Interested in a Franchise or other opportunities
Another business model is franchising, here rather than a business raising funds and using it to expand a branch network, they seek out partners who wish to run branches, or copies of the business under licence. The business doing this is the franchisor and the people taking it up, the franchisees.
In some cases a franchisor has a proven track record in a business and sees this as an effective and profitable way to expand. In many cases today, franchisors are businesses set up specifically to offer franchises, or others who have involved franchising as a part of their business development plan. Some franchisors have developed a range of franchises to market and support.
A franchisee usually pays a franchise fee to start and then a percentage of takings to the franchisor. In exchange the franchisor helps the business to get going, often includes training, systems, maybe a website and in some cases bundled in equipment, vehicles and stock to get started. Beyond this they may organise brand marketing, or joint marketing campaigns, provide help, monitor progress and maybe introduce other income streams.
Marketing franchises is an unregulated activity and excluded from the censorship around offering business opportunities, so anyone can do it, and in just about any way that they choose. It has become a huge industry, with organisations, marketing groups, promotional magazines and more, representing the interests of franchisors. Political lobbying and other tactics have paid off for the franchise marketing industry, in that there are fewer restrictions on marketing franchises, although far more people with little or no business experience are likely to become involved in them, than in other business models.
The marketing costs involved in marketing each franchise sold by some routes can be huge, and this is recovered in the franchise fee structure, although never shown as such.
Producing reliable and balanced information on all franchises is difficult, you are likely to be told of the successful franchisees but not the ones that fail, or just limp along. You are likely to be told of resale values being asked for franchises that are now being offered for sale by franchisees who want to leave, but not on the actual prices achieved or how long it took to sell. You are likely to be asked to sign confidentiality agreements before they disclose the 'secrets' of the business, even often the in depth marketing information that you need in order to decide if it is a viable business opportunity for you, or to see the franchise agreement. While you can, with assistance, work out much of this yourself, it does take a lot of time, and to do it across a wide range of franchises is impracticable for the individual.
ABAN offers a balanced picture, it looks at franchising, explaining the advantages and disadvantages, who is likely to like this model and who is unlikely to. It attempts to put statistics into context, and to assist both those who want to develop franchises and market them economically and those who want to look at franchises available.
As a member to member organisation ABAN seeks to empower and inform, to introduce those who wish to consider franchises to members who are offering them.
If you are interested in looking at franchises, finding out if it is the right route for you and looking at some available, including some that have very low cost franchise fees, then join as a free ABAN member, and you will have full access to all of this, as well as of course all other information and opportunities available to members.
ABAN does not currently have information on all franchises available on the members website, as much of what is available is too one sided and written for and in many cases by the franchisors, or marketing companies that are selling you franchises. A panel of the ABAN Plus Consultant members are working on developing an across the board review and will over time be adding information on a wider range of industries and those involved.
Some members are involved in franchises, either as existing franchisees and some as franchisors, and there are opportunities for members to meet up, particularly as a part of ABAN Plus meetings and activities, as well as making contact with ABAN Plus Consultant members.
Information for franchise companies or those who are looking to include franchising as a part of their business model is covered on another page, click here to read this.
On the member website ABAN also lists quality opportunities, it excludes multi level marketing and a wide range of activities that would not likely to be of interest or prove a sensible consideration for members.
The objective is to offer a variety, but very select group of opportunities, that may be of interest to members. This includes some other arrangements not covered under the main business models used, in some cases businesses or part developed businesses or property for sale and some commission paid roles. No one can advertise on the ABAN member site, and the opportunities presented are those selected from those being put forward by members that have been discussed and found favourable. Most in practice will have been those put forward by ABAN Personal Plus members, although a small number may have come up at other members meetings or training events.
. New. FREE franchises (for a period only) with no up front franchise fee or monthly franchise fee ever.
We think this is the best franchise deal you will ever find, in the industry with the highest margin and scope to grow enormously.
Questions and answers
Are franchises safer than other businesses.
Not really, if you compare like with like. You do see claims that franchises have far lower failure rates than conventional business start ups and while this is true, it is misleading in that it is not comparing similar entities. A franchise has to be able to be fully funded to be able to start, while most other businesses are not. To get a fair comparison we would have to look at fully funded businesses in the same industry at the same time.
Franchises have an advantage of a thought out business plan and experience gained in applying it, but a disadvantage in lack of flexibility, costs, and being managed by those who can afford to buy in rather than necessarily by the best team.
Is it better to be a franchisor or franchisee.
The franchisor has major marketing costs, has to work with whoever comes along with the money available, but gets an income independent of the profitability of the franchisees, as the ongoing franchise fees are based on turnover not margin or profit.
The franchisee is often a person with little or no business management experience, and may get a number of services provided by the franchisor, within their fees.
Does ABAN recommend franchises as a good route for those new to business
ABAN works to explain the differences, empower people to be able to understand and use the model that is best for them. In some cases this will be a franchise, other times a joint venture consortium (JVC) and some times another model.
You also have to remember that a franchise is just a licence to operate the business for a set time, and while you can sell it, the value would never be as high as a business with the same margin. There can also be problems in tying property rental periods up with franchise contract periods.
Commissioning also known as outsourcing some tasks, is another way to get some tasks undertaken, simplifying business.
There are some industries and models where franchising will work well, and in some developments ABAN suggests that rather than raising funds for expansion, businesses look at franchising as a means of expanding.
It also should be said that there are a wide variety of types of franchising and licensing arrangements, and some have distinct advantages for everyone involved.
When should I look at franchising my business
Look at it early, even if you are not going to do it for some time, it may then allow you to consider ways that you either set up your existing operation or policy or other changes that you make, so that it will be easier to franchise later. It may be that you look on your existing operation as two parts, the master franchise and you, as your first franchisee. This would allow you to understand exactly what is needed, the economics involved and to have a working model to demonstrate and train within.
It can also become a diversion from the main focus of your business, and marketing the franchise widely may be very expensive.
Don't get carried away with numbers they multiply up quickly with a lot of franchisees but instead look at details on other franchises on offer and the number of franchisees each have, and the prices they are charging.
Would I be better off putting my money into a franchise or property.
This you will have to decide for yourself, it in part depends on the amount you have, the franchise you choose and the amount of activity you want to be involved in.
If two people had the same large sum and one bought a property and the second a franchise, then the week following the property would be far more likely to be able to be sold for near the price it was bought for, while the franchise would not. In two years time which will be the most valuable is an unknown.
Unless you have a very large amount of money, you are unlikely to have enough to be fully involved full time in property.
If you have a small amount then there are some very low cost franchises within the ABAN franchise section that would allow a good income to be produced.
We asked a franchise operator what he would do faced with this decision to make, and he said he would do both, have a lower cost franchise where less is lost in the initial franchise fee and become involved in a property joint venture with the rest.
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