The Small Business Administration (SBA) reported that 30 percent of independent, non-franchise companies fail during their first year. Conversely, the U.S. Department of Consumer Affairs reported that less than 5 percent of franchises fail. Yet, some do fail. The reason(s) for failure could be a number of factors, most of which could have been prevented by due diligence during the early phase.
1. The idea. Whether you are franchising your own company or buying into a franchise system, how the concept is received by the community is critical. While hamburgers seem to have universal appeal not all food chains meet with majority approval. Also, if your business model is complicated, you are in for a struggle. You want to create an operational standard that can be taught to and replicated by any businessperson. A company may be successful when run by the entrepreneur who dreamed up the concept; however, if the business model or prototype is not easily duplicated, the chances for success are not so certain.
2. Bad location. Ask seasoned franchisees to name one of the most important keys to a successful franchise and undoubtedly they will say, "Location, location, location." Even with a well-branded name, if you are off the beaten path, inconveniently located, or in an isolated area the opportunity to be as lucrative as possible diminishes.
3. Poor marketing/advertising. Many well-established and reputable franchisors have marketing and advertising funds into which franchisees contribute monetarily. Chains like McDonald's and Subway have national campaigns, while other types of franchises may advertise on a local level. Some franchise concepts require a lot of legwork on behalf of the franchisee. Depending on the business you chose, you may have to solicit your own clients, as in technical and computer support franchises. If you are considering a concept that requires outside sales skills and you lack them, you may want to rethink your choice.
4. Competition. There are approximately 160,000 franchises in operation in the U.S. That means a lot of competition. If your market is already saturated with a concept, you may want to consider something that still is popular but not yet tapped out. Medical spas and restaurants offering healthful choices are gaining ground among the public but there is abundant room on the business owner side.
5. Unrealistic expectations. New franchisees are notorious for having very high expectations for their businesses. It may take 2-3 years before you see a profit and if you don't plan for that, you may sink before you have a chance to swim.
A word to the wise: If you don't like people, you should not buy a franchise. If you want to make it, you have to put in long hours and work with all kinds of personalities. It's an undeniable fact that some people are more difficult to interact with than others. As a business owner you need to be able to interact well with people from all walks of life. The ability to manage employees also is essential to the success of your business.
From: http://www.allbusiness.com/buying-exiting-businesses/franchising-franchises/2204-1.html
Five Reasons Franchises Fail
Top 10 Franchising Mistakes
While many people who have become franchisees are more than pleased with the results, others have been disenchanted by the dynamics and realities of franchising. Below are 10 common mistakes made by entrepreneurs who have elected to become franchisees.
1. Not being suited for franchising. Self-evaluation is one step that too many franchisees neglect to consider. Unlike opening a business of your own, buying a franchise means becoming part of a larger organizationand adhering to guidelines and structure. If this is not a concept with which you are comfortable, then do not consider franchising.
2. Not knowing enough about the product. What's to know? Those three very dangerous words have gotten franchisees into situations that they were not prepared for. Whether it is fast food or any other type of product, you need to know all about what you are selling and feel comfortable selling it. Due diligence is a key step before actually buying a franchise.
3. Not talking to other franchise owners. Many people have opened a franchise because they knew someone who did it and made it work. You need more than that to give you an idea of what franchising is all about. You need to talk with several franchisees and get their opinions before investing heavily in a business that may not be right for you.
4. Underestimating the costs. Too many franchise owners prepare only for the initial outlay of money but do not adequately plan for the ongoing financial needs. Do the math beforehand. Make sure you have a detailed budget not only of startup costs but also of operational costs for at least the first three years.
5. Failure to read the franchise agreement carefully. This should be obvious, but in the excitement of the moment, many people skim over important documents. This is huge mistake. Do some research ahead of time so you know the standard elements of the Franchise Disclosure Document (FDD).
6. Failure to have adequate legal counsel on hand. Franchise agreements are long and include a significant amount of detailed information. You should find an attorney who is familiar with such franchise agreements. Too often, franchisees sign documents they do not fully understand.
7. Not getting everything in writing. Company sales reps tell potential franchisees all sorts of wonderful things about the workings of the company. While hyping the company is part of the job, remember to get any promises in writing.
8. Not assessing the competition carefully. Many franchisees assume that the franchising company would open a location in a certain area only because they know it will be a success. This is not the case. It is up to you to evaluate your competition and plan your competitive strategy.
9. Underestimating the time commitment. Just because a franchise is part of a larger company does not mean that you will have less work to do. Yes, it is advantageous to start with a recognizable name, but you still have a ton of work ahead of you to start up and run the business. Make sure you and your family are behind such a commitment.
10. Lack of marketing. Franchise products do not sell themselves. Product recognition is a plus, but your customers also recognize the products of competing franchises. While the franchise company will help market the product, you need to do your share of local marketing and promotion as well.
The article Five Reason Franchises Fail can give you further insight into the hurdles that franchisees face when setting up franchises. For more information on franchising in general, check out the AllBusiness.com Franchise Center.
From: http://www.allbusiness.com/buying-exiting-businesses/franchising-franchises/3989-1.html
Franchising
You are an executive who is being displaced or who is dissatisfied with the way you are being treated by your company. Recently you have been thinking about putting your resume on the street, but more often than not you have found yourself thinking about going into business for yourself.
Whenever you think about going into business for yourself, you think about the horror stories and statistics you read in USA Today and the Wall Street Journal about the failure rate of independent businesses. Those statistics dampen your desire to own your own business.
Yet every week in those same newspapers you see ads by companies offering franchise opportunities. If you want to be self employed and are intrigued by the idea of operating a franchise and want to find out more about selecting the right one for you, read on.
What Is Franchising?
Franchising is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units.
Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs.
Franchising is a network of interdependent business relationships that allows a number of people to share:
* A brand identification
* A successful method of doing business
* A proven marketing and distribution system
In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.
There are many misconceptions about franchising, but probably the most widely held is that you as a franchisee are "buying a franchise." In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support. You and everyone in the system are licensed to use the brand name and operating system.
The business relationship is a joint commitment by all franchisees to get and keep customers. Legally you are bound to get and keep them using the prescribed marketing and operating systems of the franchisor.
To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system to get and keep customers.
Throughout this article we will discuss in detail some of the benefits of conducting business as part of a larger group.
Other franchisees and company operated units are not your competition. The opposite is true. They and you share the task of establishing the brand as the dominant brand in all markets entered and reinforcing the customers's familiarity with and trust in the brand. So in this respect you are working as a team with others in the system. Other franchisees share with you the responsibility for quality, consistency, convenience, and other factors that define your franchise and insures repeat business for everyone. Increasing the value of the brand name is a shared responsibility of the franchisor and franchisee.
An "ownership mentality" destroys the reason franchised and company-operated units are successful. Think about it. If you think you "bought" a franchise, you become an "owner" and begin to think and act like an owner. You will want to change the system because of your needs, you will wonder what you are paying the royalty for, and you will begin thinking of other franchisees as your competitors. For these and many other reasons you do not want to think of yourself as an "independent owner."
As a franchisee you own the assets of your company, which you have chosen to invest in someone else's brand and operating system and ongoing support. You own the assets of your company, but you are licensed to operate someone else's business system.
Finally, your desire to become a franchisee must be grounded in your belief that you can be more successful using someone else's brand and operating according to their systems and methods, than you could if you opened up your own independent business and competed against them. You want to look for a franchisor who is building a system of interdependent franchisees who are committed to getting and keeping customers, to growing faster than the market, to growing faster than the competitors, and to do all of that with high margins. When you discover a franchisor who understands this relationship, you have a franchisor worth your consideration.
The Strength of Franchising
Franchising is the most popular system for growing a business in the United States today. According to every government survey, franchising has experienced explosive growth since the mid-70s and is expected to be the leading method of doing business in the new century.
In the United States, there are over 2,500 franchise systems. These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses. This 3.2% of all businesses controls over 35% of all retail and service revenue in the U.S. economy.
Franchising's advantages over going into business for yourself include; opening quicker, experiencing success sooner, developing a customer base faster, having less risk and being more profitable.
Your success as a franchisee is based on the proven success of the franchisor to operate company units and upon the success of existing franchisees.
A company franchises because it wants to quickly and in great numbers replicate its successful company operations without significantly increasing its debt. Because it has been successful at teaching its own employees to operate the business, the company believes it can repeat the same success by teaching others to do it.
In franchising, the operating system becomes identified with the brand or trade name that you license as a franchisee. Each franchise system uses precise methods to service and satisfy the customer. By documenting these practices, the franchisor institutionalizes the buying experience. Because customers don't like surprises this consistency in operations, unit to unit, builds customer loyalty to the brand.
Franchising is successful because we Americans are people of habit and are brand-driven when we purchase goods and services. We trust brands that we see everywhere, every day. We tend to be loyal to a product or service delivered to us the same way all the time.
Investing in a Franchise
In reality you are taking your assets, which you own, and investing them in someone elses' brand and operating system. You will always own your assets. You will always own your corporation. But you will "do business as" (dba) a licensee of the franchisor.
Before You Select A Franchise...
Step 1: Evaluate Yourself
Your job is to make an informed business decision about whether a franchisor's business opportunity meets your needs and whether you can provide what the franchisor wants and needs in a franchisee.
You need to ask yourself basic questions:
What do you want from life at this time? What are your wants, needs, and desires? What are your goals, objectives, and dreams? What are you looking for in a business? Have you decided to leave what you are now doing, not just the job, but the profession?
Have you made a decision to become a part of another organization? Remember that in franchising you joined someone else's business. You are going to be using their marketing system to generate customers and their operating system to satisfy them.
Do you have the kind of personality that can accept running the business according to someone else's plan without feeling that it compromises your individuality? Do you have an interest in doing this kind of work for the length of the agreement? Have you ever worked for one company for five or ten years? Do you have related skills, knowledge, abilities, and work-related experiences similar to the ones required for running the franchise you are considering? Do you have the financial resources to open and operate the business successfully? Can the business support your lifestyle needs? Which of the franchises you are reviewing meets your financial needs short and long term?
Step 2: Evaluate the Franchise Opportunity
Evaluate the legal documents from a business perspective. Determine whether the franchisor has territory policies that might make franchisees less competitive in a highly competitive environment. Many prospective franchisees erroneously believe that having a large territory is best for them. It could, in fact, be the worst thing for them. For example, if you have too few franchisees in a market and competitors have more units than you have, it could leave you at a disadvantage in terms of dominating the market for your product or service in your area.
Look for a franchisor who can communicate a strategy not just for market presence but for dominating markets; look for a franchisor interested in establishing a competitive edge and increasing market share. If a franchisor cannot talk about these issues, it is entirely possible the franchisor is using franchising as a way to generate franchise fees and royalty revenue rather than to establish a competitive position in the marketplace.
Evaluate the marketing/advertising fee. Many franchisors and prospective franchisees erroneously believe that a low marketing fee is a good thing. In fact, the marketing fee should be related to the amount of money each franchisee needs to contribute to support an advertising campaign that will generate enough new and repeat business for each of them. A 1% advertising fee may look good now, but when you need 5% from everyone to be competitive, it might not be possible to convince all franchisees to participate.
Evaluate the effectiveness of the Franchise Advisory Council. Does the franchisor incorporate the franchisees' input in the decisions that affect the future direction of the system? Does the franchisor involve franchisees' input in decisions?
Be sure you can answer the question "How will I make money in this business?" There should be a very simple answer to this question. It will not violate earnings claims restrictions for the franchisor to answer it because you are not asking "How much money will I make?" You simply want to know how money is made in the business. Spend as much time as possible speaking to existing franchisees. Ask them if they would do it again. How long did it take them to recoup their investment? How much money are they making? Does the operating system work? Are they provided with good marketing programs? Do the franchisees get along well with each other and with the franchisor? What are the major problems with the business? Do they use all of the operating system? Is the franchisor's ongoing support adequate and helpful? The answers to these questions will help you make your decision.
Step 3: Evaluate the Franchisor's Business Plan
The franchisor should have a business plan for the system that covers at least the length of the agreement you are being asked to commit to. Ask for the plan for the market where you are going to locate the operation. Ask for their analysis of the competition. Ask how many units are being planned for your area and why that many. Why not more, why not less? Ask how much is going to be spent on marketing in your area.
Ask to look at the operations manuals or at least to see an outline of them. This is important because the operations manuals are your guideline to a successful operation. You need to feel comfortable that they are complete and clear and meet your abilities, needs, and goals.
Ask to receive a full explanation of the initial and subsequent training programs. Ask how people are trained. Is it classroom or hands-on practice? Are there case studies and discussions or is it straight lecture?
Ask for a full explanation of the pre-opening assistance offered by the franchisor. Understand any help franchisors give for site selection and lease negotiation. Be clear about what ongoing support the franchisor provides to the franchisees.
From: http://www.franchising.com/articles/49/
How to Acquire Free Web Site Promotion
You have finished making your own website. You have introduced your company and presented your products and services. You have added propositions and promos to catch your target audience’s attention. You have achieved the dos and don’ts of building a company web site. But why isn’t your website a major success?
Maybe you’re not planning the key to the best promotion of your web site. Here are some guidelines on how to acquire free web site promotions for your company’s success.
If you have started to promote your web site, keep it constant. If you promote your site with persistence, it will catch your audience’s attention.
Be patient. Try each method in promotion until you acquire the best, free promotion there is. You have to accept trial and error for your web site to reach the top.
There are many ways for your web site to be seen. Here are some free web site promotions you could try until you find the most effective.
Free promotions such as search engines and directories would give your web site the deserved traffic you always wanted. Make sure to check your web site’s ranking to know whether or not this type of free promotion is right for you.
Make a deal with other web sites on trading links which could help both web sites. Make sure to use words that could easily interest the audience.
Find free classified ads that could boost the promotion of your web site. These ads could be seen by other people who you are not targeting for, but may as well be interested in your services.
Free and low-cost internet banners are spread all through out the World Wide Web. Banners that pop-up at the top of a page or in a separate window would automatically catch your target audience’s attention.
If your web site and its free promotion did not work even after accomplishing these methods, analyze your web site. Track down all visitors, advertisements, and transactions. Then locate errors in your web site. Upload new files to your web site continuously for audience to return for new products and services. Monitor your own web site if it’s up in the market or down.
Then be ready to try the methods again and surely it will work.
It has always been said that the best things in life are free. Yes they are. And as soon as your free web site promotion proves to the audience its worth, then you’ll believe it’s true.
Free Website Promotion...Why Not?
Can you ever avail of free website promotion? Is that even feasible?
Of course yes! Nowadays, your baby website can amass huge traffic in no time thanks to free website promotion.
How does this free website promotion go anyway? What are things to be done?
Enlist your website.
Look for the hottest Internet directories and enlist your site there. This is the easiest and most effective free website promotion tactic. Start with this step and the rest of the good things will follow.
Just don't forget to prep your website and make it all spruced up for a higher chance to get accepted in your directory of choice.
Know your forums
One reason why forums are created is for free website promotion for everyone. Log in, post actively, let them know about your site in every post and you attract instant visitors right there.
Write a press release
Release your writing prowess and start up a press release that advertises your site! This is a free website promotion tactic that you can do anytime. Type a brief paragraph or two and email it to your friends, colleagues, internet e-zines, newspapers and other media and massive traffic will come to you pronto!
Be friendly online
Free website promotion means you need to be friendly to other webmasters. Why, you ask? So they can link you immediately! Establish contacts and never tire of link requests and exchanges.
Write an article
Say, your website is about your travel agency. Write an article about the perks of traveling or the hottest travel spots in the world. On the concluding paragraph, mention your website in passing. This article works as an advertorial and doubles as a free website promotion approach.
Just let the whole world know about your site
What is free website promotion without the word of mouth? Insert your website, its URL and features in daily conversations and let the good news spread from one mouth to another!
Make a banner ad
Make a banner ad for your site and ask another webmaster to do the same for his site. Then swap!
Take up a free website promotion course online
Yes, there are free website promotion tutorials. But don't you know that you can actually take a free website promotion course that can help you out further? Part of the free website promotion program is signing up for newsletters.
When you make a website, you need not pay anything to promote it. You just read it -- there is such a thing as free website promotion!
