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Do you want to be in business for yourself or by yourself?

Franchising may be your alternative to starting a business from scratch.

Dear Fred and Lyna:

For the past 20 years I have worked as an account executive for a major soft drink company, and frankly., I am sick of it. I have been looking into owning my own business and have run across several franchise opportunities. Do you think a franchise is the way to go-or should I start out on my own from scratch?

Fred: In our last blog we looked at the importance of evaluating weather you have the characteristics of an entrepreneur. Now we’ll answer the writer’s question about franchising vs. starting your own business.

Lyna: Lets take 2 people we know who started similar businesses. Brad opened a Deli franchise in Ohio, and Doug started his own deli business in Virginia. They are both happy in their choice; as well as successful.

Fred: One of the things we hear from clients we coach is that they dont like the idea of being so structured that they cant utilize their own ideas. Yet Brad found a franchise where the parent company is flexible enough to let him try new things. Brad feels like he’s part of a big family. Although there are things he cannot do per his contract; he also has a lot of support from them.

Lyna: Doug steered clear from Franchises because he doesn’t want to be restricted and he wants to have the final say in all aspects of his business, from creating the logo to having fun, funky promotions. And he had money set aside to open up his business; so he didn’t have to look for funding.

Fred: That’s another plus for franchising- most banks have no problem giving loans out for a business that already has a proven track record. And the business can open pretty quickly.

Lyna: Although it took time for Doug to build a customer base; he felt he had a larger population to work with. He realized that although Franchises have a proven brand and consistency that can bring in customers from day one, at the same time this kept away those people that didn’t care for their products.

Fred: And Doug doesn’t have monthly royalty fees to pay out. On the other hand, the best franchises- such as the one Brad is with- offer continued training and support. They realize the more successful the stores are; the more money the company makes.

Lyna: So the bottom line is that Brad works well owning a franchise because he was able to get his business up and running quickly and smoothly with the proven franchise brand. He received a loan with little effort and has the support and expertise of a successful team to help him succeed.

Fred: Doug, on the other hand, would have felt stifled and frustrated as a Franchisee. What makes him thrive is the freedom to make his own decisions. He is a great networker and builds alliances with other businesses in the community.

Lyna: So should you buy a Franchise or start from Scratch? The really is; Do you want to be in business for yourself or by yourself?

Fred: If you are considering buying a Franchise, we recommend you do some research, ask a lot of questions and talk to franchisees of the companies you are looking at.

You may be, like Hamlet, placed on a threshold of decision on whether to start out from scratch with your own business or buy a franchise. The battle between starting your own business versus buying a franchise truly depends on the person who is to make a decision. If you are on the chasm between being a pioneer business person or a thriving franchisee of an established business, you must be able to consider a lot of factors before you make the final decision. Ultimately, all the factors are affected by your current need and situation.

The first question to ask yourself is this: How much are you willing to risk? In actuality, having your own pioneer business holds a 50/50 chance of succeeding. And if you have enough money to spare and risk losing out at the beginning, you might as well try your hand in doing your one-man show. However, if you are already after profit, franchising after a pre-established business will most probably give you more security in terms of return of investment. More often than not, franchising businesses are already recognized and widespread.

You will really be able to get a fair return for your capital if you link yourself with a fairly successful franchise business. If ever a franchise business fails to give you return for your capital instantly, you will know that the blow is somehow cushioned because you are not alone bearing the burdens of the business. Unlike in a business you will build on your own, you will not experience the full blast of failures should they come. And this will keep you motivated enough to plug away until you become one excellent franchisee. You can still manage to stand out among branches of the franchise business, although not beyond the bounds set by the ultimate business owner.

While you are safer in initial income returns at the franchise business than with a pioneered business, there is nothing that can be compared to the sense of fulfillment you can have in having your own business and not patterning yourself with an idea somebody else thought of.

Furthermore, aside from enabling you to keep your creative juices flowing in a business you pioneered, having your own business will not limit you or confine you to a certain standard which most franchises have. You will get to retain your business individuality and whether it rises up as a household name for consumers or not, you manage to establish yourself at par with the bosses and not a bit below the organizational chart. You will not have to make too many adjustments in a business you own because it is yours. Other people may have to adjust with your policies should you decide to employ people and start setting standards early in the business.

It ultimately boils down to your business priorities. The decision on whether to start your own business or buy a franchise both has its advantages and disadvantages. Your particular situation, strengths and weaknesses, together with outside forces, will help you determine which is truly best for you.

Financial capacity is the important aspect that founders will have to address when business opportunities such as franchising are concerned. Franchising businesses do not come cheap and the costs involved are variable. The need to allocate the proper funds for budgeting purposes will be the immediate aspect that needs to be addressed so that every area surrounding the business will be covered for a smooth flow of operations.

Where to Look for Funds
There are various ways to which a franchise business can be accomplished. Here are some possible alternatives:

1. Financial Loans. The easiest way of being able to allocate the needed funds would be to apply for financial loans with banking and lending institutions. The process after application would call for the purpose of the loan, a background credit investigation check on the person/s applying for the loan, declared assets and the payback period for such. Interest rates will perhaps be the only point up for discussion, considering that depending on the lending institution, interest can be varied and dependent on the standard or organizational declared rate of interest on loans.

2. Investors/ Partners. Ideally, people who lack the funds and resources to engage in franchise business opportunities would look for potential partners to help them out in expenses and needed financial settlement issues. Shares or percentage of ownership for more than two persons will be up for negotiation. Normally this would depend on the amount of invested capital that a partner would have, unless otherwise specified.

3. Fixed Assets as Collateral. For franchises, land may be one good aspect to use as a means of lessening the need to include rent expense as one of the usual expenses to be incurred. But in some cases where cash or checks are more important rather than declared assets, a person can either sell the asset as a whole or use land as a form of collateral as leasing or having it rented out to get additional forms of money overall.

Franchises for sale are available anywhere and the real issue remains on the amount needed to be raised to be granted one. Also, successfully acquiring franchise rights is not the end of the long line of other expenses to be incurred since other points for consideration such as utilities and rental expenses necessary for the proper administrative and operational aspect of the business is entirely separate.

With the right resources, franchise expenses can be kept at minimum levels but incurring such expenses in businesses is only normal for any business entity. The manner of financing a franchising business opportunity would depend the amount of investment that a person and/or his partners would pledge. That is why the choice for which franchise to consider will always be important because big name franchises usually promise a profitable rate of return.

Will 2007 be as good a year for franchisees as 2006? Current franchisees appear to think so. A significant number of franchisees are confident that their business will make good progress over the next few years and become very profitable, according to a new survey.

The 2006 Industry Report on Franchisee Satisfaction by Franchise Business Review, a national franchise market research firm, revealed that 72 per cent of franchisees believe the growth opportunity for their individual franchise is either strong or very strong.

There were also many upbeat responses from franchise owners about the companies they work for, 87 per cent giving their franchise systems an overall positive rating, while 92 per cent were pleased with the quality of the products and support services provided.

Eric Stites, president of Franchise Business Review, said: “The US economy may be weakening in many places but franchisees are very positive about their growth.

“When you consider the little known fact that the top 50 public franchise companies have outperformed the Standard and Poor 500 by 70 per cent over the last six years, you can understand why franchise owners are so optimistic. More people should stop watching the stock market tumble and consider buying a franchise business.”

In addition, on the issue of business ethics, franchise companies received a 91 per cent favorable rating. In an era where the ethics of industry sectors are under increasing scrutiny, this is an important result.

Franchise Business Review said this was its “most comprehensive study ever done on franchise owner satisfaction”.

More than 10,000 franchise owners from hundreds of franchisers in over 50 industry sectors took part in the survey and answered questions on a range of topics, including franchisee training and support, system quality, franchisor/franchisee relations, financial opportunity and overall satisfaction.

These results reflected similar positive figures from a survey earlier this year, which was carried out by the International Franchise Association.

It asked its franchise members about how their own business will fare in 2006 and their views on the franchising industry as a whole and for both the outlook was optimistic.

More than two-thirds of franchisers (68 per cent) believe their firm will perform well this year, with half saying future progress will be “very good” and around a fifth thinking it will be “somewhat good”.

With franchising overall, 27 per cent commented that the industry is doing “very good” and 43 per cent described it as “somewhat good”.

People say that Christmas is “too commercial”. While for Christmas purists, the evident truth of this is a source of sorrow, for the Scrooges among us who wish to make some money out of it, that is good to know. The strong increase in the number of people spending money on leisure pursuits and activities has helped to boost demand for a number of seasonal franchises.

Seasonal franchises can include a vast array of business ideas and models including ice cream parlours, garden services and Christmas gift outlets. However, opting for a business that does not often have a regular monthly turnover can present a number of problems and therefore may only be suitable for someone will good management skills and budgeting experience.

Competent franchisees sometimes run two franchises to help ensure they have a reliable level of income throughout the year. For instance, a swimming pool cleaning franchise is likely to have a stronger turnover during the summer months, but profit will fall as winter arrives.

Therefore, a franchisee could look at opting for a second business that could boost revenues during the winter. A Christmas house decorating operation that attracts clients and money in December could help to offset the less profitable months of the seasonal franchise that sees profits surge in summer.

Potential franchisees are reminded that before committing to any operation they must make sure they do adequate market research and undertake sufficient preparation for setting up their own venture.

The first step for anyone looking to move into the seasonal franchise business is to request information from the leading chains who offer suitable opportunities. This literature can then be used to compare different options as well as assessing possible business structures and the amount of investment required to get up and running. It will also help establish what can be done to help limit the effects of seasonal differences.

Another crucial factor is to calculate how much it will cost to recruit and train staff, especially as they are likely to be employed seasonally and may not return each year. In addition, the storage of equipment that is only used during a few months of the year must be incorporated into any initial business plans.

New franchisees also need to place strong importance on how much support they will receive from the company as it could be vital to ensuring maximum returns and long-term success. This is especially crucial when marketing and publicity is needed to drum up sufficient business during the traditionally busy months to help lesson the impact of slow times.

However, no matter how much training and support is given by companies, franchisees must realise that a lot of hard work and business flair is the key to success within the seasonal franchise market.