6 Franchise Purchasing Tips
It can be pretty overwhelming to find a franchise business opportunity that you feel is right for your town, your investment level and your skills. There are so many choices these days, with new franchise opportunities appearing all the time. Lucky for you I have some steps you can take to help you make the purchasing process easier to manage.
1. Use The Internet’s Power
Don’t allow you to get sucked into a 5-day franchise website click-a-thon.
Instead of clicking from one website to another, hoping to find that “perfect” franchise to buy, use the search engines to help you narrow your choices.
Choose your favorite search engine, and type in very specific search terms. In other words, don’t type in “franchise opportunities.” Type in “franchise opportunities in healthy food,” or “franchises for sale commercial cleaning.” You’ll save hours of time.
When you find one franchise opportunity that looks really interesting and matches your skillsets and personal traits, don’t stop there. Look for one or two more that are similar.
With an investment that will probably end up being more than $100k, it’s important for you to find the best franchise for the money, both short-term and long-term. One way to do that is to have conversations with the franchise development representatives from a few different franchises.
The other way to find out which franchise opportunities will give you the most bang for the buck is by talking to existing franchisees.
In order to get to the heart of the matter and decide which franchise to focus your time and energy on, it’s crucial to talk to and if possible, visit franchisees of the concept you’re looking into. And, you’ll want to do this earlier rather than later…but not too early. Make sure you have a deep understanding of the business concept before you spend time in-person or on the phone with franchisees. They’re busy trying to make a living and will be more open to talking with you if you come across like you’ve done your homework.
3. Use The Franchise Disclosure Document
Once you’ve received the Franchise Disclosure Document (FDD), read through it. Highlight the things you don’t understand or that you have legitimate concerns about.
The 23 items you’ll find in the FDD are all important. Try not to get overwhelmed by the scope of the document. When the time comes, hire a franchise attorney (only) to go over the things you’ve highlighted. Franchise attorneys look at franchise documents every day and they know what to look for in them, and how to explain the legalities of franchise ownership.
4. Use Professionals
Once you’ve found a franchise or two that you’re quite interested in, and you’ve done a good amount of research, it’s time to invest some money.
Consider hiring a small business accountant who can educate you on some of the future tax implications of being the owner of a franchise. Some of those tax implications have to do with how you’ll set up your franchise business. Some of the entities include an LLC, an S-Corp or a C-Corp. You’ll want to know the pros and cons to each one, so you can make an intelligent decision when and if the time comes.
A franchise lawyer (as I wrote above) is an important asset to have by your side as you get closer to making a yes or no decision on the franchise(s) you’re thinking of buying. It’s important to know all you can about the documents you may end up signing.
5. Use Your Instincts
Purchasing a franchise is a big thing.
Compiling all the data you’ve collected is important. Understanding the franchise contract, and going through the numbers is too. But, there’s another thing that’s equally important – and that’s you.
You have to trust your instincts.
If what you’re about to do feels right, you may want to move forward. If it doesn’t…if it just doesn’t feel right, you may want to move on. You can always come back. And, there are plenty of other opportunities in franchising to look into if the one you thought was “The One” turns out to not be.
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Should You Look At Pet Franchise Ownership?
Some of the best advice I can give to you if you’re looking to someday own a franchise business is to look at industries that are growing. The pet industry is one of them, and I have the stats to prove it.
The pet industry is huge....and it continues to grow, with or without a strong economy. Not many industries can claim to do that. But, is that reason enough for you to consider owning a business in the pet industry?
Pet Industry Statistics
Take a look at how much money U.S. pet owners spend on their pets, year in and year out. Notice 2009-2010. The big recession took place then, and pet owners still increased their spending, according to the American Pet Products Association (APPA) numbers below.
Total U.S. Pet Industry Expenditures:
2014 $58.51 Estimated
2013 $55.72 Actual
The actual number of pet owning households is significantly higher than it was 20 years ago, according to the same 2013-2014 APPA National Pet Owners Survey*. It shows that 68% of U.S. households own a pet, which equates to 82.5 million homes. In addition, approximately four out of ten pet-owning households in the U.S. are multiple pet owners.
Pet Franchise Types
If you’re thinking of getting into the pet industry, the franchise sector offers several choices – different franchised concepts that offer a wide variety of pet products and services. Some of these franchises can be started as home-based businesses with a modest investment. Some require a brick and mortar location. Here are some examples of pet franchise opportunities:
Petland – Franchisees offer pet supplies, products and services to pet lovers in a retail setting. The company has been servicing the needs to pet owners for 45 years from their 500+ franchise locations.
Pet Supplies Plus® – Another retailer of pet products, supplies and services, Pet Supplies Plus has a large array of items that are produced in the U.S. In addition, stores partner with local animal rescue organizations hosting pet adoption events.
Zoomin Groomin – Franchisees of the concept bring pet grooming services right to their customers’ doors. Pets can experience full grooming services in the comfort of their own home or inside the Zoomin Groomin mobile washing and grooming vehicle.
Splash And Dash Groomerie And Boutique – This brick and mortar franchise offers a safe and comfortable environment for pet owners to bring their dogs and cats. They even offer unlimited monthly “bath and brush” packages for pets that seem to always get dirty.
Pet Butler – Speaking of “dirty,” there are certain duties that all pet owners have, and some of them are rather unpleasant. For pet owners that are willing to pay, Pet Butler provides pet waste cleanup and removal services, and has been doing so since 1988.
Zoom Room – Another brick and mortar franchise, Zoom Room offers dog training classes. In addition, Zoom Room franchisees offer agility training, educational seminars and Canine Good Citizen obedience training and testing.
The pet franchise sector of franchising is unique in the fact that franchisees really need to have a love for pets. It would be difficult not to. In other words, if you don’t like dogs and/or cats, a pet franchise isn’t the one for you!
If you can see yourself in a business in which you’d be spending most of your time with animals – along with a few humans of course – consider looking into a pet franchise opportunity. Learn all you can about the industry, and talk to a lot of franchisees that are doing what you may want to be doing yourself.
Finally, make sure to talk with a franchise attorney before you enter into a franchise agreement. Working with pets can be rewarding, and even fun, but it’s still a business. You need to understand your responsibilities as a franchisee as well as the franchisor’s responsibilities.
* Non-U.S. Government link
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Get Over These Dangerous Business Planning Myths
If you don’t plan your business because you don’t need a formal business plan document for a loan application or investors, you’re missing out. Planning is a tool for steering and managing your business – something that benefits all businesses, whether they need the formal document or not.
That fear and doubt so many business owners have (are you one of them?) is associated with several dangerous myths about business planning. So I want to dispel those myths with this post.
1. It’s about the management, not the plan.
Your plan exists to help you manage. It includes only what you need for its function, which is setting strategy, tactics and concrete specifics. You use it to track performance against plan, review results, and revise regularly, so the plan is always up to date. And that’s not a big document; it’s a collection of lists, bullet points, reminders and projected business numbers. I hope it’s gathered into a single place, as if it were a document, but it doesn’t have to be. And it’s only as big as you need, as polished as you need, as formal as you need.
Your business plan document, if and when needed, adds a lot of description and supporting information that aren’t in the main plan. That’s additional dressing. You add it when you have to in order to show a plan document to outsiders.
Every small-business owner suffers the problem of management and accountability. It’s much easier to be friends with your coworkers than to manage them well.
Correct management means setting expectations well and then following up on results. Compare results with expectations. People on a team are held accountable only if management actually does the work of tracking results and communicating results, after the fact, to the people responsible.
2. Not all business planning needs rigorous market analysis.
Contrary to the myth, a business plan doesn’t have to include supporting information to analyze or prove a market — at least, not until later, if and when the business purpose requires it. Not that you don’t have to know your market — but you don’t have to describe it or prove it for a lean plan. You don’t have to show some outsider who you are, what you own, or any of that.
You don’t have to do a rigorous market analysis as part of your plan if you know exactly what you’re offering, and to whom. So what about market analysis? Think about the business purpose. Do you need the market analysis to help determine your strategy? Then do it. Are you ready to go with that strategy regardless? Then don’t sweat the market analysis.
3. Good planning doesn’t reduce flexibility. It builds flexibility.
People say, “Why would I do a business plan? That just locks me in. It’s a straitjacket.”
And I say: wrong. The dumbest thing in the world is to do something just because it’s in the plan. There is no merit whatsoever in following a plan just for the plan’s sake. You never plan to run yourself into a brick wall over and over.
Instead, understand that the plan relates long term to short term, sales to costs and expenses and cash flow, marketing to sales, and lots of other interdependencies in the business. When things change — and they always do — the plan helps you keep track of what affects what else, so you can adjust accordingly.
It’s not like change undermines planning; actually, planning is the best way to manage change.
So running a business right requires minding the details but also watching the horizon. Eyes down, eyes up. At the same time.
About the Author:
Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 44 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.
5 Reasons Your Business Credit Scores Don’t Get You the Credit You Need
When you apply for a new credit line or request a credit limit increase for your business, suppliers, creditors and lenders want to see how your company has handled its existing credit obligations in the past. This enables them to determine if they should approve your request and to help determine what terms they should offer.
Lenders often use business credit scores to help them assess the level of risk a company presents. Business credit scores are calculated based on the information in a company’s credit report. In most cases, higher business credit scores mean lower risk to a lender when extending credit to a business.
Your business credit scores are calculated by a statistically derived algorithm, designed to calculate risk based on a variety of factors. Although each business credit reporting agency has its own unique scoring models, scores and ratings, other types of information – such as financials, payment history and credit diversity – all play a role in the strength of your business credit reports and scores.
Here are five reasons that may prevent your business from getting the credit it needs:
1) A weak or incomplete business credit profile – The report and demographics of a company play an important role in how creditors assess creditworthiness. A business with issues such as poor financials, outdated registrations or high-risk industry classification codes can trigger a denial of credit or unfavorable credit terms. So it's vital that your company’s documents, financials, filings, and registrations are complete, accurate and up to date.
2) Limited or negative payment history – Your payment track record demonstrates how well your company handles its current and past credit obligations. A company with limited or negative payment history will have a difficult time getting credit.
Aside from paying invoices in a timely manner, keep your credit usage consistent. Regular purchases and timely payments are what establish a positive payment history; it’s what lenders want to see.
3) Low credit limits – Low credit limits across multiple accounts plainly reveal to creditors that a business has limited credit capacity. However, a business with high credit limits reveals that it has the ability to handle large credit obligations. As a result, a business will receive much larger credit limit recommendations, especially if the company has low revolving debts. If your company has a positive payment track record with an existing supplier or creditor, it may be in your company’s best interest to request a credit limit increase.
4) High credit utilization ratio – While the size of credit limits reveal what amount of credit your creditors are willing to extend to your company, credit utilization ratios show how well your business manages it. Creditors view a high credit utilization ratio as a business with excessive debt with a greater risk of default.
Keep credit utilization ratios at 50% or below to avoid falling into this high risk category. Low credit utilization is a clear indication that your business can handle its credit obligations. Doing so will ultimately benefit you during the credit application process.
5) Lack of credit diversity – The types of trade lines your business has reporting play a substantial role in the credit granting process. Limited credit diversity may limit your company’s ability to qualify for certain types of funding. Having short term financing, revolving accounts, installment loans and open accounts reveals to creditors that your company can manage various types of credit responsibly.
Bear in mind your business credit scores will certainly have the tendency to fluctuate with each business credit agency, so it's vital to monitor your business credit profiles on a regular basis. While business credit reports and scores are an essential tool for lenders, suppliers and creditors to assess credit risk; other factors such as banking history, revenues and personal credit scores may play a larger role if a business lacks depth, diversity and density in its files.
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