I have been watching franchises offered by companies since the early 1980’s. While unlike the ’80’s and early ’90’s, franchises do not seem to be the “rage” anymore I have a few thoughts on them… as they apply to starting your own businesses. But don’t worry… I will present these thoughts over several emails to ease the burden of reading them!
For those of you not familiar with franchises, they are basically “canned” or “cloned’ business models that can be repeated by new “franchisees”. The franchisees “buy”:
1) a business model that works;
2) the right to use the “good name” (actually the goodwill of the business as built up in the public eye) to attract customers ready, willing, and able to buy from the franchisee;
3) a defined geographic area in which the franchisee has an “exclusive” or a monopoly on the franchise (or only a limited number of fellow franchisees as competitors in a defined geographic area such as a State); and
4) the ongoing support of the franchisor to give the franchisee the best chance of succeeding.
Some franchisors, many fast-food companies like McDonalds, have many “company-owned and run” stores and additionally have franchisee owned and run stores (franchises). Other companies are mostly franchises… the initial franchises being owned by the person(s) that started the company an the other ones cloned therefrom.
While franchises are good if the four requirements listed above are met, I have seen deficiencies in many franchise offers. Many people end up spending their “life savings” of from $5,000 to $75,000 or more and end up stuck with a 12-hour-a-day-job working for minimum wage… or worse! I will discuss in my next post.
Best regards,
Brian R. Rayve
From: http://ping.fm/D6m1D
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