How To Really Lower Your Franchise Business Start-Up Costs

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Piggy Bank being Smashed with Hammer
(Picture courtesy of taxbrackets.org)
 
All businesses cost money to start. Some business types, like network marketing businesses for example, require minimum investments. A quick meeting between your hammer and your piggy-bank should net enough for most of the MLM businesses that are available in the US.

On the other end of the spectrum are franchise business start-ups. Your total up-front investment can range from around $60k to well over $1 million for one of these franchises.

Let’s say that you have located an opportunity that requires a leased retail space, and a lot of equipment-like a sign business.  Your total up-front investment will be around $200,000. Your equipment–the computers, and the sign-making equipment and materials probably cost around $40,000. That’s a lot of money. But, there’s a way for you to avoid writing a check for that amount, and in a lot of situations, it’s a smart way to preserve your capital.

 

Equipment Leasing

 

I happen to have a lot of experience with leasing, because I was in the automobile franchising business for over a decade. I once read a financial column in which the writer suggested that people should, “Buy what appreciates, and lease what depreciates.”  It makes complete sense. I’d wager that someone like Jim Kramer would agree with that.

For example, if you’re going to get a vacation home, you should probably buy it. It’s value will probably increase over time. (No guarantees, but let’s assume that it will.)
Stopped by the houses just north of Minot Beach in Scituate / Cohasset

(A nice vacation home)

But, when it comes to things like automobiles, or in this case, equipment that’s going to be used every day, it’s value is not going to increase. As a matter of fact, as soon as you buy it, and use it-it’s value has decreased…a lot. I know that it’s not fair, but unless you want to expend your energy on changing the rules of business, you’re going to have to just deal with it.

If you’re going to invest $200,000 into a business of your own, wouldn’t it make sense to hold on to some of the up-front money if you can? Wouldn’t it be nice to have some money stashed away for an emergency?

If you’re investing in a franchise business, you’ll have to look over the FDD to make sure that you don’t have to buy all of the equipment that ‘s required for your business. Make sure that you’re allowed to lease some of the equipment.

 

Leasing Isn’t Free

 

If you can lease some of your equipment, you’re going to pay interest. That’s the cost of doing business. But, you’ll have thousands of dollars available to use as needed, or as I’m recommending, to stash for an emergency.

Of course, before you make any major financial decision, check with your accountant, and/or financial advisor. every situation is different.

And, check out what my friend Marco Carbajo wrote about comparing equipment leasing companies. It’s a really useful article.
 
Learn About Creative Franchise Loans 
 

Filed Under: equipment leasing, Franchise Financing, Franchise Purchasing, Incorporating

Top Questions To Ask Franchisees: Question 9

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My book on franchise ownership is designed to get you focused on fact-gathering.

That’s because it’s where the rubber hits the road.

Staying focused on only getting the facts can be a lot more difficult than you think. Even though you’re on your own when you’re making your franchisee calls and visits during the due diligence stage of the franchise buying process, there may be times that you’re emotions will get in the way of facts. It happens; it’s a very emotional time. There may also be times that other things get in the way of your goal. (Which is to get the facts.) Like a franchise mantra.

Watch the short video I created to see what I mean.
 

 

And watch out for mantras…or anything that could get in your way. Stay focused on the mission.

If you’re the owner of a franchise that requires a leased space, what was your experience like in securing it? Did your franchisor provide the help you needed?

Did you buy the book, yet?

Become a Franchise Owner!: The Start-Up Guide to Lowering Risk, Making Money, and Owning What you Do

 

Here are more questions for you to ask franchisees.
 

Filed Under: Become a Franchise Owner!, Franchise ownership, top 40 franchise questions

Preventing Franchisee Pain

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If you haven’t spent any time on one of the newest social media websites, you’re missing out on something with great potential.

I’ve been getting more active on it lately, and I’m finding that it gets my creative juices flowing, especially since I’m a visually-oriented person.

While I don’t have the discipline of this New England-based gentleman, (which means that I can’t sit in front of my pc and stay focused enough on one thing long enough to really master it) I am learning how to use it in my branding and marketing efforts.

For example, I threw a comment underneath the image below in the form of a quote. Then I asked for others to do the same. I thought that it would be fun. That was yesterday.

For some reason, I haven’t been able to get the image out of my head for the past 12 hours or so, and then it hit me; I can use this cool image for something else…

 

An Explanation

 

Some people don’t understand me. They don’t understand my motivations, at times. They don’t understand why I sometimes write posts that don’t shine a very positive light on franchising.

I have my reasons, and they have to do with a word that I want you to focus on for a moment;

Reality

That word is what drives me. It’s what I focus on when I’m writing my articles. Do I do it gently? Not at all. Should I carry a smaller stick when I’m trying to convey a message? Probably. Is my heart in the right place when I write a post like this one?  You bet.

The image below is a perfect representation of how I’m now using Pinterest–the newest social media site, to help illustrate why I do what I do. Does it work?

mother and child
 
I know that you’re excited about going out on your own, and becoming the owner of your own business. I understand. I’m just trying to make sure that you understand the realities of small business ownership, and that you haven’t missed anything in your franchise research. I want you to win! Okay? 

 

Filed Under: Become a Franchise Owner!, Franchise Education, Franchise Purchasing

Speed to Market

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When you think of some of the advantages that franchises have over independent small businesses, what are some of the things that come to mind?

Most of the people that I’ve met over the years as an advisor, or seminar speaker, tell me that they’re thinking of buying a franchise because there’s name recognition. In other words, there’s a brand.

Having a powerful franchise brand behind you in a business of your own is huge.

Unless of course it’s a young franchise concept…one that isn’t ,”branded” yet.

 

What else?

 

Other things that make franchise ownership an attractive option for some include;

  • Proven business systems
  • Group purchasing power
  • Proven marketing techniques
  • Formal training

Those are the usual subjects, and you can easily find hundreds of articles and blog posts describing each one. Good stuff. They’re great reasons to get involved in franchising. Here’s another one…

 

Source: ffffound.com via Joel on Pinterest


Speed. 

How cool would it be if you could invest in a start-up business of your own and have it up and running in 90 days?

By, “up and running, ” I don’t mean opening a business and “winging it.” Customers don’t like walking into a business that’s, “still fine-tuning things.” Today’s customers aren’t very patient, and will quickly take their money somewhere else if they don’t feel that their needs are being met.

If you’ve invested in a solid franchise, your business can be that place.
 
 

 

Filed Under: Food and Drink Franchises, franchise advantages, Small Business

The Top 100

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Around this time every year, Franchise Direct publishes its very own Top 100 Global Franchise rankings. It’s a huge undertaking, so please show your appreciation to the team at Franchise Direct-both here in the US, and across the pond in the UK, by checking out their comprehensive report.

I’ve pointed out their franchise reports in the past, and it’s once again my pleasure do so now.

But first, I want to make sure you know about the eligibility requirements for these 100 franchises;

Franchises must operate businesses in two or more countries. The exact rankings are compiled by collating a range of data, including information self-reported by franchises, FDD documents, SEC filings, published industry sources, on top of other information pertaining to the financial state of the franchise.

Are you ready to see what the Top 100 Franchises are?

franchise direct 2012 top 100 franchises
 
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Filed Under: 2012 Franchise Trends, franchise direct, the top 100

What’s Stopping You From Buying That Franchise?

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If you’ve been on the hunt for a franchise for awhile, you know about emotional roller coasters….
 

(You know you want to watch it.)

One some mornings, you wake up feeling confident about the your future. You find yourself daydreaming about the possibilities. Some of them may include;

  • Quitting your nasty-ass job
  • Spending more time with your kids
  • Having the ability to save oodles of money for their college education
  • Paying off all of your credit cards
  • Choosing a franchise that feels right
  • Cutting the ribbon during your franchise’s Grand Opening
  • Seeing your customers lined up waiting to get in your store
  • Owning multiple locations
  • Retiring in a location that has turquoise-water

peace and plenty bahamas hotel

 

Or

 

You’re tossing and turning on a nightly basis. Because you’re freaking out. (About the possibilities.)

Some of these possibilities include;

  • Having to stay in a job that makes you physically ill
  • Choosing the wrong franchise business opportunity
  • Blowing through your start-up money much faster than you planned
  • Obtaining a second mortgage just to stay in business
  • Avoiding conversations concerning college applications
  • Wishing for customers to appear inside of your store
  • Losing your business
  • Losing everything

Sad Loser!

 

Two Extremes

 

Both scenarios are possible when you take on something as big as business ownership. Not everyone is cut out for it.

If you do enough things right, you have a shot at real success. If you skimp on things like due diligence, or you purchase a franchise that’s clearly above your financial comfort level, you can lose a lot.

I purposely presented those extreme examples of what could happen if you choose to become the owner of a franchise. That’s because every franchise buyer experiences daydreams-and sometimes even nighttime dreams that are similar to the ones I presented.

Are your dreams stopping you from your dream?
 

 

Filed Under: due diligence, Franchise Business Plans, Franchise Purchasing

Top Questions To Ask Franchisees: Question Number 8

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Eventually, you’re going to want to open your new franchise business. You’ve already invested a couple of months (at least) into choosing the right opportunity; you’ve submitted the proper business plan to your lender, and were able to get your business loan approved. You’ve put some money out, and you’d like an opportunity to start getting it back. basically, you’d like to

franchise owner open for business
 
And, you’d like to do it in a reasonable amount of time.

Is that too much to ask?

 

Ask Current Franchisees This Question

 

“Were you able to open your business in a reasonable amount of time?

Makes sense, right?

If you’ve purchased a franchise like this one, which requires a great location to help insure your success as a franchise owner, it may take longer to secure one than you had previously thought. Remember; both of you, (the franchisor and you) must approve the proposed location.

Some franchise organizations, like Great Clips for example, have their own real estate departments. They probably know more about securing a suitable location than you do. Trust them. After all, part of  the reason you were willing to write a check for the up-front franchise fee was to benefit from your franchisor’s expertise and experience.

 

Don’t Be a Cheapskate

 

If you’ve invested in a franchise that requires a prime space, you’re going to have to make a commitment to step up and pay what’s required. I know that you want, “a deal.” We all do. But, high-quality–in this case, prime real estate, will cost more money than sub-prime real estate.  Don’t say no to a location based on price alone. Saying no to a property that’s $500, or even $1,000 more a month than you originally budgeted for could end up being costly in the long run.

But, you don’t have to believe me; call several franchisees and ask them if they were open for business as quickly as they wanted to be. And, ask them about their location. Find out what they’re paying. Ask them if they paid more than they thought they would when they first started scouting out locations.

If you’re a franchisee, how long did it take you to open your franchise up? Do you have any pearls of wisdom for my readers?

By the way, I’m going through all 40 questions to ask current and former franchise owners that I’ve included in my franchise book.

Here’s 1-7.

 


 

Filed Under: Franchise Purchasing, Multi-Unit Franchising, retail franchises, top 40 franchise questions
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