idea at Business Franchise

The proverb says: “Tell me who your friend is, and I’ll tell you who you are”. I can say: “Tell me who your team members are, and I’ll tell you who you are”.

Think over the following questions:

Who are the team members?

Do you, the project manager, get to pick the team?

Or are you given a list of team members and expected to include them?

The next step in the Project Management process is to identify the people who will participate in the project.

Even if you have a rock-solid goal with clearly defined steps, you have little chance of succeeding without a group of people who possess the ability and perseverance to complete the steps; failure is imminent. Ensure that the project team can work together well and has the necessary skills to get the job done. Here’s a simple analogy to illustrate the point.

Suppose that you want to buy a franchise company that specializes in building bridges in remote locations. On the day of a new site survey for a bridge across a small canyon, every one of your engineers calls in sick. So, in a panic, you call the temp agency and ask to send over six of great engineers — pronto. To your delight, they arrive on time, and you fly them to the first potential site of the new bridge. When you point the engineers to the first possible bridge site, one of them pipes up, “You do realize that we drive trains, don’t you?”

Your company may have many talented people. Your job as a project manager is to identify the people who can finish tasks in the manner required and in the time allotted. Don’t consider including a technical wizard who returns from vacation the day the project is due. Don’t consider any potential team member who does not have the time to devote to the project. A great asset who can’t put the time and focus into a project is really not a great asset at all. Always consider all factors when determining whether a person can contribute to the team.

Ask questions! Remember: you don’t have all the answers. In fact, it’s extremely difficult to even know all the questions. (If you really do have all the answers, please e-mail me. I have some work for you.) Include proposed team member “interviews” as part of the selection process. You don’t have to hold a formal meeting. Sending an e-mail message or talking on the telephone works just as well. You just need to ask a few questions. Here are some questions you need to answer as you talk with prospective team members.

1. Are they available?

No one can do an adequate job if there is no time to work on a task. Overbooked, talented individuals are just as ineffective as available people with no skills. Be sure to explain what you need for your project and what the performance expectations are. Add at least 20 percent to any estimate you give. After setting proper expectations, ask for the person’s interest and availability. Make sure that each prospect’s supervisor agrees with this availability status before you make your final team selections.

2. Are they able?

Because you’ve outlined the whole project and listed all the individual tasks (don’t worry; we’ll go over how to do this later), you have a pretty good idea about what needs to get done. You know what you need from this prospect. Ask this person about her experience with similar tasks. If Stacey’s part of the project requires her to use a Dutch oven, it makes sense to find out if Stacey has ever used a Dutch oven. Ask earnest questions: “Stacey, your part in this project would be working with a Dutch oven. Tell me about your experience with Dutch ovens. What kind of dishes have you prepared with a Dutch oven? What kind of problems have you had cooking with a Dutch oven? If I asked you to cook a peach cobbler in a Dutch oven right now, could you do it? If not, what would you need to get the job done?”

3. Are they willing, eager, and optimistic?

The last thing your project team needs is a naysayer. There’s incredible momentum generated in a project when all the team members have good morale. It’s your job to keep the enthusiasm high. Don’t kill it from the start with a team member who doesn’t want to be on the team. Sometimes, you’re forced to put someone on the team, regardless of qualifications. In those cases, spend a little extra effort encouraging good morale and ensuring that any bad vibes don’t spread to other members. Simple positive reinforcement and recognition go a long way in such cases.

4. Do they have any questions?

Always remember to be quiet and listen at some point. Ask for any questions they have about the project. You can often uncover potentially damaging things you forgot by asking for input from other people. You can also get a good feel for what each team member considers important. Make notes of your conversations. Comments and questions at this phase can be very useful later in the project.

Keep in mind during these initial interviews that your purpose is to evaluate potential team members, not to select the team on the spot. Ask for any referrals and express genuine appreciation for their cooperation. Set a deadline for announcing the team and live up to it. The goal is to form a team for this project and have a pool of resources to draw from for later projects. It’s important to avoid alienating anyone during your team selection.

5. Inheriting a team

You may not have the luxury of selecting your own team. You may have the team member list handed to you. Do not skip the interviews! Even if you inherit a team, you still need to know what each member can do. The questions just covered can give you valuable insight into some cool skills available to you. You may also find that the team is incomplete. Ask to augment the team. Fill in the missing areas. Remember that you’re on the hook. If the project fails, it’s the project manager’s fault. Go in prepared.

If you do add new team members, take the time to make sure that each member feels equally important. You don’t want the original members to feel that you added to the team because you distrusted them. They were on the original team for some reason. Whether a team member made the team due to skill or being a relative of the CEO, use the skills you find.

The success of the project reflects directly upon you, the project manager, so make every effort to assemble the best team you can.

After you’ve outlined the process and set your team, you’re ready to draw the 20,000-foot view.

Don’t overlook the importance of personality to team composition. You may be spending lots of time together. Build the team with interesting and stimulating folks (as long as they fit your selection criteria) and you’ll be more productive - and have lots more fun!

Businessmen write business plans for different purposes. I want to turn attention of my beloved readers that the size, structure and contents of the document can differ in compliance with the purposes. So, why do people write business plans?

-to evaluate the effectiveness of their prospective business or project;

-for potential investors and partners;

-to apply for a loan;

-to apply for a government preferences;

- they need to have a business plan according to the legislation of the country.

Let me characterize every purpose by turn.

It’s a very good idea to do some calculations and evaluations before you start a business or a project. Sometimes people underestimate the necessity of business plan “for myself”. They say: I’ll do it later, after my business reaches its capacity. Or: I don’t want to waste time for papers; I’ll better start making money. Or even: I’ve planned everything in my mind; why should I spend time for paper work. But it’s a big mistake when new business or project starts without preliminary planning. Why? Because when you do the calculations you summarize all the facts and can see the whole picture. You’ll better see all the threats and opportunities. You will see the prospective profit: maybe it’s too small for you? You will get not approximate (like $10,000-$20,000) but real amount of initial and current investment.

But the main reason why new business or project has to start with a completed business plan is hidden in the following: after you start a company you will be able to catch the moment when things go not as you plan. If you get less you’ll see it before it turns to real trouble. If the things go better you can instantly start thinking about other project and earn more money with your extra profit!

When you write a business plan for your potential investors and partners you need to take into consideration the main statement: THEY CAN’T READ YOUR THOUGHTS! What does it mean? If you want to prevent problems and misunderstanding in future present as many aspects of your business as possible in the business plan. Remember: things that are completely clear for you are not the same for all the people on the Earth. Write about conditions and terms of supply, methods of salary calculation, way you choose the materials and equipment. Spending time this way can help to avoid many problems with investors and partners in future.

Also you need to remember that the main purpose of investor is profit. Unlike creditors investors are not seriously interested in collateral and payback period. They want you to show so-called ROI (return on investment) – in rate they’ll get on their investment per months or per other period of time.

When you create a business plan to get an external financing in the form of a loan or credit you need to show that your business will be enough successful cover both interest and loan itself. Creditors are not interested about the life and results of your business after the payback period but they will be very happy to see a good collateral.

If your business plan is presented to government authorities while you are trying to get some guarantees or preferences you need not only to show the financial results of the business. Tell them about the additional taxes they’ll receive, about new jobs created, about any other positive influence your company will have on the community. And don’t forget to write about the ecological site of your business (it’s an advantage when you business improves the ecological situation in the region in any way).

The answer is NO. I spent a lot of time reading different articles about how to write a business plan and other forms of planning. I found that many authors present the information such way that new businessmen would come to a conclusion that business plan is the only important thing for their business success. But it is not so!

Business plan is not a goal but only an instrument. This instrument helps to summarize the business, marketing, technological and financial information. It is a document. Or better to say it’s only a REPORT! Yes, a report!

What do I mean? Before starting your new business (doesn’t matter franchise or not) you have to carry out some preliminary studies. At first you check the idea itself. I wrote about evaluating the business idea in my previous posts:
Even in franchise business you HAVE to think over the idea
Declining an idea
Declining a business idea: last three reasons
Are you ready?..

If you come to conclusion that idea is good it doesn’t mean that you can start immediately. Certainly, you can but it can lead to big problems in future and even to failure of the prospective company. What you need to do is to continue to study the internal and external factors that will influence your business in future. These factors usually include marketing, production, and organizational, legal and financial spheres. And after you finish with the study you a ready to create a document that contains all your conclusions. This document is called… yes, you a write, a BUSINESS PLAN!

So, the goal is not to write a large business plan with colorful graphs and long tables. The goal is to collect the correct information about you prospective business and to make correct decisions based on this information.

I’m going to write more about different surveys that you prospective businessmen need to carry out and about how to choose the best strategy. Also I plan to show the examples of good and bad business plans and to explain the mistakes. Come back to my blog .

Karl Marx is dead. The inventor of communism is lying in a grave at London Highgate cemetery. But the ideas he has presented to the society are still alive and prosperous. Moreover they are taking their place today. We are turning to them today. If it is hard to you to believe me you have to read Funky Business by Kjel A. Nordstrem and Jonas Ridderstrale. You will know a lot about modern economic trends and Karl Marx. They are speaking about the value of workers and especially about the value of their brains and ideas.
They were clever guys – Karl Marx, Friedrich Engels, Vladimir Lenin, Mao, Che Gevara and all other communist leaders. They were nations’ leaders. And they knew the clue idea that people not the capital are the most important production resource.
And they knew the power of unions. It seems to me that even today we are not realizing the importance and power of united people. But those guys knew.
El pueblo unido jamas sera vencido! That is the Spanish expression that means “United people will never be defeated”. It became famous during the Cuba revolution. It’s the beginning of revolution hymn. And it had become very popular in sixties. Comandante Che was definitely right. Synergetic effect is the key.
2 + 2 = 7.
The system is much more than the sum of its elements.
And united people can reach unbelievable achievements. That is the thing that brings success to revolutions.
And that is the thing that brings success to franchises. That is an American way to unite people.
Do you need examples? I have them.
Let’s examine Holiday Inn. Good franchise system I think. Holiday Inn was recognized in 2001 by Franchise Times as a Top 100 Franchise Chain. So the system is good enough.
This chain of hotels was organized in 1952 by homebuilder Kemmons Wilson to provide inexpensive family accommodation for travelers within the USA. Its franchise system allowed Holiday Inn to grow up dramatically. By 1958 there were 50 Inns across the USA, 100 by 1959, 500 by 1964, and the 1000th Holiday Inn opened in San Antonio, Texas in 1968. The chain dominated the motel market, leveraged its innovative Holidex reservation system, put considerable financial pressure on traditional hotels, and set the standard for its competitors like Ramada Inns, Travelodge, Howard Johnson’s, and Days Inn. By 1972, when Wilson was featured on the cover of Time Magazine, there were over 1,400 Holiday Inn hotels worldwide.
Many think that the main reason of that irrepressible raise of Holiday Inn is its original creed that the properties should be standardized, clean, predictable, family-friendly, and readily accessible to road travelers. But I know one more important reason. It is the unity of the chain.
In 1955 just in three year from setting up that business Kemmons Wilson created an organization of Holiday Inn franchisees, which were charged with reviewing issues important to the Holiday Inn Hotel system. One year later it had been transformed into National Association of Holiday Inns. In 1959, it changed its name to the International Association of Holiday Inns to reflect the geographic expansion of our membership. Today, it is known as International Association of Holiday Inns Owners’ Association (IAHI).
The creation of that organization has driven Holiday Inn to its tremendous spurt.
Today the IAHI represents the interests of nearly 3,000 owners and operators of InterContinental Hotels Group (IHG) hotel brands, including:

• Crowne Plaza Hotels and Resorts
  
• Holiday Inn Hotels and Resorts
  
• Holiday Inn Express
• Staybridge Suites
• Candlewood Suites

The mission of the IAHI, as it stated on their site, is to operate an association of hotel owners and operators that create a multi-level forum for exchange of information, ideas and best practices between franchisees and IHG company executives. As a result of this process owners and operators will enhance the value of their license agreement and IHG executives will gain insight to better achieve company goals. 
The International Association of Holiday Inns Owners’ Association is focused on 3 main objectives to help promote members’ long-term interests:

• Increasing hotel revenues and market share growth.
  
• Achieving earnings before interests and taxes, operating profit, and return on investment that surpasses the competitive set for each brand.
  
• Creating long-term brand and hotel asset value through excellent brands, quality operations, superior marketing, and team member development.
  

The International Association of Holiday Inns Owners’ Association also effectively represents members’ interests to the broader hotel industry on legislative issues, along with vendors and other resources, helping to achieve the objectives outlined above.
 The organization that shares the experience, promotes franchisees, teaches them is the key factor of Holiday Inn’s success. It makes entrepreneurs feel comfortable within the franchise system. It provides a kind of support to franchisees even if it has to lobby their interests through franchisor. As a result people are willing to invest large amounts of money (Holiday Inn franchisee’s total investment differs from 1 to 10 million dollars) in this business providing it by an extremely quick development.

When starting a new company or buying a franchise business everybody needs to make an important decision about the size of the prospective firm. Certainly it depends on the sphere of business, on franchise agreement, on the money you are going to invest and so on. But it is a good idea to think about the benefits that you can get if government officials will consider your company a representative of small business. As you may know there is a set of privileges or special conditions for small business firms. Government helps them to obtain loans on better conditions, protects their economic and juridical rights, and so on. But how to know whether the new company is eligible for all that privileges? I’m going to answer this question here.
 
The first thing that determines the company’s status is its legal position. The firm can considered a representative of small business when it is independently owned and operated and not dominant in its field of operation.
 
The second thing concerns size of the company. The SBA (Small Business Administration) has developed size standards that define the maximum size of an eligible small business. They vary by industry, and in some cases they depend on the number of employees but for other industries the size standards are determined in millions of dollars. I summarized these standards below:
 
Agriculture, Forestry, Fishing and Hunting (including Crop Production, Animal Production) – max $0.75 millions of dollars
Agriculture, Forestry, Fishing and Hunting (including Timber Tract Operations, Forest Nurseries and Gathering of Forest Products, Support Activities for Agriculture and Forestry) - max  $6.5 millions of dollars
Agriculture, Forestry, Fishing and Hunting (only Logging) – max 500 employees
Agriculture, Forestry, Fishing and Hunting (including Fishing, Hunting and Trapping) - max  $4.0 millions of dollars
Agriculture, Forestry, Fishing and Hunting (including Forest Fire Suppression and Fuels Management Services) - max  $16.5 millions of dollars
 
Mining (including Oil and Gas Extraction, Mining (except Oil and Gas), Drilling Oil and Gas Wells) – max 500 employees
Mining (including Support Activities for Oil and Gas Operations, Support Activities for Coal Mining, for Metal Mining, for Nonmetallic Minerals (except Fuels) - max  $6.5 millions of dollars
 
Utilities (Hydroelectric and Fossil Fuel Power Generation, Nuclear Electric and Other Power Generation, Electric Bulk Power Transmission and Control, Electric Power Distribution) - a company is considered small if it is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale and its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.
Natural Gas Distribution– max 500 employees
Water Supply and Irrigation Systems and Sewage Treatment Facilities - max  $6.5 millions of dollars
Steam and Air-Conditioning Supply - max  $11.5 millions of dollars
 
Construction (including Construction of Buildings and Heavy and Civil Engineering Construction except Land Subdivision and Dredging and Surface Cleanup Activities) - max  $31.0 millions of dollars
Land Subdivision - max  $6.5 millions of dollars
Dredging and Surface Cleanup Activities - a company must perform at least 40% of the volume dredged with its own equipment or equipment owned by another small dredging concern.
Specialty Trade Contractors - max $13.0 millions of dollars
 
Food Manufacturing (except some industries mentioned below) - max 500 employees
Food Manufacturing (including Wet Corn Milling, Cane Sugar Refining, Beet Sugar Manufacturing, Cookie and Cracker Manufacturing) - max 750 employees
Food Manufacturing (including Specialty Canning, Breakfast Cereal Manufacturing, Fats and Oils Refining and Blending) - max 1000 employees
Soft Drink and Bottled Water Manufacturing, Ice Manufacturing, Breweries, Wineries, Tobacco Stemming and Redrying, Other Tobacco Product Manufacturing - max 500 employees
Distilleries - max 750 employees
Cigarette Manufacturing - max 1000 employees
 
Textile Manufacturing (except mentioned below)  - max 500 employees
Broadwoven Fabric Mills, Fabric Coating Mills, Tire Cord and Tire Fabric Mills - max 1000 employees
 
Apparel Manufacturing  - max 500 employees
Leather and Allied Product Manufacturing (except Rubber and Plastics Footwear Manufacturing)- max 500 employees
Rubber and Plastics Footwear Manufacturing - max 1000 employees
Wood Product Manufacturing- max 500 employees
 
Paper Manufacturing (including Pulp Mills, Paper and Paperboard Mills, Folding Paperboard Box Manufacturing, Non-Folding Sanitary Food Container Manufacturing) - max 750 employees
Paper Manufacturing (including Corrugated and Solid Fiber Box Manufacturing, Setup Paperboard Box Manufacturing, Fiber Can, Tube, Drum, and Similar Products Manufacturing, Coated and Laminated Packaging Paper and Plastics Film Manufacturing, Coated and Laminated Paper Manufacturing, Plastics, Foil, and Coated Paper Bag Manufacturing, Uncoated Paper and Multi-wall Bag Manufacturing, Laminated Aluminum Foil Manufacturing for Flexible Packaging Uses, Surface-Coated Paperboard Manufacturing, Die-Cut Paper and Paperboard Office Supplies Manufacturing, Envelope Manufacturing, Stationery, Tablet, and Related Product Manufacturing, Sanitary Paper Product Manufacturing, All Other Converted Paper Product Manufacturing) - max 500 employees
 
Printing and Related Support Activities - max 500 employees
 
Petroleum Refineries - the petroleum refinery company must be a concern that has no more than 1500 employees nor more than 125,000 barrels per calendar day total Operable Atmospheric Crude Oil Distillation capacity.
Asphalt Paving Mixture and Block Manufacturing, Petroleum Lubricating Oil, Grease and All Other Petroleum and Coal Products Manufacturing - max 500 employees
Asphalt Shingle and Coating Materials Manufacturing - max 750 employees
 
Chemical Manufacturing (including Petrochemical, Industrial Gas, Inorganic Dye and Pigment and Alkalis and Chlorine Manufacturing, Ethyl Alcohol and All Other Basic Organic Chemical Manufacturing, Synthetic Rubber, Cellulosic Organic Fiber, Noncellulosic Organic Fiber and Nitrogenous Fertilizer Manufacturing) - max 1000 employees
Chemical Manufacturing (including Synthetic Organic Dye and Pigment Manufacturing, Cyclic Crude and Intermediate Manufacturing, Plastics Material and Resin Manufacturing, Medicinal, Botanical and Pharmaceutical Preparation Manufacturing, Soap another Detergent Manufacturing, Explosives Manufacturing) - max 750 employees
Chemical Manufacturing (including Carbon Black, Gum and Wood Chemical Manufacturing, Fertilizer Manufacturing, Pesticide and Other Agricultural Chemical Manufacturing, In-Vitro Diagnostic Substance Manufacturing, Biological Product (except Diagnostic) Manufacturing, Paint, Coating and Adhesive Manufacturing, Polish and Other Sanitation Good Manufacturing, Surface Active Agent and Toilet Preparation Manufacturing, Printing Ink, Photographic Film, Paper, Plate and Chemical and All Other Miscellaneous Chemical Product and Preparation Manufacturing, Photographic Film, Paper, Plate and Chemical Manufacturing) - max 500 employees
 
Plastics and Rubber Products Manufacturing (except Tire Manufacturing) - max 500 employees
Tire Manufacturing- max 1000 employees
 
Nonmetallic Mineral Product Manufacturing (including Flat Glass and Gypsum Product Manufacturing) - max 1000 employees
Nonmetallic Mineral Product Manufacturing (including Vitreous China Plumbing Fixture and China and Earthenware Bathroom Accessories Manufacturing,  Nonclay Refractory Manufacturing, Other Pressed and Blown Glass and Glassware Manufacturing, Glass Container and Cement Manufacturing, Mineral Wool Manufacturing) - max 7500 employees
Nonmetallic Mineral Product Manufacturing (including Vitreous China, Fine Earthenware and Other Pottery Product Manufacturing, Porcelain Electrical Supply and Brick and Structural Clay Tile Manufacturing, Ceramic Wall and Floor Tile and Other Structural Clay Product Manufacturing, Clay Refractory Manufacturing, Glass Product Manufacturing Made of Purchased Glass, Ready-Mix Concrete, Concrete Block and Brick, Concrete Pipe and Other Concrete Product Manufacturing, Lime Manufacturing, Abrasive Product Manufacturing, Cut Stone and Stone Product Manufacturing, Ground or Treated Mineral and Earth Manufacturing, All Other Miscellaneous Nonmetallic Mineral Product Manufacturing) - max 500 employees
 
Primary Metal Manufacturing (including Iron and Steel Mills, Iron and Steel Pipe and Tube Manufacturing from Purchased Steel, Cold-Rolled Steel Shape Manufacturing, Steel Wire Drawing, Aluminum Refining, Primary Aluminum Production, Primary Smelting and Refining of Copper, Copper Wire (except Mechanical) Drawing) - max 1000 employees
Primary Metal Manufacturing (including Electrometallurgical Ferroalloy Product Manufacturing, Secondary Smelting and Alloying of Aluminum, Aluminum Sheet, Plate and Foil Manufacturing, Aluminum Extruded Product Manufacturing, Other Aluminum Rolling and Drawing, Primary Smelting and Refining of Nonferrous Metal, Copper Rolling, Drawing and Extruding, Secondary Smelting, Refining, and Alloying of Copper, Nonferrous Metal (except Copper and Aluminum) Rolling, Drawing and Extruding Secondary Smelting, Refining, and Alloying of Nonferrous Metal (except Copper and Aluminum) - max 750 employees
Primary Metal Manufacturing (including Iron Foundries, Steel Foundries, Aluminum Die-Casting Foundries, Nonferrous (except Aluminum) Die-Casting Foundries, Aluminum, Copper and Other Nonferrous Foundries (except Die-Casting) - max 500 employees
 
Fabricated Metal Product Manufacturing - max 500 employees (except the industries mentioned below)
Enameled Iron and Metal Sanitary Ware Manufacturing,  Ball and roller Bearing Manufacturing, Metal Heat Treating - max 750 employees
Metal Can Manufacturing, Small Arms Ammunition and Small Arms Manufacturing - max 1000 employees
Ammunition (except Small Arms) Manufacturing - max 1500 employees
 
Machinery Manufacturing - max 500 employees (except the industries mentioned below)
Construction Machinery Manufacturing, Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing, Industrial Truck, Tractor, Trailer and Stacker Machinery Manufacturing - max 750 employees
 Turbine and Turbine Generator Set Unit Manufacturing, Office Machinery Manufacturing - max 1000 employees
 
Computer and Electronic Product Manufacturing (including Manufacturing of Electronic Computers, Computer Storage Devices, Computer Terminals, Other Computer Peripheral Equipment, Telephones, Magnetic and Optical Recording Media) - max 1000 employees
Computer and Electronic Product Manufacturing (including Radicand Television Broadcasting and Wireless Communications Equipment and Other Communications Equipment Manufacturing, Audio and Video Equipment Manufacturing, Electron Tube Manufacturing, Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing, Prerecorded Compact Disc (except Software), Tape, and Record Reproducing) - max 750 employees
Computer and Electronic Product Manufacturing (including Software Reproducing, Bare Printed Circuit Board and  Semiconductor and Related Device Manufacturing, Electronic Capacitor and Electronic Resistor Manufacturing, Electronic Coil, Transformer, and Other Inductor Manufacturing,  Electronic Connector Manufacturing, Other Electronic Component Manufacturing, Electromedical and Electrotherapeutic Apparatus Manufacturing, Automatic Environmental Control Manufacturing for Residential, Commercial and Appliance Use, Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables, Totalizing Fluid Meter and Counting Device Manufacturing, Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals, Analytical Laboratory Instrument Manufacturing, Irradiation Apparatus Manufacturing, Watch, Clock, and Part Manufacturing, Other Measuring and Controlling Device Manufacturing) - max 500 employees
 
Electrical Equipment, Appliance and Component Manufacturing (including Electric Lamp Bulb and Part Manufacturing,  Household Refrigerator and Home Freezer Manufacturing, Household Laundry Equipment Manufacturing, Motor and Generator Manufacturing,  Primary Battery, Fiber Optic Cable and Other Communication and Energy Wire Manufacturing) - max 1000 employees
Electrical Equipment, Appliance and Component Manufacturing (including Electric Housewares and Household Fan Manufacturing, Household Vacuum Cleaner and Cooking Appliance Manufacturing, Power, Distribution and Specialty Transformer Manufacturing, Switchgear and Switchboard Apparatus Manufacturing, Relay and Industrial Control Manufacturing, Carbon and Graphite Product Manufacturing) - max 750 employees
Electrical Equipment, Appliance and Component Manufacturing (including Residential Electric Lighting Fixture, Commercial, Industrial and Institutional Electric Lighting Fixture Manufacturing, Other Lighting Equipment Manufacturing, Storage Battery Manufacturing, Current-Carrying Wiring Device Manufacturing,  Noncurrent-Carrying Wiring Device and All Other Miscellaneous Electrical Equipment and Component Manufacturing) - max 500 employees
 
Transportation Equipment Manufacturing (including Aircraft Manufacturing) - max 1500 employees
Transportation Equipment Manufacturing (including Automobile, Light Truck and Utility Vehicle Manufacturing, Heavy Duty Truck and Motor Vehicle Body Manufacturing, Motor Home Manufacturing, Aircraft Engine and Engine Parts Manufacturing, Other Aircraft Part and Auxiliary Equipment Manufacturing, Guided Missile and Space Vehicle Manufacturing, Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing,  Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing, Railroad Rolling Stock Manufacturing,  Ship Building and Repairing, Military Armored Vehicle, Tank and Tank Component Manufacturing) - max 1000 employees
Transportation Equipment Manufacturing (including Gasoline Engine and Engine Parts Manufacturing, Other Motor Vehicle Electrical and Electronic Equipment Manufacturing, Motor Vehicle Steering and Suspension Components (except Spring) Manufacturing, Motor Vehicle Brake System Manufacturing, Motor Vehicle Transmission and Power Train Parts Manufacturing, Motor Vehicle Air-Conditioning and All Other Motor Vehicle Parts Manufacturing) - max 750 employees
Transportation Equipment Manufacturing (including Truck Trailer, Travel Trailer and Camper Manufacturing, Carburetor, Piston, Piston Ring and Valve Manufacturing, Vehicular Lighting Equipment Manufacturing, Motor Vehicle Seating and Interior Trim Manufacturing, Motor Vehicle Metal Stamping,  Boat Building, Motorcycle, Bicycle and Parts and All Other Transportation Equipment Manufacturing) - max 500 employees
 
Furniture and Related Product Manufacturing and Miscellaneous Manufacturing - max 500 employees
 
Wholesale Trade - max 100 employees
Retail Trade – max $26.5 – $6.5 millions of dollars (see below)
New Car Dealers - max $26.5 millions of dollars
Supermarkets and Other Grocery (including Convenience) Stores, Gasoline Stations with Convenience Stores, General Merchandise Stores - max $25.0 millions of dollars
Nonstore Retailers (including Electronic Shopping, Electronic Auctions, Mail-Order Houses) - max $23.0 millions of dollars
Used Car Dealers - max $21.0 millions of dollars
Manufactured (Mobile) Home Dealers - max $12.0 millions of dollars
Heating Oil Dealers - max $11.5 millions of dollars
Aircraft Retail Dealers - max $9.0 millions of dollars
Gasoline Stations, Men’s, Women’s and Family Clothing Stores, Shoe Stores - max $8.0 millions of dollars
Electronics and Appliance Stores - max $8.0 but $6.5 millions of dollars for Camera and Photographic Supplies Stores
Recreational Vehicle Dealers, Motorcycle and Boat Dealers, All Other Motor Vehicle Dealers, Furniture and Home Furnishings Stores, Building Material and Garden Equipment and Supplies Dealers – max $6.5 millions of dollars
Meat Markets, Fish and Seafood Markets, Fruit and Vegetable Markets, Baked Goods Stores, Confectionery and Nut Stores, All Other Specialty Food Stores, Beer, Wine and Liquor Stores and Health and Personal Care Stores - max $6.5 millions of dollars
Children’s and Infants’ Clothing Stores, Clothing Accessories and Other Clothing Stores, Jewelry Stores, Luggage and Leather Goods Stores, Sporting Good, Hobby, Book and Music Stores - max $6.5 millions of dollars
Florists, Office Supplies and Stationery Stores, Gift, Novelty and Souvenir Stores, Used Merchandise Stores, Pet and Pet Supplies Stores, Art Dealers, Tobacco Stores, All Other Miscellaneous Store Retailers (except Tobacco Stores), Liquefied Petroleum Gas (Bottled Gas) Dealers, Other Fuel Dealers, Other Direct Selling Establishments - max $6.5 millions of dollars
 
Air Transportation (including Scheduled Passenger Air Transportation, Scheduled Freight Air Transportation, Nonscheduled Chartered Passenger Air Transportation, Nonscheduled Chartered Freight Air Transportation) - max 1500 employees
Offshore Marine Air Transportation Services - max $25.5 millions of dollars
 Line-Haul Railroads - max 1500 employees
Short Line Railroads - max 500 employees
Water Transportation - max 500 employees
Truck Transportation - max $23.5 millions of dollars
Transit and Ground Passenger Transportation - max $6.5 millions of dollars
Pipeline Transportation of Crude Oil, Pipeline Transportation of Refined Petroleum Products  - max 1500 employees
Pipeline Transportation of Natural Gas - max $6.5 millions of dollars
All Other Pipeline Transportation - max $31.5 millions of dollars
Scenic and Sightseeing Transportation - max $6.5 millions of dollars
Support Activities for Transportation (including Port and Harbor Operations, Marine Cargo Handling, Non-Vessel Owning Common Carriers and Household Goods Forwarders, Packing and Crating) - max $23.5 millions of dollars
Support Activities for Transportation (including Air Traffic Control, Other Airport Operations, Other Support Activities for Air Transportation, Support Activities for Rail Transportation, Navigational Services to Shipping, Other Support Activities for Water Transportation, Motor Vehicle Towing, Other Support Activities for Road Transportation, Freight Transportation Arrangement, All Other Support Activities for Transportation) - max $6.5 millions of dollars
 
Local Messengers and Local Delivery, Warehousing and Storage - max $23.5 millions of dollars
Postal Service - max $6.5 millions of dollars
Couriers - max 1500 employees
 
Publishing Industries (except Internet) - max 1500 employees but for Software Publishers the standard is max $23.5 millions of dollars
 
Motion Picture and Video Production, Motion Picture and Video Distribution, Teleproduction and Other Postproduction Services - max $27.0 millions of dollars
Cable and Other Subscription Programming - max $13.5 millions of dollars
Television Broadcasting - max $13.0 millions of dollars
Motion Picture Theaters (except Drive-Ins), Drive-In Motion Picture Theaters, Other Motion Picture and Video Industries, Record Production, Sound Recording Studios, Other Sound Recording Industries, Radio Networks, Radio Stations - max $6.5 millions of dollars
Integrated Record Production/Distribution - max 750 employees
Music Publishers, Internet Publishing and Broadcasting - max 500 employees
 
Telecommunications (including Wired Telecommunications Carriers, Paging, Cellular and Other Wireless Telecommunications, Telecommunications Resellers) - max 1500 employees
Telecommunications (including Satellite Telecommunications, Cable and Other Program Distribution, Other Telecommunications) - max $13.5 millions of dollars
 
 Internet Service Providers, Data Processing, Hosting, and Related Services - max $23.0 millions of dollars
Web Search Portals and Other Information Services - max $6.5 millions of dollars
 
Credit Intermediation and Related Activities (including Commercial Banking, Savings Institutions, Credit Unions, Other Depository Credit Intermediation, Credit Card Issuing, International Trade Financing) – max $165 million in assets. A financial institution’s assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.
Credit Intermediation and Related Activities (including Sales Financing, Consumer Lending, Real Estate Credit, Secondary Market Financing, All Other Non-Depository Credit Intermediation, Mortgage and Nonmortgage Loan Brokers, Financial Transactions Processing, Reserve, and Clearing House and Other Activities Related to Credit Intermediation) - max $6.5 millions of dollars
Financial Investments and Related Activities, Insurance Carriers and Related Activities, Funds, Trusts and Other Financial Vehicles - max $6.5 millions of dollars
 
Real Estate (including Lessors of Miniwarehouses and Self Storage Units) - max $23.5 millions of dollars
Real Estate (including Leasing of Building Space to Federal Government by Owners) - max $19.0 millions of dollars
Real Estate (including Lessors of Residential Buildings and Dwellings, Lessors of Nonresidential Buildings (except Miniwarehouses), Lessors of Other Real Estate Property)  - max $6.5 millions of dollars
Real Estate (including Offices of Real Estate Agents and Brokers, Residential Property Managers, Nonresidential Property Managers, Offices of Real Estate Appraisers, Other Activities Related to Real Estate) - max $2.0 millions of dollars
 
Rental and Leasing Services (including Passenger Car Rental, Passenger Car Leasing, Truck, Utility Trailer, and RV (Recreational Vehicle) Rental and Leasing, Office Machinery and Equipment Rental and Leasing) - max $23.5 millions of dollars
Rental and Leasing Services (including Consumer Electronics and Appliances Rental, Formal Wear and Costume Rental, Video Tape and Disc Rental, Home Health Equipment Rental, Recreational Goods Rental, All Other Consumer Goods Rental, General Rental Centers, Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing, Construction, Mining and Forestry Machinery and Equipment Rental and Leasing, Other Commercial and Industrial Machinery and Equipment Rental and Leasing) - max $6.5 millions of dollars
 
Professional, Scientific and Technical Services (including Custom Computer Programming Services, Computer Systems Design Services, Computer Facilities Management Services, Other Computer Related Services) - - max $23.0 millions of dollars
Testing Laboratories - max $11.0 millions of dollars
Professional, Scientific and Technical Services (including Offices of Certified Public Accountants, Payroll Services, Other Accounting Services) - max $7.5 millions of dollars
 
Professional, Scientific and Technical Services (including Offices of Lawyers, Title Abstract and Settlement Offices, All Other Legal Services, Tax Preparation Services, Landscape Architectural Services, Drafting Services, Building Inspection Services, Interior Design Services, Industrial Design Services, Graphic Design Services, Other Specialized Design Services, Administrative Management and General Management Consulting Services, Human Resources and Executive Search Consulting Services, Marketing Consulting Services, Process, Physical Distribution and Logistics Consulting Services, Other Management Consulting Services, Environmental Consulting Services, Other Scientific and Technical Consulting Services, Research and Development in the Social Sciences and Humanities, Advertising Agencies, Public Relations Agencies, Media Buying Agencies, Media Representatives, Display Advertising, Direct Mail Advertising, Advertising Material Distribution Services, Other Services Related to Advertising, Marketing Research and Public Opinion Polling, Photography Studios, Portrait, Commercial Photography, Translation and Interpretation Services,  Veterinary Services, All Other Professional, Scientific and Technical Services) - max $6.5 millions of dollars
 
Professional, Scientific and Technical Services (including Architectural Services, Engineering Services, Map Drafting, Geophysical Surveying and Mapping Services, Surveying and Mapping Services) - max $4.5 millions of dollars
Research and Development in the Physical, Engineering, and Life Sciences - max 500 employees
Information Technology Value Added Resellers - max 150 employees
 
Management of Companies and Enterprises - max $6.5 millions of dollars
 
Administrative and Support Services (including Facilities Support Services) - max $32.5 millions of dollars
Administrative and Support Services (including Janitorial Services) - max $15.0 millions of dollars
Administrative and Support Services (including Temporary Help Services, Employee Leasing Services) - max $12.5 millions of dollars
Administrative and Support Services (including Investigation Services, Security Guards and Patrol Services, Armored Car Services, Security Systems Services (except Locksmiths) - max $11.5 millions of dollars
Administrative and Support Services (including Office Administrative Services, Employment Placement Agencies, Document Preparation Services, Telephone Answering Services, Telemarketing Bureaus, Private Mail Centers, Other Business Service Centers (including Copy Shops), Collection Agencies, Credit Bureaus, Repossession Services, Court Reporting and Stenotype Services, All Other Business Support Services, Tour Operators, Convention and Visitors Bureaus, All Other Travel Arrangement and Reservation Services,  Locksmiths, Exterminating and Pest Control Services, Landscaping Services,  Other Services to Buildings and Dwellings, Packaging and Labeling Services, Convention and Trade Show Organizers, All Other Support Services) - max $6.5 millions of dollars
Administrative and Support Services (including Carpet and Upholstery Cleaning Services) - max $4.5 millions of dollars
Administrative and Support Services (including Travel Agencies) - max $4.5 millions of dollars
 
Remediation Services - max $13.0 millions of dollars
Solid Waste Collection, Hazardous Waste Collection, Other Waste Collection, Hazardous Waste Treatment and Disposal, Solid Waste Landfill, Solid Waste Combustors and Incinerators, Other Nonhazardous Waste Treatment and Disposal, Materials Recovery Facilities - max $11.5 millions of dollars
Septic Tank and Related Services, All Other Miscellaneous Waste Management Services - max $6.5 millions of dollars
 
Educational Services - max $6.5 millions of dollars
Ambulatory Health Care Services (including Kidney Dialysis Centers, Hospitals) - max $31.5 millions of dollars
Ambulatory Health Care Services (including Medical Laboratories, Diagnostic Imaging Centers, Home Health Care Services) - max $12.5 millions of dollars
Ambulatory Health Care Services (including Offices of Physicians, Mental Health Specialists, Family Planning Centers, Outpatient Mental Health and Substance Abuse Centers, HMO Medical Centers, Freestanding Ambulatory Surgical and Emergency Centers, All Other Outpatient Care Centers, Blood and Organ Banks, All Other Miscellaneous Ambulatory Health Care Services) - max $9.0 millions of dollars
Ambulatory Health Care Services (including Offices of Dentists, Offices of Chiropractors, Offices of Optometrists, Offices of Mental Health Practitioners (except Physicians), Offices of Physical, Occupational and Speech Therapists and Audiologists, Offices of Podiatrists, Offices of All Other Miscellaneous Health Practitioners, Ambulance Services) - max $6.5 millions of dollars
 
Nursing Care Facilities, Continuing Care Retirement Communities - max $12.5 millions of dollars
Residential Mental Retardation Facilities - max $9.0 millions of dollars
Residential Mental Health and Substance Abuse Facilities, Homes for the Elderly, Other Residential Care Facilities, Social Assistance - max $6.5 millions of dollars
 
Arts, Entertainment and Recreation - max $6.5 millions of dollars
Accommodation (including Hotels (except Casino Hotels) and Motels, Casino Hotels, Bed and Breakfast Inns, All Other Traveler Accommodation, RV (Recreational Vehicle) Parks and Campgrounds, Recreational and Vacation Camps (except Campgrounds), Rooming and Boarding Houses) - max $6.5 millions of dollars
Food Services and Drinking Places - max $6.5 millions of dollars but $19.0 millions of dollars for Food Service Contractors
Repair and Maintenance - max $6.5 millions of dollars (but Computer and Office Machine Repair and Maintenance - max $23.0 millions of dollars
 
Personal and Laundry Services (including Linen Supply, Industrial Launderers) - max $13.0 millions of dollars
Personal and Laundry Services (including Barber Shops, Beauty Salons, Nail Salons, Diet and Weight Reducing Centers, Other Personal Care Services, Funeral Homes and Funeral Services, Cemeteries and Crematories, Coin-Operated Laundries and Drycleaners, Pet Care (except Veterinary) Services, Photo Finishing Laboratories (except One-Hour), One-Hour Photo Finishing, Parking Lots and Garages, All Other Personal Services) - max $6.5 millions of dollars
Personal and Laundry Services (including Dry-cleaning and Laundry Services (except Coin-Operated) - max $4.5 millions of dollars
 
Religious, Grantmaking, Civic, Professional and Similar Organizations - max $6.5 millions of dollars
 
If a potential borrower is close to these standards, size eligibility should be discussed with the local SBA office. Also note that the standards for a particular business may change from time to time and some exceptions do apply.
 
Uhhhh… I’m done with this…It took much more time when I thought at the beginning.

While searching the Internet for interesting information about franchising to share with the readers of my blog I found an outstanding idea that had been realized by the company called Entrepreneur’s Source. They managed to create their franchise business helping others to start-up and operate franchise businesses. I understood that I had to write about it.

The business system created by Entrepreneur’s Source can be divided into 2 parts (as I understood from the information in their web site). On the one hand they work with the companies that already have their business systems. The company offers its clients to expand their operations through creating a franchise system for their business. I really liked the way they present the idea. They explain that they are not consultants but coachers for their clients. They say that every person tries to decrease or avoid risk. It’s natural. And they promise their clients to help to decrease a business risk. Based on their experience the Entrepreneur’s Source is going to train their customers how to swim in a seethed and sudden water of business-sea. They use the idea of coaching comparing their service with the process of teaching to read. On their web site they ask a question: Did You Teach Yourself to Read?
As a sports coach develops an individual training program for each sportsman, Entrepreneur’s Source develop a franchise program for the clients taking into consideration all individual peculiarities. Their package of services includes:
1. Feasibility assessment. Analytics of Entrepreneur’s Source determine if business is franchisable in general.
2. Business plan. They create a document answering marketing, production, and organizational and financial questions concerning prospective franchise business.
3. Raising capital. They help in creation documents and calculations necessary to obtain an external financing.
4. Regulatory compliance. They check if the franchise system and all documents (including disclosure and agreements) meet all the legislative requirements.
5. Marketing & advertising. Well-developed promotion program is a key feature of any franchise system.
6. Lead generation and candidate qualification.
7. Expansion plans
8. And much more …

On the other hand Entrepreneur’s Source deals with those thinking to start-up their business. And they attract prospective franchisees not only for the franchisors mentioned above but also for themselves. Yes, before they decided to earn money while helping others to start-up franchise business (as franchisor or franchisee) they created such system for their own company. And it gave them the experience on how to qualify candidates in order to choose appropriate ones. Now they use the following scheme: they don’t use contract employees to run their satellite offices, but open each new office as a franchised business. The royalty payment is 25%, and Entrepreneur’s Source franchisees pay it from every placement fee – the money received from franchisor when the company places a candidate.

As for me I really liked this idea. The only negative thing in this business is concerned the money that prospective or existing franchisor has to pay to this consulting company. I haven’t found the exact information on the company’s web site, but the other sources say that your franchisor pays them a commission, typically 30% to 75% of the franchise fee. Certainly it is a trade-off. You can set-up your business system yourself or turn to professionals. In the latter case it will cost you and your potential franchisees, as you’ll have to increase the initial fee to cover the consulting costs.

Starting your business while singing a franchise agreement has many advantages over starting a company yourself. It is easier, it takes less time and you can get help and support from more experienced partner (the main company). But not so many people decide to buy a franchise license. I think that one of the main reasons for this is initial fee that a potential franchisee needs to pay to franchisor.
Today I want to say a few words expressing my opinion regarding why the franchise fee is so high. My observations are based on the following statistics given by the leaders of some franchises:
“Ron Eriksen, the vice president of market development for the Baby’s Room USA Inc., Elmhurst, Ill., provides the following facts: last year the company sends out 775 four-color brochures by Priority Mail costs $14. Only 6 percent of those recipients sent back a preliminary application form; 1.8 percent of the 775 became new Baby’s Room franchisees”.
My calculations and comments:
It means that the company spent $10,850 only for colorful brochures and received only 14 new franchisees (775 requests multiplied by 1.8 percent). So only to get the money back the Baby’s Room USA Inc. has to increase the franchise fee by $775. Is it fair? Maybe franchisee will say no because nobody wants to pay for the others who decided not to become franchisees of that company. But it’s absolutely fair from franchisors point of view.

“Steven Romaniello, president and chief operating officer of US Franchise Systems Inc., in Atlanta, says that his hotel company spends $50,000 on promotion and recruitment efforts for each franchisee who eventually buys a Days Inn, Microtel or Hawthorn Suites franchise”.
No comments needed. Even if franchisor decides to cover a part of this sum himself (let’s say 50 percent) the other part has to be included into the initial fee. The other part will be received by franchisor later in the form of royalty payments. By the way this can explain why sometimes royalty is greater than the cost of current support provided to franchisee: franchisor tries to cover some earlier expenditures.
Greg Longe, president of the Molly Maid and Mr. Handyman franchise systems in Ann Arbor, Mich., says, “Our Internet leads are way up this year, but all that means is that we have to do a lot more work to generate a solid candidate. Most of the people we’re hearing from aren’t qualified to run our concept.”
My comments:
When he says “a lot more work to generate a solid candidate” he speaks about people who will do this work. Company needs to hire qualified manager (or even managers) to deal to convert at least some of the leads to new franchisees. Company bears the costs of salary, Internet and phone communications, and many others dedicated to manager’s work. And as every cost it will increase the final price. In our case it will increase the initial fee in the start-up period or royalty during the operational period.

And initial fee includes not only advertising and recruitment costs. In most cases the main company provides training for the chief manager or key personnel of new franchisee. To do this they need to pay to trainers, to buy some stuff (like materials, paper and so on)…
Thinking about all that things I came to the conclusion that low initial franchise fee can be a bad sign (not “is” but “can be”). Certainly it depends on business sphere and region or country. But at least it’s a point to think over one more time whether to sing a franchise agreement with a company that sells its idea for the price that doesn’t cover the costs. It may seem strange…

Usually a prospective businessman thinking about buying a franchise knows the business sphere to work in. In this case to choose the exact franchisor to sign the agreement he needs to check as many as possible different franchise listings. It can be very useful because new franchise opportunities appear almost every week. Every franchisor tries to offer something different, some advantages. Some provide everything for lower initial fee; the others agree to train not only you but your key stuff. The royalty payments also differ as well as franchisees’ compulsory contribution to an advertising fund.

So if you decide to save your time and to choose the first franchisor you came across in the business sphere you wanted to work in, you may miss the better opportunity. Time is money. Here it’s exactly so.

Where to find such listings? There are a lot of them in the Internet and you can also get an access to printed directories. They provide a good list of franchise business opportunities for different spheres: food franchise and retail business, business in Internet and different types of services from consulting to tourism and hotel business.

Rob Bond, publisher of Source Books, asserts that there are currently about 2,300 open franchise business opportunities in North America operating in more than 50 industries, from automotive products and services to travel. More than 25 different Internet sites provide directories of franchise companies. At least six publishers sell print directories. “Bond’s Franchise Guide 2001″ (Source Book Publications, 2001) provides in-depth profiles of the 1,200 or so companies that returned his questionnaire; and “Franchise Opportunities Guide” (International Franchise Association, 2000) cites the 800 franchisers that are members of the trade group International Franchise Association.

It’s necessary to remember that no single directory covers everything. It’s a good idea to read at least one on-line and one off-line listing.

Welcome to Wonderland! It can absolutely change your point of view and I hope make world better
OK, let’s imagine ourselves in Australia. Koala bears, platypuses and local circumstances cohabit with the lifestyle of United Kingdom and United States… And in 1946 two guys have decided to start a business there. They were going to produce and sell rubber strip matting and mats from transmission belt edges sourced from Dunlop Salvage. Nice idea, don’t you think so?
Anyway they did it and they called their company Clark Matting & Rubber.
They had been working for about 40 years. Nothing special… They earned some money I think.
But the business wasn’t too profitable as in 1982 the company was sold to The Adsteam Group.
The Adsteam Group tried to change the business but failed. So in 1990 they faced more difficulties and they decided to close the Clark Rubber retail operation.
Look, they couldn’t even find a buyer for that business. It was so nice business niche!
 

And now welcome to Wonderland.
In 1994 Chris Malcolm had taken a license of the Clark Rubber brands and decided to try franchise model to this business. The franchise system has absolutely changed the long-winded history of the company. No more time to think over. The pace of company development has increased drastically. In just 1 year there were 25 franchised stores. Five years later, Chris Malcolm purchased the Clark Rubber brands from its owner.
Let’s evaluate the achievements of the company highlighted at their internet site:
1998
Clark Rubber Franchising opens its 50th franchised store
1999
Winner of the Franchise Council of Australia’s Franchise System of the Year Award, Category Entry Capital over $200,000
2002
Highly Commended - ACA Australian Catalogue Award, Home Repairs and Outdoor Catalogue
2003
Chris Malcolm became one of the inaugural inductees in the FCA Hall of Fame
2003
Finalist in the FCA Franchisor Retail and Business Category. (21 - 100 Outlets)
2003
Certificate of Merit - Australian Catalogue Award, Amazing Christmas Catalogue
 

Today, Clark Rubber Franchising has 70 stores throughout Australia and is growing. Retail sales growth percentages have surpassed national averages year after year. Our high quality support services from our Franchise Support Office are constantly being refined and improved, with an intranet system making access to up to date information a breeze.
Clark Rubber recognizes that the success of any franchise system very much depends on the success of its franchisees and is full of praise for the enthusiasm, commitment and contribution made by the Clark Rubber Franchisees that have helped make this great Australian brand the success that it is.
 

Is there anybody going to argue my idea that franchise system could resurrect dead business?

Every loan is not more than a transaction between two parties. The first party is the lender (bank, financial institution, government authority and so on) another is the borrower (person, company, organization or institution). When people speak about obtaining a loan to start or expand a franchise business in most cases they consider the eligibility of their idea or business sphere to get a credit. But this is a two-way road. The franchisee needs to check the eligibility of the loan conditions to finance his/her idea. Today I’m going to write about the conditions of the Small Business Administration loans programs. I’ll tell you what they can provide you (what you have to provide them I described in my previous messages).

While thinking if the SBA programs are suitable for you the first thing to take into consideration is the maximum money you can obtain. The SBA’s 7(a) Loan Program limits the loan amount to a maximum of $2,000,000 dollars. But is doesn’t mean that you will get the Small Business Administration guaranty for the whole sum of loan. SBA’s maximum guaranty is $1,500,000. Thus, if a business managed to get the SBA guaranteed loan for $2,000,000 dollars, the maximum guaranty to the lender will be $1,500,000 or 75 percent.

The next thing is interest rate. It’s necessary to take it into consideration and to compare with other possible loans because interests will increase your company’s fixed costs.
As you can learn from my other articles dedicated to the SBA, this government institution doesn’t provide money itself but provides guaranties. It means that the interest rates are a subject to negotiations as regarding any other loan from commercial institution. But at the same time the Small Business Administration establishes maximums, which are pegged to the Prime Rate. This is one of their instruments of small business support.
In most case the interest rate is fixed (it’s easier to calculate I think) and it depends on the amount of loan and its maturity. Below you can see the table of possible fixed rates.

Loan amount Maturity Interest rate
$50,000 or more less than 7 years Prime Plus 2.25
$50,000 or more more than 7 years Prime Plus 2.75
$25,000 - $50.000 less than 7 years Prime Plus 3.25
$25,000 - $50.000 more than 7 years Prime Plus 3.75
$25,000 or less less than 7 years Prime Plus 4.25
$25,000 or less more than 7 years Prime Plus 4.75

Sometimes financial institutions use variable rate loans. The formula to calculate the interest rate is rather complicated. It uses the fixed rates presented above and rates the federal government pays for loans. It means that this rate is more adjusted to the economic changes like inflation, recourses’ prices, stock market situation and government monetary and fiscal policy. The rate can change not often than monthly and must be consistent (calculated on either monthly, quarterly, semiannually, annually or any other defined, consistent basis). So in the case of variable interest rate the lender and the borrower negotiate the amount of the spread that will be added to the base rate.
It’s also should be mentioned that SBA strictly prohibits the majority of the fees of SBA loan applicants.
And there’s one more thing that should be taken into consideration. It’s the prepayment penalty.
SBA loans that have the maturity 15 years or more and the prepayment amount is over 25 percent of the whole amount and the prepayment is made within the first three years are charged the penalty.
It could be calculated this way: 5% during the first year, 3% during the second year or 1% during the third year after disbursement.
This information is enough to estimate whether you are capable to receive the SBA loan and whether you need it.

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