A Washington Post article yesterday reported on a growing trend of some franchisees that are keeping their day jobs and choosing franchises as a way to create a second revenue stream and as a hedged bet in case of layoffs.
According to the Post, franchise investors that choose a franchise that can be operated remotely generally fall into three categories: (1) currently unemployed but want to keep their options open in case they get an offer; (2) consultants who want to supplement their income; and (3) the fully employed who want to make money on the side.
Obviously, working a full time job and running another business is challenging – which is one reason that a number of franchisors do not sell franchises to people who don’t plan to operate the business themselves. The key to success is finding a great manager for your franchise business who you can trust to run the business without your full time involvement, as well as good back-up support for your manager.
Prasad Raju, an IT architect who invested in a Great Clips hair salon franchise, plans to keep his day job and says he expects the salon to add $40,000 to $50,000 in net income to his personal bottom line.
Raju said that he plans to keep his day job and is not concerned about managing the new franchise business. “Franchising appealed to me because they have a proven model,” he said. “If you can execute your model, you’ll be successful.”
To learn more about franchising opportunities, attend our free July 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
As national franchise brokers, we are often asked by people interested in buying a franchise if they should be looking at purchasing an established franchise brand or if a hot new start-up would be a better choice.
The established brand can usually offer a higher success rate because of an established track record; the start-up may provide a better ROI if you get in on the ground floor and it really catches on. So which is the better choice?
The answer is, of course, it all depends on you. What is your tolerance for risk? While every business involves some level of risk, established brands are usually less risky. What is your family situation? Are you single and only looking to support yourself, or do you have a young family counting on the income this new business will generate? Your family should be comfortable with your decision as well, since you will need their support to succeed.
How much experience do you have with start-ups? Getting in on the beginning of a new franchise concept can be exciting as well as financially rewarding if the concept takes off, but there is likely not much of a track record for you to examine. You will need to do extra due diligence to ensure the new business model is sound and talk to any other franchisees to see how the business is being received by customers. If you feel the concept has legs – that it meets a long-term market demand and has a management team in place with great business experience – it could be a good choice for you.
To learn more about the variety of franchise concepts available to investors, attend our free July 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
At the International Franchise Expo in New York earlier this month, there seemed to be no shortage of franchise offerings that target kids – and the busy parents of those kids. Three that caught the eye of Entrepreneur magazine included:
Cool de Sac – a full service restaurant offering health meals for kids and play stations where they can burn off some of that post-meal energy while parents enjoy more upscale food and beverage offerings.
Kidokinetics – a franchise that offers sports programs for schools, camps and private parties; Kidokinetics taps a growing trend of school systems outsourcing PE classes.
British Swim School – started in the UK in 1981, this franchisor is a recent transplant to the U.S. and teaches swimming to people of all ages, from infants through seniors, using public pool facilities.
Entrepreneur currently lists 157 businesses with franchise opportunities in the Children’s Products & Services category. While many focus on education and child care, there are some that offer special niche services, like a children’s acting school, cooking school, hair salon, photography studio, LEGO camps and more.
To learn more about the wide range of franchise categories and finding the right one for your skill set, attend our free June 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Franchise lending rose six percent in May 2012 from May 2011, according to the monthly Franchise Lending Index. About 47 percent of May 2012 franchise loans were made to new franchise units.
Even though lending increased year-over-year, it was down from the previous month by 0.5 percent, reflecting the still-tight credit market. The International Franchise Association estimates that demand will outstrip lending supply by 18.6 percent in 2012. To bridge the gap, the IFA recently hosted a session on private equity investing in franchising at its International Franchise Expo in New York earlier this month.
Private equity firms are becoming interested in franchise investments because franchisors offer a predictable recurring revenue stream, requires relatively low capital expenditures to maximize growth of an established brand, and are often driven by business concepts that have broad consumer appeal.
Another recent development in start-up lending has been the crowdfunding resource made possible through The Jumpstart Our Business Startups (JOBS) Act, which was signed into law on April 5, 2012 by President Obama. The JOBS Act is intended to increase domestic job growth by improving access to investment funding for non-public companies.
The JOBS Act contains provisions that reduce regulatory burdens on capital formation and on public and private companies. Of notable interest to small businesses and start-ups is the addition of crowdfunding to the list of transactions that are now exempt from SEC registration under the JOBS Act. Usually conducted via the Internet, crowdfunding allows entities to raise small amounts of investment capital from a large pool of investors.
The crowdfunding exemption, which is included in several that await SEC rulemaking within the next 270 days, will allow privately held companies to raise up to $1 million annually, either through a SEC-registered crowdfunding portal or through a registered broker.
To learn more about how to fund a franchise, attend our free June 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
Most people are unaware of how the franchise sector impacts our overall economy, but as the infographic below illustrates, some of today’s most well-known brands were launched during a recession, and franchised businesses continue to serve as a workhorse for productivity and wealth creation in the U.S.
Philadelphia franchise attorney Lane Fisher of Fisher Zucker, who is also a member of the board of directors for the International Franchise Association, was interviewed recently by TheStreet.com about choosing the right franchise business. Here are some outtakes of that conversation:
What are the first steps to take after you make that decision to buy a franchise?
Fisher: It's important to understand what your skill set is so you can look at opportunities that complement your skill set. You also need to consider the amount you have to invest in the business. That's incredibly important. In addition to what you might have in cash, often folks look to financing. While the financing market has been gloomier, we are seeing that loosen up -- there does appear to be companies that have financing available. There is also a unique way to garner financing by using your IRA. You need to gather some intelligence to figure out what you have to spend.
Should a potential franchisee have all their financing in place before they approach a franchisor?
Fisher: Smart franchisors have garnered relationships with lenders who understand their business model. [Banks that are not familiar with the franchisor] would have to invest a lot of resources to get to know the franchisor. It's hard to do that looking at a lot of disparate opportunities.
What are the key factors of a good franchise?
Fisher: In a good business, strong trademarks is certainly up there; reasonable unit economics -- we call it reasonable return on investment; one that has teachable skills with well-defined training systems and operating procedures; one that has a unique concept that is differentiated from competitors; and one that has seasoned management with both experience in franchising and in the underlying business that's being franchised. Look for a company with a track record of growth.
A Forbes.com article earlier this week listed 10 questions that a savvy potential purchaser of a franchise should be asking before they make an investment. These questions are ones that a qualified franchise broker would encourage you to ask as well, as part of a comprehensive franchise purchase process.
The questions may seem tough, but not having the answers could make it much tougher for you if you make your franchise purchase decision based on superficial criteria. Here are the questions:
What do franchisees say about the franchisor?
What is the franchisee turnover rate?
What is the franchisee failure rate?
Why did those franchises fail?
Would an existing franchisee buy this franchise again?
What is it really like to work in this business?
How are conflicts between franchisees and franchisors resolved?
What percentage of the chain is franchised?
What support does the franchisor provide beyond initial training?
What kind of business experience do franchise managers have?
Going beyond the Franchise Disclosure Document and talking to both current and former franchisees can provide you with important insight into the franchise opportunity you are considering.
To learn more about smart ways to invest in a franchise, attend our free June 26 webinar,Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
CNBC.com is reporting on the growing trend of Americans looking for a way to take charge of their work life, and saying that franchises are attracting many of these investors because of their proven business models and ongoing support.
As Jennifer Ketels, a former Las Vegas ad agency owner, noted in the CNBC report, “There's so much uncertainty in corporations right now, especially on the West Coast and California. It doesn't matter how good an employee you are; if you're working for someone else, for a corporation, there's uncertainty.”
Three years ago, Ketels invested in a frozen yogurt store and has since opened four other units in California and Washington. The recession brought cheap leases, and while people may not have been able to afford a vacation, they could afford to splurge on tasty treats.
The growing optimism in the franchise sector is also seen in recently revised forecasts from IHS Global Insight, which adjusted its earlier 2012 forecasts upward for franchise employment and franchise output.
IHS Global Insight also noted that some franchise sectors are growing faster than the industry average of 5.3 percent predicted for this year. Sectors that are averaging close to 6.1 percent growth include commercial and residential services, personal services and home healthcare services.
If you are interested in learning more about taking charge of your work life, attend our free June 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
A new survey by Citibank conducted in May of 750 small business owners around the U.S. shows that the number of small businesses reporting positive business conditions has doubled since 2010.
Overall, 33 percent of small business owners reported that their business is better today than it was a year ago; another 33 percent said they expect their business to grow by more than 10 percent in 2012.
Small business owners cited these ways they have kept their businesses growing:
88% kept updated and knowledgeable about their field
70% increased face time with customers
67% updated/upgraded computer systems
52% increased their use of the Internet and social media
51% built a network of suppliers and partner companies
The survey also found that while the recession has taken a toll on many small business owners – 66 percent reported the economy as the main stressor for their businesses – a majority said they have weathered the bad economy by reinventing their businesses through new products and services and technology.
If you are interested in learning more about running your own small business, attend our free June 26 webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.
It seems as if more people than ever these days are interested in having their work destinies in their own hands as well as the rewards that come with being your own boss. However, the shaky economy still makes many people afraid of taking on too much risk. This is how franchising hits the sweet spot of entrepreneurship and mitigated risk.
Here are the top 5 reasons you should discover franchising in 2012:
Flexible financing. Since franchises provide lenders with the added comfort of a proven business model and track record, franchisees often find financing a franchise is much easier than doing a startup from scratch. Some lenders even specialize in lending to franchisees; an Entrepreneur Authority advisor can provide you with more information.
Training. Franchisors provide all the necessary training for franchisees, which gives you a great opportunity to learn exactly how your business will operate by training in a similar environment and provides you with mentors to help reduce the risk of costly mistakes.
Brand awareness. When you invest in a franchise, you invest in a system that includes established brand identity and awareness as well as customer loyalty.
Higher success rate. Franchisees typically enjoy a much higher success rate than regular startups that have no proven system or brand identity.
Support. Franchises offer a valuable support system for their franchisees – not just corporate support, but real operating support from others in the franchise system.