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Franchising Week 3 4

The document discusses options for starting a new business, including starting an independent business, buying a new franchise, or buying an existing franchise. It outlines factors to consider such as costs, risks, financing, and support provided for each option. The document then provides steps for investigating options, including determining a viable business concept, assessing the market potential, and evaluating personal financial readiness. Finally, it outlines criteria for selecting a franchise such as costs, demand in the local area, competition, training, and the franchisor's experience and expansion plans.

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Charlene Balisalisa
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9 views27 pages

Franchising Week 3 4

The document discusses options for starting a new business, including starting an independent business, buying a new franchise, or buying an existing franchise. It outlines factors to consider such as costs, risks, financing, and support provided for each option. The document then provides steps for investigating options, including determining a viable business concept, assessing the market potential, and evaluating personal financial readiness. Finally, it outlines criteria for selecting a franchise such as costs, demand in the local area, competition, training, and the franchisor's experience and expansion plans.

Uploaded by

Charlene Balisalisa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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FRANCHISING:

BEGINNING YOUR SEARCH

WEEK 3&4
CHARLENE S. BALISALIS
Learning Outcomes:
At the end of this chapter, the student will be able to:
Identify the options when you begin your business.
Learn to investigate your options.
Learn to investigate the franchise.

Identify the criteria for selecting the franchise.


WHAT ARE YOUR OPTIONS
WHEN YOU BEGIN YOUR
BUSINESS?
WHAT ARE YOUR OPTIONS WHEN YOU
BEGIN YOUR BUSINESS?

Once you make the decision to start your own


business, you need to decide whether you want to
be an independent business owner or a
franchisee.

Options for beginning a business:

✔ start a new business


✔ buy a new franchise
✔ buy an existing franchise
Starting a new
Business
Starting a new Business
Advantages Disadvantages
 usually lower start-up cost  requires more time and energy
 independence and creative  high risk of failure
freedom  takes longer to become profitable
 freedom with location and  financing may be more difficult to
procedures obtain
 no inherited problems from an
existing business
Buying a new
Franchise
Buying a new Franchise
Advantages Disadvantages
 reduced risk of failure  costs more (fees, royalties,
 proven methods and products supplies)
 start-up assistance  smaller profit margins
 on-going training and support  lack of independence and freedom
 local, regional and national  difficult to achieve redress if
advertising franchisor fails to meet obligations
 collective purchasing power  • a franchisor’s problem may
 research and development become your problem
 association and synergy with
other franchisees
 ▪ easier to obtain financing
Buying An Existing
Franchise
Buying An Existing Franchise
Advantages Disadvantages
 the business is already up and  tangible limitations:
running  design problems
 risk and uncertainty may be reduced  location problems
 the basic infrastructure is in place:  merchandise problems
 established location
 existing customers and reputation  intangible limitations:
 employees  pricing problems
 vendors  inadequate procedures
 policies and procedures  ease problems
 cash flow  potentially higher costs to buy
 easier to obtain financing  legal liability in inheriting lawsuits
HOW DO YOU INVESTIGATE
YOUR OPTIONS?
HOW DO YOU INVESTIGATE YOUR
OPTIONS?

Regardless of whether you choose to become an


independent business owner or become a
franchisee, research is the single most important
activity in making your decision. Without adequate
information, you may end up making the costliest
decision of your life.

Steps for beginning a business:

✔ What business?
✔ Is there a market?
✔ Can you afford it?
✔ Can you make enough money to make it
worthwhile?
What Business Should You Start?

“Find something you love to do and you’ll never have to work a day in your life.” —Harvey
Mackay

Sometimes people start a business because they think they’ll make a lot of money, only to find out that
they do not enjoy the business. The adage, “know thyself” certainly applies here. You
should start a business in an industry that you will enjoy for the next 10 to 15 years.
Ask yourself:

✔ What do you like to do? (interest and hobbies)


✔ What do you know how to do? (experience)
✔ What do you do well? (special skills and talents)
✔ Which industry(s) involve your interests and use your skills and talents?
✔ What products or services could you sell in this industry(s)?
✔ Would you rather sell a product or service?
✔ What products or services would you like to sell the most?
Determine If There Is A Market
All successful businesses must:

✔ satisfy a need or
✔ solve a problem or
✔ respond to a trend

Before starting any business, determine if there is a market for your


product or service.
Conducting market research:

✔ How many potential customers are in your area?


✔ Will your product or service sell?
• What need does it satisfy?
• What problem does it solve?
• What trend or fad does it address?
✔ What should the appropriate pricing be?
✔ Who are your competitors?
✔ How many competitors do you have?
✔ What do they offer?
✔ How will your product or service be unique?
✔ What marketing niche can you capture?
Determine If You Can Afford To Start A Business

 In order to start a business, you have to


have money!
 In order to stay in business, you have to
make money!
 The single most common reason new
businesses fail is that they did not have
enough money to begin with!
Costs to consider:
✔ Estimate your start-up costs:
• location design and construction
• professional fees
• equipment and fixtures
• furniture
• opening inventory and supplies
• insurance
• Pre-opening labor
• Opening advertising and promotion
✔ Estimate how much working capital you will need (the money you will need until
the business becomes profitable—include your living expenses, if necessary)

• Salaries
• Insurance
• Utilities
• Advertising
• Rent
• interest on a loan, if applicable
Brainstorm where you might be able come up with money:

• yourself
• family
• friends
• savings and investments
• a partner
• selling personal assets
• loans
Determine If You Can Make Enough Money To Make The Venture Worthwhile

✔ Estimate the profit potential for the business:


• income
• expenses
• profit (income – expenses)
✔ Think about the amount of time and energy it will take to make the business successful.
✔ Make a decision as to whether you think you can make enough money to make the
entire
venture worth your time and energy!
HOW DO YOU INVESTIGATE A
FRANCHISE?
HOW DO YOU INVESTIGATE A
FRANCHISE?

Like starting any business, buying a franchise


involves a risk. Studies show that successful
franchisees:

✔ conduct their own marketing research


✔ use their own financial and legal advisors
✔ develop thorough marketing and business plans
✔ have prior work experience
WHAT ARE THE CRITERIA FOR SELECTING A FRANCHISE?
✔ How much money will this franchise cost before it becomes profitable?
✔ Can I afford to buy this franchise?
✔ Can I make enough money to make the investment worth my time and energy?

Your abilities:

✔ Do you have the technical skills or experience to manage the franchise?


✔ Do you have the business skills to manage the franchise?

Demand:

✔ Is there enough demand in your area for the franchisor’s products or services?
✔ Is the demand year-long or seasonal?
✔ Will the demand grow in the future?
✔ Does the product or service generate repeat business?

Competition:
✔ How much competition do you have, including other franchisees?
✔ Are the competing companies/franchises well established?
✔ Do they offer the same products and services at the same or lower prices?
✔ Is there a specialty or niche you can capture?
WHAT ARE THE CRITERIA FOR SELECTING A FRANCHISE?

Before buying any business, you must carefully consider many factors that
are critical to your success:

✔ costs
✔ training and support
✔ your abilities
✔ franchisor’s experience
✔ demand and competition
✔ expansion plans
WHAT ARE THE CRITERIA FOR SELECTING A FRANCHISE?
Brand Name:
✔ How well known is the franchise name?
✔ Does it have a reputation for quality?
✔ Have any consumers filed complaints with the local Better Business Bureau? Training and
Support:
✔ What kind and how much training and support does the franchisor provide?
✔ Do existing franchisees find this level of training and support adequate? Franchisor’s

Experience:
✔ Has the franchisor been in business long enough to have established the type of business
strength you are seeking?
Expansion Plans:
✔ Is the franchisor planning to grow at a rate that is sustainable?
Thank you!

Does anyone have any


questions?

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