc hoped to show potential franchisees that by working with him and by becoming a McDonald’s franchisee, their path to small business success would be easier.

Small business owners, no matter the industry, have faced and will always face common issues. After all, while flipping burgers is different than, say, selling flowers, both businesses still require that the owner deal with taxes, handle employees, get customers, etc. They are not that dissimilar. And becoming part of a franchise might not always be the best solution to a problem – it’s just one of the many creative ways to look at solving any of the common issues for small business owners.

Click here to read more articles from small business expert Steve Strauss

Here are five common issues that all small business owners face:

1. Getting the help they need: The two complaints that I hear most often from other small business owners are “not enough time” and ”not enough money.” Not surprisingly, the issues are tied to one another.

A lack of extra capital means that many small business owners do too much themselves. Not only does that result in the ”not enough time” conundrum, but ironically, it reinforces the ”not enough money” one too. The fact is, you can really only grow your business by spending the dough to bring in the help you need. That will create an alternate cycle where (hopefully) you can make more money and thus bring in even more help.

2. The cash crunch: A declaration of “not enough money” oftentimes means there is a cash crunch, and there are all kinds of reasons for them. You might own a seasonal business that makes very little revenue at some points of the year. You might need to spend unexpectedly to upgrade equipment. Whatever the reason, there are a few smart ways to deal with this problem:

Budget better: If you know you are always extra busy around the holidays, then you simply must make that money last all year long.
Create additional profit centers: Again, if you’re a holiday seasonal business, figure out a way to make money during the summer as well as in December.
Get a loan or line of credit: Educate yourself on the best avenues to new capital. Take advantage of the financial institutions that are in business to help you get the capital you need.

3. Challenging clients: Back when I practiced law, we had a saying that we thought was clever but is probably said by many in a client service business: “It would be a great business,” we would joke, “if it weren’t for the clients.”

Look, we all have them – problem clients. The question really is, what do you do about them? One school of thought is simply to tolerate them, and that makes sense, especially if they are an important client. However, sometimes, when the bad client goes from challenging to a real distraction from other important things, the only thing to do is to cut them loose.

4. Recruiting and retaining top talent: One thing the best business owners know is that they are only as good as their people. The challenge for the small businessperson is that keeping great talent around can be tough when budgets don’t always allow for big raises. The trick then is to find out what your best people need and give that to them, whether it be recognition, training, a better title, an opportunity to try something new, or room for advancement.

For more, http://smallbusinessonlinecommunity.bankofamerica.com/community/running-your-business/generalbusiness/blog/2012/09/25/5-common-issues-that-small-business-owners-face

Franchising for Beginners

Do your homework before leaping into a franchise business model.

by Sherron Lumley.

“I didn’t want to start from scratch,” says Ann Bell who bought a Subway sandwich-shop franchise in 2010 with her husband Steve. “I was a stay-at-home mom and our kids are older now and off to college, so I decided it was time to go back to work,” she says. Although her husband had small business experience, Bell was more of an entrepreneurial beginner, so buying a franchise appealed to her as a safe way to invest in a business and re-enter the work force. “I work better under structure,” she says.

Pull-Quote.pngIn the franchise form of business, a franchisor licenses to a franchisee the right to operate under a trade name, sell its products and services, and receive guidance, in exchange for a fee. “My first step was to research the business model, to see if I could believe in it and embrace it,” says Bell. Typically, the franchisor provides business expertise in the form of marketing plans, management guidance, financing assistance, training, and sometimes site location. The Bells who are from Oregon, went to “Subway School” in Connecticut for training.

Here is a look at three early steps to franchise ownership.
Step One – Decision to buy a franchise: Yes/No

A franchise is a familiar form of business in America, accounting for 10.5 percent of all businesses with paid employees, according to the U.S. Census Bureau. Clearly, the decision to buy a franchise has some strong advantages. In The Franchise Bible, How to Buy a Franchise, or Franchise your own Business, author Erwin J. Keup, says that group advertising power, recognizable trademarks, franchisor experience, patents and designs, training from experts, and a lower risk of failure or loss of investments are top reasons to become a franchisee. Other reasons are uniform operation, assistance in financial and accounting matters from the franchisor, and ongoing support.

Although ongoing support is typically considered one of the greatest advantages of franchising, it comes with a price. Nolo.com, a legal resource publisher, provides a look at some of the disadvantages to franchise ownership, which include royalty payments to the franchisor, advertising fees, and high start-up costs. Indeed, nine of the top ten U.S. franchises have start-up costs averaging more than $100,000 and the top three (Hampton Hotels, ampm convenience stores, and McDonald’s) are beyond the million-dollar mark to start.

For a sense of the ongoing fees franchisors expect, Subway requires franchisees like the Bells to pay 12.5 percent of their gross sales every week to the company; 8 percent of this goes toward franchise royalties and 4.5 percent goes towards advertising. This is in addition to the initial franchise fee of $15,000 and Subway franchise capital requirements fall between $115,000 and $258,000. However, not all franchises require such a hefty investment. Number seven on the list of the Franchise 500, Vanguard Cleaning Systems, has start-up costs of just $8,000 to $38,000.

For more information on choosing between launching your own business or buying into a franchise, check out our recent story: “My Way or the Buy Way.”

Step Two – Shopping for a franchise

Certainly, cost will be a factor and franchise options will be far different for a small business owner with a few thousand dollars of capital versus another with a million or more to invest. Here are a few of the many ways to shop for a franchise at all budget levels:

The Franchise Registry, through a partnership with the U.S. Small Business Administration (SBA) maintains a list of companies with franchises that are pre-approved for expedited loans.

The Federal Trade Commission recommends attending a franchise exposition to compare a variety of franchise opportunities and using a franchise broker who can help with applications and paperwork. But remember, the brokers often work for the franchisor. Information about upcoming national and international franchise expos and trade shows is available online at FranchiseDirect.com.

Franchise.com is another popular online resource. It offers an interactive search of franchises for sale by budget, industry, and location. The Internet is full of franchise websites to research, but “be on the lookout for certain characteristics that are very common among untrustworthy or illegitimate franchising sites,” warns Kevin Murphy, author of The Franchise Handbook. He specifically cautions against dealing with a company that does not provide full financial details at the outset and says that websites with overly aggressive marketing and a lot of hype should also be avoided.

As with any small business venture, consider the demand, competition, and ability to operate the business in making a franchise selection.

Step Three – Follow a franchise investigation strategy

“Never do business with people you have not met,” say the authors of Street Smart Franchising, Joe Mathews, Don DeBolt and Deb Percival. “Franchising at its best is a highly personal relationship. You are entrusting your dreams and capital into the care of the franchisor leadership,” they say. Visit the franchisor’s home office and further investigate the franchise by interviewing franchisees in person, and reviewing the Franchise Disclosure Document (FDD) with an attorney with expertise in franchise law.

In interviewing other franchise owners, ask questions about their experiences, both good and bad. “It’s important to interview people so you know the bad and ugly,” says Bell, who found this helped her know ahead of time what it would really be like to own a franchise. For example, she learned that unlike working for someone else, “It’s nice to work for yourself, but you do take your work home with you,” Bell says.

A look at financial prospects for franchising

Using Census Bureau data, the International Franchise Association released a detailed report on this segment of the U.S. economy called The Franchise Business Economic Outlook: 2011. It forecast growth in all industries except Business Services, reporting: “The largest percentage increases in the number of establishments in 2011 are projected in Lodging (4.4 percent), Automotive (3.9 percent), Retail Products and Services (3.9 percent), and Commercial and Residential Services (3.7 percent).”

“The forecast of stronger growth in 2011 for franchise businesses is good news for our country. When franchise businesses are stronger, so is our economy as a whole,” said IFA President and CEO Stephen J. Caldeira. “However, while the forecast reflects a stronger outlook for the franchise industry and the overall economy, franchise businesses will continue to struggle with accessing sufficient credit that would enable business expansion and job growth,” he said.

Caldeira says that lending to franchise businesses was down in 2010. “For 2011, the credit gap between supply and demand should show some improvement, but we are a long way off from the pre-recession, more robust appetite for business investment and lending.” According to the SBA, total small business lending peaked in 2008, when depository institutions in the United States held small business loans valued at more than $711 billion, then declined by 8.3 percent to $652 billion by 2010. In the first quarter of 2011, the SBA reported bank lending to small business [including franchises] fell by $15 billion.

Since 2007 when the Census Bureau first gathered franchise data, the number of franchise establishments is estimated to have grown steadily from 765,723 to 784,802, whereas overall entrepreneurship has had a slight decline. (Bureau of Labor Statistics data for self-employment in non-agricultural industries.) Perhaps one explanation for this is that risk-averse behavior kicks in during times of economic duress. The Bells wanted to own a small business, without all of the risks involved with going solo. By buying into something larger, gaining considerable expertise and centralized marketing, advertising, and promotion, Bell says she felt comfortable with the decision to buy a franchise. “I’m really happy with my outcome,” she says.

.

Additional Franchise resources:

The Franchise Registry, in partnership with the U.S. Small Business Administration maintains a list of companies with franchises that are pre-approved for expedited loans.
Read the Federal Trade Commission Consumer Guide to Buying a Franchise.
Find franchises for sale by budget, industry, and location online at Franchise.com
Investigate franchise and business opportunities with the Better Business Bureau
Learn about upcoming franchise expos and tradeshows at FranchiseDirect.com.

My Way or the Buy-Way? Should you start your business from scratch or buy a franchise?

by Cindy Waxer.

Cary Cheung wakes up at 4:30 a.m. every morning to run a business that requires him to pay a fee. He doesn’t own it outright, and it doesn’t even bear his name. And yet he couldn’t be happier.

That’s because Cheung is a franchise owner of Doc Popcorn, a maker of flavored popcorn that uses a variety of organic and all-natural ingredients. In fact, Cheung abandoned his career as an assistant vice-president at WaMu Investments to become Doc Popcorn’s very first franchisee in November 2009. And just a few weeks ago, Cheung and his wife, Judy, opened their second Doc Popcorn location in California.

Pull-Quote-Tall.pngThe Cheungs aren’t alone. According to the International Franchise Association, approximately 4 percent of all businesses in the United States are franchisee-worked. And the consultancy Franchise Marketing Systems says that franchising is a business model that generates more than $1 trillion in U.S. sales annually across more than 70 industries. Franchised businesses ran 767,483 establishments in the United States through 2008, including establishments owned by both franchisees and franchisors.

But while running a franchise business can be both professionally attractive and personally satisfying, not everyone is cut out for the task. Just ask Amy Bennett, owner of The Greene Grape, a Brooklyn, New York-based seller of fine food and wine. The choice was obvious to Bennett: “Part of opening my own business rather than a franchise was for it to be a creative outlet for me. I wanted something I could contribute to meaningfully.” Add that desire for creativity to the many negatives associated with franchising, such as royalty fees, restrictive licenses, meddlesome franchising authorities, and a lack of ownership, and it is easy to see why many are dissuaded from signing up to become a party to a franchise.

For many others, of course, those negatives are more than outweighed by the many benefits of running a business associated with an established brand and backed by the marketing muscle and support of a large corporation. So how do you know if you’re best suited to run a franchise or if you should strike out on your own? Answering these five questions can get you a step closer to the right answer.

1. How much legwork are you willing to do?

“When you invest in a franchise, you’re getting the brand name of the franchisor, the operating system, a proven track record, not to mention ongoing support, education and training,” says Brian Miller, president of The Entrepreneur’s Source, a business ownership consultancy in Connecticut. “If you started out running your own business, however, you really wouldn’t have anybody to rely on.”

That kind of pre-existing structure was precisely why the Cheungs opted to run a franchise. “My parents owned their own restaurant so I saw the struggles they had starting off and all those lessons they had to learn,” he says. “The attraction of a franchise is the system is created for you.”

“There are very few people who are true entrepreneurs and who can really go out and make a business their own,” says Miller. “But there are a lot of people who have that passion and fire in their belly and know that they want to take control of their own destiny but need a little bit of help.”

2. What are you willing to invest financially?

Launching your own business often requires little to no capital, especially if you start small. But many popular franchises demand lots of upfront capital and collateral—sometimes up to millions of dollars—from a prospective franchisee before offering a contract. These “working capital reserves,” as they’re called, are often required by franchisors so that they will feel comfortable that a franchisee can stay in business until he or she reaches the financial break-even point.

In the case of Cheung, he invested between $100,000 and $150,000 to open his first store, including upfront franchise fees. “That was a main reason why we chose Doc Popcorn—the low entry point.” Every other franchise he looked at was going to cost from $200,000 to $250,000 to start, he says.

Still, some franchises are willing to lend a helping financial hand. “My wife and I funded the store on our own, but I know that Doc Popcorn has third-party connections to help with funding,” says Cheung.

To learn more, check out our previous article on franchise startup costs.
3. Can you back someone else’s product?

While there’s definitely something to be said for creating your own business, many entrepreneurs are proud to peddle a franchise’s products. “The only reason we signed with Doc Popcorn is because of the product and what it represents,” says Cheung. “Of course, trying to make money is always a goal for all business owners but you have to believe in the product.”

For Bennett, however, launching The Greene Grape was an opportunity to express herself and act on her vision of a perfect wine shop. “At the time I opened my first wine store, there wasn’t really a franchise that focused on handcrafted, affordable wine,” she says. “My twist on a regular wine store was part of the creative process.”

4. How much say would you like in the business?

“The advantages to running your own business are mostly in creative control,” says Bennett. “I can market the way I want, my store can have a personality that reflects who we are. This means a lot more work, of course, but at the end of the day I can step back and be proud of how the store is presented.”

That’s not to suggest that franchisees don’t have any input. Rather, Miller explains, “As you become successful in a franchise system, there are opportunities for you to work collaboratively and to develop new products and services.”

5. How long can you wait to break even?

According to Miller, “the support given by a franchise in the beginning in terms of brand recognition means that you might have a quicker start in terms of sales. Educating the consumer for a new business definitely takes more time. Depending on how a franchise agreement is structured, that could mean breaking even for the franchisee earlier.”

Still, if the substantial franchise buy-in requirements are too steep, taking the franchise route (and its more desirable, early break-even point) may not be a realistic option for many budding entrepreneurs. Instead, they may have no other option but to launch on their own, either diving into entrepreneurship full-time and striving for a quick rise in profits or running a side or part-time venture for a longer period of time, until the business proves it can stand on its own.

My Way or the Buy-Way? Should you start your business from scratch or buy a franchise?

Cary Cheung wakes up at 4:30 a.m. every morning to run a business that requires him to pay a fee. He doesn’t own it outright, and it doesn’t even bear his name. And yet he couldn’t be happier.

That’s because Cheung is a franchise owner of Doc Popcorn, a maker of flavored popcorn that uses a variety of organic and all-natural ingredients. In fact, Cheung abandoned his career as an assistant vice-president at WaMu Investments to become Doc Popcorn’s very first franchisee in November 2009. And just a few weeks ago, Cheung and his wife, Judy, opened their second Doc Popcorn location in California.

Pull-Quote-Tall.pngThe Cheungs aren’t alone. According to the International Franchise Association, approximately 4 percent of all businesses in the United States are franchisee-worked. And the consultancy Franchise Marketing Systems says that franchising is a business model that generates more than $1 trillion in U.S. sales annually across more than 70 industries. Franchised businesses ran 767,483 establishments in the United States through 2008, including establishments owned by both franchisees and franchisors.

But while running a franchise business can be both professionally attractive and personally satisfying, not everyone is cut out for the task. Just ask Amy Bennett, owner of The Greene Grape, a Brooklyn, New York-based seller of fine food and wine. The choice was obvious to Bennett: “Part of opening my own business rather than a franchise was for it to be a creative outlet for me. I wanted something I could contribute to meaningfully.” Add that desire for creativity to the many negatives associated with franchising, such as royalty fees, restrictive licenses, meddlesome franchising authorities, and a lack of ownership, and it is easy to see why many are dissuaded from signing up to become a party to a franchise.

For many others, of course, those negatives are more than outweighed by the many benefits of running a business associated with an established brand and backed by the marketing muscle and support of a large corporation. So how do you know if you’re best suited to run a franchise or if you should strike out on your own? Answering these five questions can get you a step closer to the right answer.

1. How much legwork are you willing to do?

“When you invest in a franchise, you’re getting the brand name of the franchisor, the operating system, a proven track record, not to mention ongoing support, education and training,” says Brian Miller, president of The Entrepreneur’s Source, a business ownership consultancy in Connecticut. “If you started out running your own business, however, you really wouldn’t have anybody to rely on.”

That kind of pre-existing structure was precisely why the Cheungs opted to run a franchise. “My parents owned their own restaurant so I saw the struggles they had starting off and all those lessons they had to learn,” he says. “The attraction of a franchise is the system is created for you.”

“There are very few people who are true entrepreneurs and who can really go out and make a business their own,” says Miller. “But there are a lot of people who have that passion and fire in their belly and know that they want to take control of their own destiny but need a little bit of help.”

2. What are you willing to invest financially?

Launching your own business often requires little to no capital, especially if you start small. But many popular franchises demand lots of upfront capital and collateral—sometimes up to millions of dollars—from a prospective franchisee before offering a contract. These “working capital reserves,” as they’re called, are often required by franchisors so that they will feel comfortable that a franchisee can stay in business until he or she reaches the financial break-even point.

In the case of Cheung, he invested between $100,000 and $150,000 to open his first store, including upfront franchise fees. “That was a main reason why we chose Doc Popcorn—the low entry point.” Every other franchise he looked at was going to cost from $200,000 to $250,000 to start, he says.

Still, some franchises are willing to lend a helping financial hand. “My wife and I funded the store on our own, but I know that Doc Popcorn has third-party connections to help with funding,” says Cheung.

To learn more, check out our previous article on franchise startup costs.
3. Can you back someone else’s product?

While there’s definitely something to be said for creating your own business, many entrepreneurs are proud to peddle a franchise’s products. “The only reason we signed with Doc Popcorn is because of the product and what it represents,” says Cheung. “Of course, trying to make money is always a goal for all business owners but you have to believe in the product.”

For Bennett, however, launching The Greene Grape was an opportunity to express herself and act on her vision of a perfect wine shop. “At the time I opened my first wine store, there wasn’t really a franchise that focused on handcrafted, affordable wine,” she says. “My twist on a regular wine store was part of the creative process.”

4. How much say would you like in the business?

“The advantages to running your own business are mostly in creative control,” says Bennett. “I can market the way I want, my store can have a personality that reflects who we are. This means a lot more work, of course, but at the end of the day I can step back and be proud of how the store is presented.”

That’s not to suggest that franchisees don’t have any input. Rather, Miller explains, “As you become successful in a franchise system, there are opportunities for you to work collaboratively and to develop new products and services.”

5. How long can you wait to break even?

According to Miller, “the support given by a franchise in the beginning in terms of brand recognition means that you might have a quicker start in terms of sales. Educating the consumer for a new business definitely takes more time. Depending on how a franchise agreement is structured, that could mean breaking even for the franchisee earlier.”

Still, if the substantial franchise buy-in requirements are too steep, taking the franchise route (and its more desirable, early break-even point) may not be a realistic option for many budding entrepreneurs. Instead, they may have no other option but to launch on their own, either diving into entrepreneurship full-time and striving for a quick rise in profits or running a side or part-time venture for a longer period of time, until the business proves it can stand on its own.