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General

No freebie promotional coupons or gimicks

Some franchisors allow their franchisees to conduct their own promotions. Be especially careful of "free" coupon giveaways in whatever form. Subway is ending their free sub card (you need to get a certain number of stamps and you get a free sub).

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How to franchise your business, and what franchisees can learn

If you want to be a franchisee, understanding the motivations and decisions made by franchisors is important. I came across this article that walks through the general considerations a franchisor must deal with when deciding whether to franchise their business. Reading the article will help franchisees evaluate whether the franchise fees and royalty are a fair exchange for the training and franchise system. The article lays out 13 steps, all of which should be included and considered during a franchisee’s due diligence. First, the article helps evaluate whether a particular business can be franchised effectively. Franchisees need to understand what makes a good franchise business before evaluating the thousands of franchise oppotunities out there. The article also describes the intellectual property consideration (mainly trademarks) which will somewhat strengthen the exclusionary power of franchises. It discusses the importance of the business, strategic and execuation plans of the business. The article further describes how important pro-active operations and training support are to a franchisee’s success and for establishing a consistent brand image. All of the above are important research points for franchisees, even when the franchisors has hundreds or thousands of units already sold. If a franchisee has weak training, poorly thought out business plan or poor site selection rules, you will find yourself one unhappy franchisee. update 6-9-2005: Thanks for the link, Dane.

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10 tasks when starting a new business

As a follow up my previous post, this article contains a relevant list. 10 MAJOR TASKS WHEN STARTING A NEW BUSINESS 1. Determine startup costs and find the money (e.g. savings, home-equity loan, business loan, etc.). 2. Find location (many startups begin in owner’s home). 3. Choose legal structure (sole proprietorship, partnership, corporation, limited liability corporation). 4. Apply for business license if city requires it and/or other required permits and licenses, depending on type of business. 5. Register a fictitious business name and/or apply for trademark (a franchiser will handle this issue). 6. Obtain seller’s permit if business will sell products subject to sales tax. 7. Apply for tax-identification number for IRS if business will have employees. 8. Set up business bank account to keep company revenue and spending separate from personal account. 9. Set up record-keeping system to track finances, deductible business spending, etc. 10. Write a business and marketing plan. Of course, these are the most basic prerequisites and there are MANY more major tasks and gut checks, but this is a good start.

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Family ditches perfect life for pizza franchise, togetherness

I found this story interesting. It tells the story of a working family ditching their jobs for the life of a franchisee. Are they making more money? No. Are they working less hours? No. Are they happier? Yes. They’re living on less, spending more hours at work and couldn’t be happier. They are saving money on business clothes, gas and travel costs, food, and other work related expenses. How do they market and advertise the business? With no advertising budget, the couple do their own marketing. Don and Kasey tour the nearby residential neighborhoods dropping off menus sporting their Z Pizza address. Don delivers small pizza boxes to nearby businesses with an invitation to bring it to the restaurant in exchange for a free pizza. I find many franchisees are making less money but are more happy in the end.

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Selling your franchise territory

You may have seen the garage organization and shelving ads in the mailers, I know I have. I think the idea is novel and can make someone a nice living. I didn’t realize it was a franchise business, but I suppose it can be profitable enough. One franchisee of the Garagetek system with a territory in Jacksonville, Florida, has sold the franchise business and area expansion rights for about $300,000 (he initially paid $25,000). Often, if you can afford it, signing a franchise agreement to develop a geographic or metro area is the safest and most financially protectable position. The restrictions on where in your terriroty you can set up shop, how many locations you plan to saturate the area with, and many other competitive factors are much more within your control.

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Today matters

Have you been putting off the decisions that are important? Are you spending your short time on earth the way you want? What if you knew you were gong to die in 2 years, what would you do different? Attorney Carolyn Elefant from MyShingle.com legal blog wrote a touching reminder that life is sometimes unexpectedly short no matter how healthy our lifestyle, and the decisions you make TODAY are important and long lasting. How you lead your life is your decision, and maybe the risk of buying a franchise is a risk worth taking.

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What if franchisor is slow supplying inventory?

If the Franchise Pundit hasn’t given you enough reasons to research your franchisor before buying into the company, here is another one. As a franchisee, you are required to purchase inventory, supplies and other items through the franchisor or one of its listed suppliers. What if the franchisor is slow in delivering the product you need to sell? Well, you are out of luck. You’ll be in legal trouble for breaching the franchise agreement if you buy supplies or products elsewhere. Moral of the story? Research the franchisor’s management, talk to other franchisees, ask to see the financial results of the franchisor and their credit ratings based on audited financial statements. Demand (or better, ask your lawyer to demand) the franchise agreement include a clause that you can buy necessities from alternative equivalent sources if the franchisor fails to deliver in a certain amount of time. If they refuse, I’d walk.

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Fastest Growing Franchises and other data

You’ll find some interesting information in this document from the 2005 Franchise Finance Conference. Using their methodology, our friend Dippin’ Dots was the fastest growing franchise. The median investment was between $93K – $185K, with CompuChild USA being the lowest with a $8,850 franchise fee.

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Sample Uniform Franchise Offering Circular

The Federal Trade Commission (“FTC”) requires that a franchisor provide full disclosure of the business to a prospective franchisee in the form of the UFOC. You must be given the Uniform Franchise Offering Circular (“UFOC”) at least 10 days before signing any franchise agreement or during your first face-to-face meeting, whichever comes first. Ever wonder what a UFOC look like? Download and check out Durango Grill’s UFOC (pdf). It’s from 2001, so it probably isn’t their current UFOC. Update 4-27-2005: Fixed broken link to UFOC

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OK, I’m back

Well, I made it! Now I live downtown and have a wonderful view of the skyline. I used eMove to hire some guys to help me move. On that site (owned by U-Haul) you can hire strong laborers by the hour to help you load a truck. I’ve used them 3 times already, and they cost between $15 to $40 an hour per man.

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Will post again in a few days

Hello loyal readers. I’m moving and need the next few days to pack and unpack my stuff. I’ll repost again starting Monday, April 25. Get ready for some educational reads such as REAL financial statements from a variety of franchises that the smart Franchise Pundit fans have emailed in. 😉

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