Do you desire Home Business Ownership but cringe at the thought of starting from scratch?
Possibly a Home based Franchise is your answer.
A Franchise is a business in which "... the franchisor, the owner and developer of the franchise system licenses [you] franchisees to use trademarks, service marks, logos, or advertising owned or developed by the franchisor." (International Franchising Association, Franchising basics).
With some franchise programs, the business operates using the Franchisor's brand name only.
Other programs are less restrictive and allow for the usage of both a trade name in addition to the franchisor's brand name.
Common to all franchise programs, the franchisee[ you] is responsible to pay the franchisor, advertising fees, initial fees, service fees, and or royalty fees.
You are responsible for payment whether your business is profitable or not.
Additionally, many franchisor's provide educational programs to franchisees before the inception of the business.
Often times, they've done demographic studies and other studies to ensure that you have greater odds of returning a profit.
Major Franchise Types
• Unit Franchising
Is the most simple type of franchise in which the Franchisor grants the franchisee the right to operate a single operation at a specified location or within a particular territory.
• Area Development Franchising
In accordance with a "development schedule", the franchisee agrees to establish a predetermined number of "unit franchises" within a particular territory.
• Subfranchising/Master franchizing
Is quite similar to Area Development Franchising with the major difference being that the franchisor grants the subfranchisor the option of opening the unit franchises herself or selling the the franchises to third parties. (Common with International franchising)
• Affiliate Franchising
This type of set up is typically used by an owner of an established business who decides to join/affiliate with a franchised chain.
This allows for the benefit of the franchises brand. This is common with many real estate.
• NonTraditional
This type of set up is customized between the franchisor and the franchisee.
Franchises are not the same as Dealerships and distributorships
A dealership or distributorship differs from a franchise in that there is no FEE involved. Dealers purchase products usually from the manufacturer at wholesale prices.
Note however, that a dealership can become a Franchise IF a FEE is paid to the franchisor AND the distributor is dependent upon the franchisor's pay structure.
Considerations when buying a franchise
• There's a benefit to purchasing a franchise that is well known
• Will the franchisor provide ongoing education and support?
• Were demographic studies performed?
• How many of the franchises have closed operation? Why?
• Have you STUDIED the franchiser's Comprehensive Disclosure Statement? It's required by Law that prospective Franchisee's are provided Comprehensive Disclosure, a copy of the franchisor's Standard Franchise Agreement, Audited statements, a list of the names of all of the Franchisees, as well as a copy of all documents that require the franchisees' signing.
By law, each of the above must be provided at least 2 weeks prior to purchase date.
• I've heard the saying, "if you buy a McDonald's, be prepared to eat burger's for breakfast lunch and dinner." In other words, your business requires commitment.
Additional Sources of information
•Success Magazine
•International Franchise Association www.franchise.org
•Franchise Sales Press *Get this magazine since it is known for its focus on franchise opportunities. Further, they perform regular interviews with both franchisees as well as with franchisors.
•SBA Small Business Association
•Brokerage firms and analysts Since stock information on A public company is useful.
•Franchise Lawyer •Federal Trade Commission Public Reference Branch
•UFOC "Uniform Franchise Offering circular -- the material that is provided by law, by the franchisor to the qualified franchisee. This is likely the most telling of all information gathered.
•Attorney General's Office
•BBB located in the city of the Franchisor's headquarters.
•Your Banker should have access to the Dunn and Bradstreet Report on the particular Franchisor.
•Contact the franchisor's franchisee's listed in UFOC. *** Prepare a list of relevant questions prior to calling.
Purchasing a franchise usually equates to a reduction in investment risks since the" system" and Franchise name is established, training and ongoing support is provided, market research has been conducted... Conversely…
franchise ownership can be costly. Consequently, it is critical that you investigate the franchise thoroughly prior to purchasing.
There is a continual rise in the number of franchises. Obviously, there's a HUGE market for this method of business ownership. When approached methodically and practically, Franchise ownership can be Very lucrative and much simpler than beginning a business from the ground up.
Be wise and ensure that you conduct sufficient research prior to committment.
If you’ll need financial backing, then you will need to create a business plan. There’s a handy Business Plan workbook available at our site.
Bridging the Gap between Opportunity and Success, OwnABizToday.com
About the author:
Due to her terminally ill, physically and mentally handicapped child, Shawn was FORCED out of the "job market" and FORCED into "self employment" ...After experiencing a multitude of financial difficulties. Because of her life's experiences, Shawn understands that it's impossible to predict future circumstances and thus it's terribly important that people...particularly parents, develop financial security. Consequently, leading others toward business ownership has become a passion for Shawn. Presently, Shawn is the Author of OwnABizToday's, Ezine, which presents New Home business Start up's and Small Business Resources each week.
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Bridging the GAP between Opportunity and Success, OwnABizToday (http://www.ownabiztoday.com )
The True Cost of
Self-Employment
by: Kenny Herbold
Do you think you are ready to make that leap to full self-employment?
The profit from your part-time (up till now :-) business is matching or
exceeding your regular paycheck, so you think it’s time to fire your boss
and make do without that paycheck. Before you take that final step to
personal freedom, make sure you truly understand what you are giving up.
Your employer paid benefits may cost you more than you realize. For many
people it will take more than $40,000 of profit per year to replace a
$40,000 annual salary.
When I talk about your employer paid benefits I’m not referring to the
“free” office supplies, subsidized soft drinks, or even the occasional
free meal at the holiday party. The items that you need to consider are
the benefits that are going to cost you the most money. Although if you
really like soda I guess you might want to include this too! According to
a survey published by the US Chamber of Commerce in January 2004, employer
paid benefits averaged 42% of an employees salary in 2002. That means you
need an additional 35 – 45% more than your current salary to make up for
these lost benefits.
If this number shocks you, then let’s take a look at some of the
typical benefits employers provide. Again, based on the US Chamber of
Commerce's survey medical insurance cost approximately 15% of an
employee's salary. However, employers also cover the cost of many other
forms of insurance. They include
Disability,
Dental,
Vision,
Life,
Unemployment,
Long Term Care Insurance, and
Workers Compensation
You might be thinking that you pay premiums for these products already.
Even if you do, your employer is most likely paying the lion’s share of
the cost. Not to mention that many times the premiums you are paying are
using pre-tax dollars. This means you end up paying less in taxes because
the amount of your premium is deducted prior to calculating your taxable
income.
When you own a home-based not only are are you going to be responsible
for the full cost of all forms of insurance using after-tax dollars, you
are going to be responsible for self-employment taxes. Self-employment
taxes include the employer paid portion of Social Security and Medicare
taxes. This means your bill for these taxes are going to double. Instead
of paying 7.65% of your income for these, you will now pay 15.30%. And
don’t forget about having to pay estimated taxes. You will have to file
and pay taxes 4 times a year now, instead of just once. Not only do your
taxes increase so do the headaches and the cost of filing!
The second highest benefit cost is your retirement benefits. Your
employer’s 401(k) match guarantees an immediate return of up to 100% on
your money, depending on how much your company will match and how much you
contribute. If your company has a defined benefit pension plan, you are
losing a guaranteed income in retirement. You are also taking on the
additional risk because you are 100% responsible for investing the money
to replace it.
These are only a few of the largest items that make up the 30 – 40% of
your salary that will become your responsibility when you become
self-employed. Your company might be paying for many other perks also.
Some other things you might want to consider are
company car (this includes gas and maintenance)
annual or performance bonuses
professional training or expenses (including professional journal or
society dues)
software license that let you use programs like Microsoft Office
programs on your home computer
vacation pay (that’s right, you no longer get paid when you take
days off)
All of these, and any others you might be able to think of will needed
to be included in the total cost of becoming self-employed.
I hope you don’t think I’m trying to discourage you from finally being
able to become your own boss. I just know that the excitement of finally
making this move can make us forget about some of the “extras” we are
receiving. You are considering a very serious change and need to make sure
that the benefits are going to outweigh ALL of the costs.
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