The Master Franchise Option

Franchise - Many people want to be a franchisor and not a franchisee. Some of them own businesses they would like to franchise, but they note that someone else has already franchise that type of business and are quite successful. Often, they do not wish to compete against such a successful company or there are several successful corporations franchising in the same industry and they feel the competition will just be too high.

Still, they might realize their dreams by becoming a master franchise ; which is basically a franchisor under the same brand name that operates within a region or state. Buying up the state rights to franchise a given franchise brand name might be a very wise way to go. It is definitely something to look at and worth looking into.

Indeed, I recommend that someone who wants to become a master franchise have franchising experience or bring on board a CFE Certified Franchise Executive from the International Franchise Association who has the least a decade or more experience in franchising at least a similar type of business format.

You must realize if you wish to be a master franchise that you're going to need quite a bit of funding. Generally a franchisor needs about $1 million to turn a prototype small business that has been up and running for ten years into a franchising company. Of course, if you buy a master franchise and wish to franchise only one state and you're going to use the current franchisor's system to do so, and thus, you can probably get by on a lot less.

Still, you are going to need a good chunk of change for working capital for the first five years and you should never buy a master franchise opportunity from a startup franchisor unless they have all the bugs worked out, and have a solid team behind them with excellent capital. Please consider all this. < Franchise >

By Lance Winslow

Before You Buy a Franchise Find Out Why the Franchisor is Franchising

Franchise - If you are considering buying a franchise of your own you might want to consider a couple of questions that you should ask the franchisor or prior to your purchase. One question I always like to ask franchisors on behalf for franchise buyers is; why did you decide to franchise, and expand your business this way? Why didn't you just start opening up all your own locations? Their answers to this question can be very revealing.

You see, if they are franchising just to make a lot of money and franchise fees then they are probably not very good businesspeople because it costs about $1 million up front in capital to franchise and it takes a good 5 to 10 years to really get a good return on investment in the franchise industry.

It's a lot of headaches, a lot of litigation, a lot of sacrifice, and a tremendous amount of work to franchise a company. Although it is enticing to become the next Ray Kroc (founder of McDonalds) the reality is that the failure rate amongst franchisors is five to one over the first five years. Those are not very good odds when you're risking $1 million in working capital.

If however the franchisor has a great product or service that is very much desired by the consumer, but realizes they simply cannot expand fast enough to conquer the marketplace and attain a huge chunk of the market share, then sometimes franchising really is the best way to go especially if they have the right team behind them and the million dollar war chest. Please consider all this. < Franchise >

By Lance Winslow

Steady Growth in Franchise is Essential

Franchise - If you are considering buying a franchise and wish to own your own business, as a franchisee then you need to carefully study the various franchisors and their offerings to make sure it is a good fit and that the companies are financially stable. Perhaps you didn't know this but franchisors have a high rate of failure and most go out of business before five years. In fact it's even worse than that the failure rate of small businesses in the US, as franchisors rates of failure are pushing 5 to 1 in the first five years.

The failure rate of franchising companies is triple that of franchisee failures. One thing that I advise franchise buyers to check out is to see if the franchisor has maintained steady growth. Most likely what you'll find is that the franchisor goes through spurts of growth based on a market conditions and the business cycles. If you do a little bit of research you will also find that the franchisor can go through wild swings in available capital, and on their income statement.

A franchising company that grows real fast can often become cash poor and that means the level of support for his franchisees goes down to a trickle, which is something you definitely don't want to know in advance if you are going to be one of the franchise team members. So before you buy make sure that the company maintains steady growth, and in times of rapid growth did they give proper support or franchised outlets, and keep up with their cash flow.

There are two ways to get to the bottom of this question. One is to look at the financial statements for several years back and contrast that to the number of outlets and growth. The second way to figure this out is to talk to franchisees that are currently in the system about the level of support to see if it has been steady. Please consider all this. <>

By Lance Winslow