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. 

Uniform Franchise Offering Circular (UFOC)

August 22nd, 2006

There is a legal document that any franchisee must be supplied with before the signing of the Franchise Agreement. The Federal Trade Commission (FTC) has made such a regulation in order to provide franchisees with material information about operation of franchise system. UFOC is urged to help franchisees understand and analyze franchisor’s intentions.
The Uniform Franchise Offering Circular must be presented to franchisee 10 days before the signing of the Franchise Agreement.
Every franchise company in every industry should provide its prospective franchisees with that information divided by the following 23 categories:
1. The Franchisor and Any Predecessors
2. Identity and Business Experience of Persons Associated with Franchisor
3. Litigation History
4. Bankruptcy (i.e., any franchisees who may have filed)
5. Listing of the Initial Franchise Fee and Other Initial Payments
6. Other Fees and Expenses
7. Statement of Franchisee’s Initial Investment
8. Obligations of Franchisee to Purchase or Lease from Designated Sources
9. Obligations of Franchisee to Purchase or Lease in Accordance with Specifications or from Authorized Suppliers
10. Financing Arrangements
11. Obligations of the Franchisor; Other Supervision, Assistance or Services
12. Exclusive/Designated Area of Territory
13. Trademarks, Service Marks, Trade Names, Logotypes and Commercial Symbols
14. Patents and Copyrights
15. Obligations of the Franchisee to Participate in the Actual Operation of the Franchise Business
16. Restrictions on Goods and Services Offered by Franchisee
17. Renewal, Termination, Repurchase, Modification and Assignment of the Franchise Agreement and Related Information
18. Arrangements with Public Figures
19. Actual, Average, Projected or Forecasted Franchise Sales, Profits or Earnings
20. Information Regarding Franchises of the Franchisor
21. Financial Statements
22. Contracts
23. Acknowledgment of Receipt by Respective Franchisee

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.

Franchise can resurrect your business

July 19th, 2006

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?

Second Best Franchise System in Germany

July 9th, 2006

Just a few days ago one of the most famous German business magazines – Impulse have conducted a survey. The main idea of this survey was to make an analysis of franchises in Germany and to rank them.
The survey was based on the information of the magazine and according to some experts. The experts are working in franchise sphere as consultants and/or as researchers. The experts were suggested to rank the companies by twelve criteria that were organized in three directions.
They were:

  • sustainability of the franchise concept
  • sustainability of the business idea
  • dynamics of the franchise idea.

The first direction described general characteristics of the franchiser. It was connected with the age of the franchiser organization, the number of business partners of the franchiser, and overall franchiser’s profit and sales.
Under the terms of the second direction the expert were supposed to look the same business from franchisees’ position. Those criteria covered the market position of franchise system, market competition density, the benefits of the idea to potential franchisee and the potential revenue of the franchisee.
And the criteria of the third direction had to estimate the growth of the franchise system in the past and its future plans. The criteria were the past growth of the system, the planned growth to 2008 and the expansion potential for partners.
I bet you know who is the winner. McDonald’s for sure. Who could doubt about it? They really have fantastic system that is almost perfect for the moment…
But the most interesting question is whose system is the second?
You might think it’s Burger King, Tchibo or Obi… But you will be wrong. The second rank has
Fressnapf.
Have you ever heard about this company? No? There’s nothing unusual in it. The company is not widely known outside European Union. It’s not even mentioned in Wikipedia (at least in it English part. Of course there’s an article about it in German :) ).
But still it’s the largest European specialized retail chain for petfood and pet accessories.
Its founder and managing partner Torsten Toeller had used the idea of pets supermarkets that were rather common in the USA and Canada. The mission and the vision of the company was to sell specialized pet products on a large scale, while keeping prices low. The economy on scale principle has contributed to his tremendous growth in this niche. Fressnapf had become the right company in the right place.
The rapid development of the company should be given company franchisees the credit. They really managed to uphold Torsten Toeller initiatives.
“We’re like a pack of hungry wolves with one pack leader - that’s the idea behind Fressnapf. We all fight it out and everyone gets their fill!” says Torsten Toeller. The market couldn’t defend itself against that troop…
For the moment the system includes almost 270 franchise partners, and the 4000 or so staff employed at over 750 sites not only in Germany but in Austria, Denmark, France, Luxemburg, Belgium, Switzerland, the Netherlands and Italy. The company is working to start in Ireland and Spain.
The main principles that were originally used by Torsten Toeller are the main incentive for company’s success. They are fast growth, standardized processes, effective value added chains,
and the development of own brands.
These principles allowed the company to proceed from a store in Erkelenz, selling petfood and pet accessories to Europe’s leading supplier of pet food and accessories and number 2 German franchise system in just 15 years.
I wish every franchise company could boast of its development that way.

Interesting facts about US franchising

June 29th, 2006

When I started my blog more than two months ago I wanted to discuss a franchise as one of the most developed form of business in the United States. But I never knew that it is SO DEVELOPED!
I found an interesting statistics that proves this.

  • A new Franchised Business opens somewhere in the United States every 8 minutes.
  • 75 industries use franchising to distribute goods and services to consumers.
  • Franchised Businesses provide goods and services worth $624.6 billion per year in the United States (2001)
  • There are 767,483 franchised business establishments in the United States (2001).
  • Franchised Businesses provide over 18,000,000 jobs in the United States (2004 estimate)
  • In the United States more than 40% of all retail sales come through franchising.

 

After realizing that facts I’m even more surprised thinking about countries (many of less developed countries and former Soviet Union republics) that even have no franchise legislation and that don’t develop that business… I have no idea why this can happen…

7-Eleven franchise: is it for me?

June 14th, 2006

The friend of my parents at last decided to franchise… And as he is rather ambitious person he wants to choose among the top and the most well-known. He looked around and found nothing better than 7-Eleven, Inc.
 

I was asked to collect as many as possible facts about this franchise (he is not so good in Internet). It was not difficult and I decided to publish this information in my blog too (to kill two birds with one stone).
 

Industry:
Food
 

Franchise package includes:
a) initial training to franchisees on how to operate and manage their stores; training includes practical part of 6 weeks working in one of the stores;
b) operational consulting, assistance and help in all business aspects; meetings every week;
c)  franchisor develops the building, provides the store equipment and pays the utilities.
d) franchisor owns or leases the land;
e) franchisor provides credit resources on everyday basis if needed;
f) franchisor prepares all financial documents (income statements and balance sheets, financial activity summaries (e.g., daily sales receipts, purchases, cash expenditures) and even some marketing reports; everything operates under special information computer automated system.
 

Fee:
a) initial franchise fee to 7-Eleven (averaging approximately $70,000, depending on the store’s gross profit, but that may vary significantly depending upon the area);
b) a typical initial cash payment is about $83,000, which includes a down payment on the store’s opening inventory, supplies, business licenses, permits, bonds, cash register fund and the initial franchise fee.
 

Franchisee rights and responsibilities:
a) store business decisions are made by the franchisee himself but he can turn to franchisor for advice in any business sphere;
b) A 7-Eleven franchisee does not own the property, store or equipment, but leases or subleases it from 7-Eleven, Inc. as part of the franchise agreement.
 

So the program is OK especially for those who have poor economic background. You are not responsible for financial documentation, credits, real estate and equipment. But at the same time this franchise provides you too little freedom. Do you agree to obey all the time? If so, the business is right for you.

Another survey or “are franchise trends different from general economic tendencies?”

June 13th, 2006

Every year Franchise Recruiters Ltd. (FRL) conducts a study and analysis of the tendencies of franchise business. Unfortunately I managed to get access only to the materials for the year 2005 but I hope they will allow making some interesting conclusions. As I think the main tendencies and relations remained the same for thus year too.
 
The procedure of survey was rather usual. The main data were collected while asking questions about the current situation and business forecast. But unlike International Franchise Association FRL interviewed 100 of the top U.S. franchise executives. On the one hand it increases the statistical error of the survey as they asked only leaders. But on the other hand I think the information can be useful at least because the leaders understand the market and the business, they have enough experience to predict what factors will benefit or hurt them. Why? Because they are the leaders…
 
So the first thing to say about concerns general growth. Top U.S. franchise executives predict 6% growth in net new unit development. What do they mean by “net”? They subtract closing companies from new ones. It means that number of new franchisees will grow even more than by 6%. If to compare this to the growth of GDP as the main economic indicator the interesting thoughts come to my mind. The U.S. gross domestic product growth was projected to be 3.3% in 2005; it’s two times lower than franchise number growth and also lower than the same indicator in 2004. My comments:
- growth in number of franchises is not caused by high revenue expectations of prospective franchisees; maybe they think franchise way of starting a business to be more attractive or easier in comparison with the standard one; it becomes more evident against a background of slowing of the economy in general;
- growth in number of franchises will increase the level of competition, especially in such traditional franchise industries as food and retail sales. As a result the market can see the decrease of prices (better variant for consumers) or decrease in quality (in order to provide at least any profit to companies). Anyway I think that at least in traditional franchise industries new companies can get much less profit than they assume.
 
The respondents also mentioned some other negative factors that can influence business development:
-slower overall economic retail expansion;
-relatively high energy prices;
-real estate tribulations;
-shipping cost surcharges
-and rising interest rates.
Also they mentioned prices as a very important factor. People are already hurt by increased oil prices and are not ready to inflation in any other industry.
My comments:
Franchisors (based on franchisees requirements and their own researches) have to think a lot about the ways to decrease the other costs and to increase the productivity. Maybe they need to examine the following variants:
-introduce new technologies (better equipment, informational and electronic systems, new materials, etc.);
-look for new suppliers of equipment and materials (check the opportunities provided by countries with cheaper labor force);
-outsource the less competitive parts of their business and so on.
At the same time they really need to shift the main accent toward attracting consumers. As I see it would be very difficult to hold the winning position without interesting advertising campaigns, better package, additional services, and improving public position and company reputation. It is the responsibility of almost every franchisor: the time will never forgive that delay, and another franchisor in the same industry will get the benefits of 6% growth I wrote about in the beginning of that post…
 
I’m going to continue commenting that survey later as it contains many other interesting facts and forecasts. But for this moment I wish to make a short conclusion. The situation in a franchise sphere is very controversial. On the one hand we see that more people believe in franchising as a way to start their business. On the other hand we understand that they will face an extraordinary competition supported by other negative factors. I suppose that in a short period of time it will result in a greater differentiation among franchisors. Those using new methods in business will take a bigger part of the pie. The others who rely only on traditional instruments and approaches will loose their positions.

Even in franchise business you HAVE to think over the idea

June 1st, 2006

Today I was a witness of the dialogue between two students. They are 14 or 15 and were discussing how they would start their future businesses. I hope they will not have objections if I present a part of this dialogue here.

“I’m thinking about IT business. It’s the easiest… and the sphere is growing”
“Do you have an exact idea? E-commerce?… ”
“I don’t know. I think to take the list of franchises and will choose the one with the best program or the least investment…”

I wanted to interfere but decided to stay away and to express my opinion here.
I’m absolutely sure that it’s necessary to study a franchise program before investing your personal or borrowed money. But I think that studying the idea itself is more important. If you choose a franchise with an attractive program but the idea is not OK for your region or your country the result will never satisfy you. And it’s not necessary to be a prophet to say that to avoid bankruptcy you’ll have to invest more, to work harder and so on.

What factors can make an idea having no prospects? I found some and want to express my opinion with the potential readers of my blog.

At first I need to mention the demand for the product. You need to take into consideration as many as possible factors that influence the willingness and ability of people of the concerned territory or country to buy these goods and services. It’s not too hard if you live in this region yourself. You can spend some time listening to people’s complaints. You can ask your friends and neighbors. It’s not necessary to carry out a marketing research if you are planning to start a small business company. (Certainly if the matter concerns a big investment and large company it’s better to order a marketing research from professionals).
The factors you have to think over vary for different ideas and different markets. I’ll say some words about the most important ones as I think.

So, the first one is geographical, historical, religious and cultural traditions that prevail on the concerned market. I’ve read a story about McDonalds’ franchise in France (unfortunately it was some years ago and I can’t recall the source). It was a sad story. The idea almost collapsed because of cultural food traditions in the country. The author of the article explained that historically the French were in earnest about food. And the idea of fast-food itself was offensive for them. But if to add that the French have no special liking of American life style we’ll get the complete picture of extremely bad idea.
But at the same time the same franchise idea (I mean McDonalds’) became enough profitable in Japan. Why? Because it was absolutely uncommon for Japanese and was taken by them as something interesting, and unusual, and modern.

The next factor that influences demand is size and growth of the target market. It includes the number of potential buyers. Thinking about buyers you have to study their tastes and preferences on the one hand. Also you need to study buyers themselves: age, income, sex, life style and so on. You need to study their attitude to your idea before you start your business. By the way it will help in future while planning advertising and promotion activities.

Also it’s necessary to think about seasonality of demand. If sales change greatly during the year it means that your personal income will change too. Sometimes you’ll get nothing at all. Usually you’ll have to invest more money in inventory when demand goes down. Are you ready for this?

OK. That’s enough for demand factors for the first time. Read my next post to answer what other factors can make a franchise idea having no prospects.

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