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The Truth About Franchising
Truth About Franchising
A Franchise – The Path To Ones Financial Dreams?
Often times the general public will get the perception that a franchise is the answer to all their financial dreams. For a rare few this may be the case, but there is significant reason to be leery of this line of thinking.
For starters, I did a little research and found some of the most popular franchises. On the following page are some of their financial requirements. If that doesn’t make you think twice, there is more revealing data below, of which you should be made aware.
SCORE Volunteers.
SCORE’s 10,500 volunteer counselors have more than 600 business skills. Volunteers are working or retired business owners, executives and corporate leaders who share their wisdom and lessons learned in business.
Exploring Franchising Options: Do Your HomeworkBy Jerry Chautin
SCORE Counselor, Atlanta, GA; Manasota, FL; and Cyberchapter
We see franchised businesses popping up all over. Yet some of the most recognizable franchise brands are under attack in civil courts. And one of the most prolific attackers is Robert Zarco, a lawyer with offices in Miami and West Palm Beach. He goes after sellers of franchises, called franchisors, wherever and whenever they mistreat his clients. Zarco told me, “the problem with franchising is the perception of rewards is very different than reality.”
With so many franchises in the United States, you might think that these small business owners, called franchisees, are a happy lot. Not necessarily so, says Susan Kezios, president and founder of the American Franchisee Association, a trade association that represents franchisees nationwide.
She tells us that many of her members are unhappy with the franchises they purchased and would have made different choices if they knew then what they know now.
See the rest of this article here.
The Harsh Reality.
A study by Dr. Timothy Bates, a professor at Wayne State University in Detroit, found that the franchise failure rate actually exceeded 30 percent and that franchises made lower profits than independent entrepreneurs. Dr. Bates’ study also found that the average capital investment of franchisees was $500,000 compared to $100,000 for independent entrepreneurs.
Bates’ Research Underscores Three Harsh Realities
Dr. Timothy Bates
Professor at Wayne State University, Detroit, MI
Many franchisees never make much money. Average profitability is poor, especially after taking into account the purchase price of the franchise. So take the hype used to sell franchises with a big pinch of salt!
“Studies” used to sell franchises are paid for by the franchisors. Don’t mistake the information provided for balanced consumer guide information. It’s a carefully engineered sales pitch. Getting hold of the information you need to make a rational buying decision is difficult, to say the least. So use your common sense and a healthy dose of cynical discretion.
Franchise agreements always favor the franchisor. It is very easy to be swept away in the heat of the moment and get into a binding contract that is not in your best long term interests. And it is very hard to get out of a franchise agreement without taking a big financial loss. Remember, the main purpose of franchising is to make the franchisor wealthy. So be careful.
The full report can be found here.
Franchise Financial Requirements.
The following are some of the most popular franchises and their
financial requirements.
The following franchise information can be located here.
McDonalds Valvoline Oil Change Quiznos Subs Ben & Jerry’s Ice Cream | Baskin Robbins – 31 Flavors Dairy Queen |
Still Interested In A Franchise? Click Here
Press Release
A Franchise: Financial Redemption or Ruin?
Franchise opportunities are a hot commodity. Business magazines tout the top 10 franchises of this industry and the top 500franchises overall. The reviews spout promises, the ads are absolutely enticing and financial success beckons behind the shiny promises.
So what’s really behind the franchise opportunity curtain? Is purchasing a franchise an act that opens the door to financial freedom, to a sports car, life on the beach and a beautiful companion? Or is purchasing a franchise just another way to give all of your hard earned money to someone else, only to end up paying them royalties and fees on every dime you make?
Sorting out franchise fact from fiction isn’t easy. Companies who offer franchises get their most happily satisfied and successful franchisees to appear in ads. (Or they hire actors to look and act successful and happy.)
Reading through franchise listings can leave you bleary eyed and wondering what happened to simple math. Franchises offer different business models, different growth opportunities and a world of different participation requirements.
Common franchise opportunities offer training and hold your hand through the setup process and in initially running the business. They’ll require fees, some hefty, in return for all this assistance. It isn’t unusual for a high level franchise opportunity to cost upwards of a quarter of a million dollars and that’s before the monthly royalties and advertising contributions that are mandatory.
There’s no room for individuality in operating a franchise. The businesses all look alike. Everyone who operates one of the businesses dresses like all the other business operators. It isn’t unusual for a franchise company to issue a non-compliance warning to franchisees who have the smallest item out of place or turned in the wrong direction.
Ifyou want a cookie cutter business and can afford to spend thousands of dollars for the opportunity to continue paying royalties and fees, a franchise might work for you. If you are looking for the success factor at a little bit lower cost, there are legitimate home based business options available.
For those franchises that do work, that do make the franchisees money and help them achieve financial freedom, the business model is well developed and tweaked as often as industry,technology and the business environment change. Successful franchisee stake the knowledge offered by the franchise opportunity and make it work for them.
It is interesting that the president of the American Franchisee Association says that many of the members are unhappy with the franchise they purchased and would have made different choices if they knew then, what they know now. A study by a professor at Wayne State University showed that the franchise failure rate was in excess of 30%, and that independent entrepreneurs make higher profits.So what does all this tell us? It should be screaming to us that we need to do our homework. There are tens of millions of people looking for a legitimate home business,so sales and prospects are ripe at this point in time. Just be wise and cautious, and get the appropriate information so you are making the right choices.
As you are looking for a well-developed business model that produces results but doesn’t require the extreme investment and other fees that franchises require, you’ll find a wealth of information and opportunity available here.
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