Street Smart Franchising

September 16th, 2006

FOR IMMEDIATE RELEASE
CONTACT: Erika Sumner, PR by the Book, (281) 895-7190, erika@prbythebook.com 

Is Opening a Franchise for You? Find out with Street Smart Franchising
Franchising represents more than 10% of the private sector economy and 14% of the jobs 

(CONNECTICUT) If you’re looking to have your own fast food franchise, here’s a typical scenario. You will have to have $175,000 that isn’t borrowed, provide 40% of the funds (also not borrowed) it takes to open the restaurant which can range from $400,000 to $750,000, and find a profitable location. Due to the complication of the franchise game, Joe Mathews, Don DeBolt and Deb Percival pulled their expertise in their new book, Street Smart Franchising (Entrepreneur Press, July 2006). It does what other franchising books won’t-it reveals the challenges within the franchise game using rare stories taken straight from the trenches. 

In the U.S. alone, there are an estimated 2000 different franchisors as well as more than 770,000 retail outlets. These retail outlets employ over 8 million people, and account for more than 1 trillion dollars in annual sales. Mathews, DeBolt and Percival offer an in-depth look into what happens during the investigation and ramp up of a franchise business as well as “real world” tactics and strategies for succeeding in franchising. They also demonstrate how humanity impacts franchising. For instance, most entrepreneurs naturally resist external controls and systems, meaning the people most likely to purchase a franchise are least likely to follow the system they just invested in. 

What makes Street Smart Franchising most unique is the fact that it offers “street smarts” as opposed to “book smarts.” Mathews and DeBolt realize that what’s taught in the classroom doesn’t always work in real life. Case studies can’t help a franchisee when they awaken at 1 o’clock in the morning for the third sleepless night in a row because they are consumed by the stress of a start up business. However, a franchisee can pick up Street Smart Franchising and discover high stress and loss of sleep is normal and temporary in the start up stage of the life cycle of their business as well as find successful strategies for managing stress during this critical stage and how to successfully navigate towards the next stage. 

Joe Mathews has worked as a franchising manager for Subway, Blimpie, Motophoto, and Entrepreneur Source. In 2002, Mathews founded the Franchise Performance Group and became a consultant, helping franchise companies excel in the business of franchising. Mathews resides in Connecticut with his wife and three children. He graduated with a Bachelor of Science in Marketing from the University of Connecticut. 

Don DeBolt is former president of the International Franchise Association (IFA), one of the world’s oldest and largest trade associations representing the franchise community. He has served as a member of the Committee of 100 and the Public Affairs Committee of the U.S. Chamber of Commerce; a member of the Department of Commerce’s Industry Sector Advisory Committee on Wholesaling and Retailing for Trade Policy Matters; sat on the board of directors of the Small Business Legislative Council and the National Cooperative Bank’s Retail Finance Corporation; and was a member of the National Congress for Community Economic Development Advisory Council. 

Deb Percival works in franchise development and has an extensive background in writing. Before joining the world of franchising she worked in marketing for 20 years, owning her own public relations firm for 12 of those years. Her clients have included national and international corporations and her writing has received numerous awards for content, clarity and originality.
For more information, check out www.FranchisePerformanceGroup.com. 

The other side

August 22nd, 2006

While surfing Internet I have met an article that made me overlook some of my views on franchise system.
It is called Marketing the Franchise and written by Edward N. Levitt, a franchise lawyer and partner with Gowling LaFleur Henderson LLP, who has over 30 years experience practicing franchise law, is a prolific writer, a noted lecturer and is currently General Counsel to the Canadian Franchise Association.
I used to consider franchises mostly from franchisees point of view. What should an entrepreneur do in order to find the right franchisor? What are the most thrilling franchise experiences in … (let’s say Australia)? What are the main rules to follow in order to be successful franchisee?
But franchise as any other system is a two-way highway. And franchisors also face a lot of problems during setting up and organizing a franchise system work.
Their problems are problems of other growth. Where should a company search for its franchisees? What are the criteria to choose the right guys to work with that business? How should business relationships be installed? Where are the responsibilities borders? What information and authority should be shared with franchisees? How should a company respond to improper franchisees?
All that topics are called franchise marketing. And a franchisor should be clear in his mind answering all that questions.
So the article is a must read to anyone thinking to install his own franchise system and highly recommended to anyone interested in franchises.

Business plan: enough for success?

August 17th, 2006

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 :-) .

What moves franchises and revolutions?

August 12th, 2006

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.

No more evil franchisee

August 9th, 2006

Franchise is evil.
At least officials of Village Board of New Paltz are thinking so. They decided to announce their village a franchise-free zone.
“We need to level the playing field,” Mayor Jason West said.
“We need to give those who do want to open local businesses some kind of a leg up,” he said. “It seems a simple way to do that is within the 1.7 square miles of the village (is to know) you’re not going to have to compete with that franchise that is doing bulk buying.”
So they are going to examine carefully all the cases of new business registrations in order to be sure that it’s not a franchise start-up. They are using a kind of formula to do this. A new business should not possess a “standardized menu or standardized array of merchandise with 50 percent or more of in-stock merchandise from a single distributor bearing uniform markings.” Other business features would include use of architecture, facade, or signage considered to be part of a “format which causes it to be substantially identical” to other businesses.
Anyway they think that a franchise business disturbs their local enterprises so they are not going to allow this happen.
Certainly they have to permit some franchises even to that area as there are businesses that couldn’t be performed locally. But the main rule applies:

NO MORE FRANCHISES.

By the way have you ever thought about franchise impact on your life? I’ve just copied the industries that possesses franchises from www.franchiseopportunities.com
You could fill these industries by franchises you know at your area.

Advertising
Direct Mail Advertising
Internet
Mobile Motion Advertising

Auto Products/Services
Detailing
Muffler and Brake Repair
Oil Change
Paint and Body Repair
Parts
Products
Radiator Service
Services
Transmission
Windshield Replacement/Repair

Beauty
Cosmetics
Hair
Tanning/Spas

Bridal
Accessories
Full Service

Business Opportunities
Dollar Stores
Home-Based
Internet
Publishing
Security
Tanning Beds/Pools/Spas
Vending

Business Services
Advertising Franchises
Brokers/Consultants
Business Consultant
Check Cashing
Collections
Commercial Cleaning
Direct Mail Advertising
Document Shredding
Embroidery
Employment/Staffing
Entertainment
Expense Reduction
Financial
Income Tax/Accounting
Insurance
Limo Services
Mail/Shipping/Packaging
Medical Billing
Mobile
Printing/Copying
Promotional Items
Publishing
Real Estate
Restoration
Sales/Marketing
Senior Care
Shipping/Transportation
Signs
Telecommunications
Training/Development

Child Related
Child Fitness Center
Child Party Franchises
Children’s Services
Children’s Clothing
Education

Cleaning/Maintenance
Automotive Services
Blind and Window
Carpet Cleaning
Commercial Cleaning
Drapery/upholstery cleaning
Food Service
Maid Services
Sanitation

Computer and Internet
Computer Internet
Computer Products
Computer Services
Computer Training
Internet Advertising
Internet Consulting/Training
Internet Service Providers
Mobile/Onsite
Website Design
 Financial Services

Check cashing
Pay day loans
Tax Preparation

Foods
Baked Goods
Bar Grill and Pubs
Cafe
Candy/Snacks
Chicken
Coffee/Espresso
Cookie
Energy Drinks
Fast Food/Take-Out
Foods Restaurants
Full Service Restaurants
Hamburger
Hot Dogs and Sausage
Ice Cream/Yogurt/Frozen
Italian
Juice Bar
Mexican
Pizza/Pasta
Sandwich/Delis
Seafood
Smoothies
Soups and Salads
Speciality Foods
Taco
Wings
Wraps

Health/Fitness
Hair/Beauty
Health/Diet/Fitness
Lady Fitness
Medical/Dental/Optical
Nutrition
Tanning
Weight Loss

Home/Mobile Services
Advertising Services
Air Purification
Appliance Repair
Automotive Services
Business services
Cabinet Refinishing
Carpet Cleaning
Closet Organization
Debt Consolidation
Decoration/Remodel
Delivery Services
Drapery/upholstery cleaning
Environmental
Food delivery
Garage
Glass/window replacement
Handyman
Pets
Home based
Home Improvement
Home Inspection
HVAC
Lawn/Landscape
Maid Service
Moving/Storage
Outdoor Lighting
Painting
Pest Control
Photography/Video
Plumbing Services
Propane
Real Estate
Sanitation
Security Systems/Alarms
Senior Care
Sports & Recreation
Storage/moving
Surface Restoration
Tools and Equipments
Water Treatment

Lodging
Hotels/Motels

Manufacturing
Home Furnishings
Homes
Manufacturing
Mattresses
Signs

Pet Related
Kennel
Pets Training
Retail

Photography/Video
Products
Services

Real Estate
Agencies
By Owner

 Restoration
Fire/Smoke Damage
Floor
Surface

Retail
Arts/Crafts/Framing
Auto/Truck/Trailer Rental
Automotive Services
Beauty
Blind and Shutter
Business Services
Cellular Phone
Clothing/Apparel
Convenience Stores
Dollar Store
eBay drop off stores
Embroidery
Flooring
Flowers
Furniture/Furnishings
Gifts/Collectibles
Hair and Beauty Salon
Lawn/Garden/Home
Manufacturing
Party
Pets/Animal Supplies/Services
Photography/Video
Printing/Copying
Recreational/Sports
shipping/packaging
Signs
Specialty
Tanning
Tools/Hardware/Equipment
Travel Services
Video/Audio/Electronics
Window Treatment

Seasonal
Amateur Sports Events
Landscaping

Securities
Investigations
Securities

Security/Investigations
Document Shredding
Systems/Alarms

Senior Care Services
In-Home Care
Senior Health Centers

Sports/Recreation
Amateur Sports Events
Fitness Centers
Golf Franchises
Photography/Video
Recruiting
Sporting Goods
Sports Bar

Travel
Agency
Cruise
Lodging

Vending
Vending Machines

Wholesale/Distribution
Associations
Brokers
Distributors
Wholesalers

Is your company small? It depends…

August 9th, 2006

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.

Coaching and franchising: do they have anything in common?

August 5th, 2006

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.

Business plan for your business

July 31st, 2006

Business plan is a short description of your present or future business. It is like a resume for your company.
The main reason you should have your business plan is to allocate your resources properly. You have to know either you are investing in the right direction.
“The business plan is a necessity. If the person who wants to start a small business can’t put a business plan together, he or she is in trouble,” says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.
Despite its overwhelming importance for a business (especially for a new one) many companies neglect it. And the main reason for that ignorance is the visible difficulty of its writing. It could be understood as most business plans should include the following information:
1   Introductory part
2   General information
3   Analysis of enterprise condition
4   Marketing
5   Organizing part of project
6   Work cycle
7   Investment project
8   Financial analysis of project.
9   Analytical part
10 Conclusions, recommendations

Are you really sure you know all the answers for the questions above?
Certainly there are easier forms of business plan writing. One of them is suggested by Small Business Administration. It includes the following parts:
              
1. Cover sheet
2. Statement of purpose
3. Table of contents
                I. The Business
               A. Description of business
               B. Marketing
               C. Competition
               D. Operating procedures
               E. Personnel
               F. Business insurance
               II. Financial Data
               A. Loan applications
               B. Capital equipment and supply list
               C. Balance sheet
               D. Breakeven analysis
               E. Pro-forma income projections (profit & loss statements)
               Three-year summary
               Detail by month, first year
               Detail by quarters, second and third years
               Assumptions upon which projections were based
               F. Pro-forma cash flow
          III. Supporting Documents
               Tax returns of principals for last three years Personal financial statement (all banks have these forms)
               For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor
               Copy of proposed lease or purchase agreement for building space               
               Copy of licenses and other legal documents
               Copy of resumes of all principals
               Copies of letters of intent from suppliers, etc.

Anyway you have to do it yourself or turn into a consulting company. They are willing to see you there with such kind of order as it is rather expensive service.
There’s one more opportunity to write a business plan. There are different sites suggesting software that assists in business plan writing. Sometimes you could even find a freeware. But in this case you have to investigate the way the software works.
So you have to decide what way of business plan writing is the best opportunity for you.

Living next door to…

July 25th, 2006

Today I’ve talked to my former classmate who was the franchise owner for at least the last five years or maybe even more (as I don’t know if the franchise we were speaking about was his only one). When he learned that I was editing my personal franchise blog he told me an interesting fact from his business experience. It can be useful while studying a prospective franchise agreement.

So my friend is the owner of a small franchise business related to food industry. When he was choosing the franchisor company to work with he spent a lot of time comparing different franchise agreements. At least he opened a small restaurant and was enough happy as the main company provided everything that had been promised for the initial fee. By the way the fee also was not too high, and as a result my friend had almost no problems with finances for his new business. I need to say that he was an enterprising person with good knowledge of business and marketing. And not only this! He was enough lucky on the one hand, and far-seeing on the other hand to surround himself with good specialists. So the result was even better that promised by the official statistics for that kind of franchise business in that region. He was happy. He managed not only to earn money operating his personal company but also he was doing something for people, he impacted their lives by selling good products they really needed. In a short time he had a lot of clients, and many of them recommended his company to their friends and relatives. It was like a business paradise…

As usual in true life stories then comes a huge BUT.
But as some time have passed he found his business going to shutdown. He really could continue it but the overall situation in that area moved him to make the decision of closing. What has happened with that prospering business?

Unfortunately the business of my friend was destroyed by his franchisor. How could this happen you may ask. Is there any franchisor that is willing to annihilate its milch cow? No, for sure. But the situation could become reality for most franchisees.

One day my friend has found another restaurant of the same franchisor opened not far from his place. The franchisor company has conducted a kind of analysis and found high profitability of business in that region (it was for sure… My friend has slaved away in order to make it so profitable).  And as a result they gave an advice for their next franchisee that he could start his business in a very profitable environment.
As a result my friend has lost a considerable part of his clients who were not devoted to his place so much. He had even lost some of his regular customers. They decided that another restaurant is a product of my friend’s business development. So they have thought that there’s no difference between that two places.

My comment to this story is the following:
Read your franchise contract very carefully. You should examine it on the topic of yours and your franchisor’s business rights. And there should be a statement on the area you are working solely at. You shouldn’t agree to start a business in the area inner competition could destroy your business.

How to choose the best franchise to be eligible for the SBA loan?

June 27th, 2006

The first thing to think about is type of business. When they say “TYPE of BUSINESS” they mean a lot of different factors.
On the one hand they say that almost every small business company can apply for the SBA loan. On the other they carefully evaluate the company’s current and prospective activity. The general evaluation criteria include:
-to be the US resident;
-to get financial resources from other sources too, including personal savings;
-to operate for profit (the SBA does not work with charitable, religious, or other non-profit or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives)
 
What about franchises? They are eligible but only if franchisee makes financial decisions independently (the situation when franchisor deals with accounting and financial management is the first sign that franchisee will not get financing or guaranty from the SBA).
 
Speaking about business sphere I need to say that they can be divided into 3 groups:
I. Completely eligible (those not included into groups II and III)
 
II. Eligible with some limitations or restrictions
1. Businesses in agricultural sphere and farms. They can get financing and guaranty from the SBA but government wants them to turn to the Farm Service Agency (FSA) and check their financing and supporting programs first. It’s rather logical, I think…
2. Business in fishing sphere. It’s the same situation as in agricultural sphere. Government wants them to contact their specialized organization first - the National Marine Fisheries Service (NMFS), a part of the Department of Commerce.
3. Businesses in medical sphere (hospitals, clinics, emergency outpatient facilities, and medical and dental laboratories, convalescent and nursing homes). They are eligible if they have a proper medical license from the appropriate government agency.
 
III. Not eligible business.
There are some business spheres that are not supported by government programs in general and by the SBA program in particular. But I need to say that in my mind they are not associated with franchise business (maybe except some spheres in gambling…). They are:
1. Any form of illegal business (no comments)
2. Real estate investment. As I understand it doesn’t mean that government dislike that form of business or consider it something worthless. It’s rather reasonable as investment business consider real estate as a something short-term, as the object of business, but not capital or factor of production. And it conflicts with the main idea of small-business loan programs of the SBA – to help buying long-term assets to be used in production of goods or providing services.
3. The same relations exist toward other speculating activities (firms getting profits from fluctuations in price rather than through the normal course of trade). Also I can state that such types of business is too risky for the government as I think…
4. The companies that do not produce goods or provide services (companies dealing with money – financial institutions, banks, insurance companies on the one hand and gambling companies like casinos on the other). I think that they can easily survive without government support :-)
 
What else do you need to consider in order to become eligible for the SBA programs except types of business? You need to present for what purposes you are going to use that money. Read my next article to learn what purposes are OK and what are not…

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