Tag Archives: pricing

Reasons to Consider Becoming a Franchisee


Maybe you’re one of the growing number of baby boomers who have been downsized or have become fed up with the corporate politics. You might be seeking a business to own after serving our country in the military. Or you realize it’s time to act on the entrepreneurial spirit burning within you before it’s too late.

Whatever the reason, the next decision is what type of business to buy. One of the venues you might be considering is a franchise. Because you haven’t delved into it before, you might be unaware of a few key benefits of this business model. Many people have made very good livings under the protective umbrella of a franchise. Following are five reasons why:

  • It’s Established. A new business would require you to set up everything from scratch. Even with an existing business, you may be buying its problems. In either case, you will have to experiment (which may be costly) to get to the money making formula.

One variation of buying an existing business is purchasing a current franchise. Here the franchisor should be willing to provide a description of the business model and what it takes to work properly. With a franchise, everything is ready to go. Unsuccessful techniques have already been drummed out of the system. What’s left are methods that should work with your investment and efforts.

  • Marketing. Probably one of the toughest business concepts to execute well as an independent start-up, especially if you’re not familiar with it, is how to successfully market your product or service. Due to the enormous change that the Internet has introduced to business (Think about what it did to the Yellow Pages.), this has become particularly challenging without the help of a franchise system.

The Internet has been a great boost to many franchises that compete with bigger companies that spend millions on mass media advertising. Most franchises are about local business or one-on-one customer connections. The Internet helps make these connections. Look for franchises that help you use the Internet juggernaut in tandem with other marketing ideas.

For example, the types of ads, where to run them and how to reach your target market are all crucial to your business success.  A franchisor not only creates advertisements beneficial to all but also provides guidance for what media is most effective for specific business locations.

  • Pricing. This is a two-part consideration. First, considering the initial investment, starting up a business from scratch can be a tough guessing game. A very common cause of business failure is under-funded start-ups since no accurate cost estimates were available.

Be sure you purchase a franchise you can afford that does not result in an excessive debt burden. And consider how much cash in reserve you need to have. This is the extra money that is needed to keep up with the ongoing cost of doing business before the business can provide a good level of income. The franchisor should be able to give you fairly accurate start-up costs and alerts to extraordinary things that can happen. The franchisor can also give you an estimate of how long it can take to have a new store pay the bills.  Finally, consider what it takes to keep your household going and have the cash on hand for that.

The second part of Pricing is how to charge your customers. This often is a mysterious trial and error process with non-franchise businesses.  For franchises, in many cases, the franchisor will set the prices or provide price guidelines so that you can make money. This saves you from having to perform the tough task of arriving at the right price point on your own.

Keep in mind, though, that the franchisor cannot set your day-to-day prices unless you sign an agreement that stipulates this is the way you will operate the business. This is especially important to retail businesses where local competition can radically affect pricing.  Be sure you closely review your franchise agreement wording around this issue before entering into a long term arrangement.

  • Support. One of the major pluses of owning a franchise is that you will find assistance and guidance for setting up the business. This support is ongoing through any rough patches you might encounter. In addition to the franchisor, you have a network of other franchise owner-operators with whom you can discuss concerns.

Look carefully for how business information is delivered to franchisees and how easy it will be to get the franchisor’s attention on important issues. Ongoing access to decision makers and personalized attention when needed goes beyond company manuals and online email contacts.  Being able to get this valuable input if/when it’s needed, can make the difference between costly mistakes and consistently implementing what works.

  • Innovation. A good franchisor is always on the prowl for ways to improve the experience of their business owners. This could come in the way of new advertising, additional ancillary products/ services to sell and opportunities to expand beyond the original business model.

Ask the franchisor if new ideas and products are tested or proven when they are introduced. Also, find out whether new things not in the business model when you join up, are optional or if they become mandatory when they are introduced.

Remember, franchisors have a vested interest in the success of their franchisees.