Which way to go in business? Start small by your own or franchise?
January 25, 2012 · 9
Question by Nin9 :
I am 50/50 wavering what to do – I plan to begin a signs business and I am thinking whether to go begin my own OR franchise (SignARama) – Just want your opinion.
Answer by Mexican :
I also looked at buying a franchise, it seemed the easier strategy to use because everything was at place. But after looking at it a little further, I modified my mind. What I came crossways was you are usually essentially “buying” yourself work. And not a straightforward job! There is obviously a very large investment, and you might be under tighter principles than any job We have ever had. You might be told how much time per week you need to work, exactly the amount of people you are granted to hire, regular two weeks vacation, which has to be booked ahead, and so forth. Too many rules for me personally, considering I am setting up all the funds and told never to anticipate much of your return for 36 months!
Being I acquired no experience owning a regular business both, I opted for multi-level marketing. Again, everything is at place but my own initial investment was merely a $200. All the equipment are available, along with full training and also mentoring, I just necessary to sell the merchandise. I selected health and fitness because your largest market is obviously the baby boomers, which is what they are seeking now. It’s a fantastic car for boosting your net worth, you set your own individualized hours, work from residence and I pass whenever I must. Because it’s left over, even when I’m apart, my business continues to acquire money.
I came crossways it to function as simplest system with all the ideal pay plan on the market. I started making a profit my own first month, something that was impossible with a operation.
How about you, give your view in the comments below !
This is an extremely important decision for you. I hope the following helps out a bit. First is survey data from current franchisees of four sign franchises. (I have no opinion on any of these companies). Second is general insight on investing in a franchise.
Data from 14 Sign-A-Rama franchisees in 13 different states:
Prior to opening your franchise, which (if any) of the following did you underestimate (seven choices)?
Most frequent responses: % answering
Difficulty in hiring/retaining quality staff= 71%
Amount of working capital required for your 1st year in business = 64%
Start-up costs= 50%
Is your income more, less or about what you expected prior to opening your business?
% answering
More = 14%
Less = 64%
About what was expected = 21%
Summary: 35% are making about what they expected, or more.
If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?
% answering
Yes = 69%
No= 31%
Data from 15 Signs By Tomorrow franchisees in 12 different states:
Prior to opening your franchise, which (if any) of the following did you underestimate?
Most frequent responses:
% answering
Amount of working capital required for your 1st year in business= 53%
Degree of stress (tie)= 47%
Workload (tie) = 47%
Is your income more, less or about what you expected prior to opening your business?
% answering
More= 0%
Less = 57%
About what was expected = 43%
Summary: 57% are making about what they expected, or more.
If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?
% answering
Yes = 67%
No= 33%
Data from 14 different Signs Now franchisees in 12 different states:
Prior to opening your franchise, which (if any) of the following did you underestimate?
Most frequent responses:
% answering
Degree of stress= 50%
Difficulty in hiring/retaining quality staff (tie)= 43%
Expertise required to run the business (tie)= 43%
Is your income more, less or about what you expected prior to opening your business?
% answering
More= 14%
Less = 64%
About what was expected= 21%
Summary: 35% are making about what they expected, or more.
If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?
% answering
Yes = 71%
No= 29%
Data from 15 Fast Signs franchisees in 13 different states:
Prior to opening your franchise, which (if any) of the following did you underestimate?
Most frequent responses:
% answering
Difficulty in hiring/retaining quality staff (tie)= 47%
Workload (tie)= 47%
Amount of working capital required for 1st year in business (tie) = 40%
Degree of stress (tie)= 40%
Is your income more, less or about what you expected prior to opening your business?
% answering
More = 23%
Less = 38%
About what was expected = 38%
Summary: 61% are making about what they expected, or more.
If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?
% answering
Yes = 87%
No= 13%
Once you identify an area or type of business, the best way to truly assess whether to buy any franchise is to speak directly with several (at least six, preferably more) franchisees for the company you are considering. A self-examination as to whether owning a business is what you really want is also essential, as is a very thorough due diligence. Here are 10 steps that should be taken by anyone considering investing in a franchise:
1 – Conduct due diligence on yourself
2 – Find a great accountant
3 – Find a great attorney specialized in franchise law
4 – Conduct due diligence on the business
5 – Refresh and enhance your business acumen
6 – Write a business plan
7 – Identify and hire a great team- then create a culture to retain it
8 – Hone your leadership skills
9 – Hone your sales skills
10 -Create a schedule that allows some time for family and friends
Some other information you may find helpful:
Most franchise contracts are 10-year commitments for which the franchisee has virtually no rights. They’re structured such that the franchisee has very little latitude or say in how the business is operated. You have flexibility to hire your staff, manage them and set your own prices, but most everything else, from displays to products you may/may not carry to signage/advertising, equipment, technology, etc. is usually either governed by or subject to the approval of the franchisor. It’s not like owning your own business, it’s more like being a store manager who, if the business is profitable, takes home most of that. And if the business is not profitable and you want to sell it or close it after five years, these are both very difficult to do. The former is usually via either a very large fee (an example is a local franchisee who paid $100,000 to terminate his franchise contract with one of the more popular women’s fitness center franchises) or personal bankruptcy (franchise contracts generally require you that you be personally liable your business debts, not just through whatever type of corporate entity you might establish; e.g., LLC, S Corp., Partnership, etc.). The latter option of selling your franchise is generally accomplished only at a very large discount.
There are dozens of things to investigate when considering investing in a franchise, but here are some fundamental questions to ask current franchisees:
About how many hours per week do you dedicate to your franchise business?
How would you describe your relations/communications with your franchisor?
Is the franchisor fair with you in resolving any grievances?
Are territories equitably granted?
How would you describe the initial and ongoing training provided by your franchisor?
In what ways could the parent company most improve?
Is your income A) more, B) less or C) about what you expected prior to opening your business?
If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?
The last one is of course the most important. There are many very happy, wealthy franchisees out there, but it’s not a guaranteed formula for success. Every opportunity is unique and requires extensive due diligence of both the franchise itself as well as the regulations governing the industry. If you have more specific questions, please feel free to contact me.
If you know the sign business well, perhaps you have worked in one, and you have an understanding of accounting and business, then you should start on your own. If however, you know little about the sign business, and don’t understand accounting, then go with the franchise. They should be able to help you along the road to success.
Many years ago when the concept of franchise start, it was indeed a good concept as there are many people whom had make it as the concept of franchise was made in such a way that there is a 50/50 passing of risk and rewards to the franchisee.
However, over the years, there has been a high derogation of the franchise concept as the franchiser are making concept out to bleed the franchisee and getting rid of their products at the expenses of the franchisee. in addition, franchisee are faced with :-
1) High entry cost
2) High and over demanding expectation from the franchiser that they themselves may have difficulting in meeting
3) high exit cost – at the termination, you can be strip to nothing.
Unless, you are telling me that you are getting another KFC or Macdonald franchise, most of the other franchise are useless. for it is my personal opinion that the good ones are taken up by all the Big Corporate whom had bunch of good financial advisers, accountants and business development people whom are able to make the join sound business decision towards risk and rewards.
Coming back to the devil you don’t know, yes….starting from stratch is difficult as not do people not knowing you, but you are faced with many ways of learning the ropes yourself….unlike in a franchise where it is as good as they are teaching you how to do business……..so the question is “is this learning curve worth the addition sums that you are going to be sinking in?”
so effectively, in conclusion, regardless of whether it is a new business or franchise, it would be best for you to evaluate your market first and the kind of products that you are intending to sell.
Use a cost/benefit analysis. Undoubtedly, buying into the franchise will cost more, whether it’s a one-time fee, a percentage of sales fee, annual fee, or otherwise. You’ll still have to buy the same amount of equipment in either scenario, so you have to try to determine if the higher expenditures will lead to higher profits. Also, you’ll need to be sure you can afford to buy into the franchise. Know exactly what the fee structure is, including any hidden fees, for a total “out-of-pocket” expenditure number. Now to stray from the dollars and cents of it….is this a well-organized franchise? How do they rate in customer satisfaction? Is name-recognition going to drive customers to your establishment? Know ALL you can about the franchise before making your final decision. Their financials should be strong and their reputation should be solid for you to consider franchising with them. Best of luck!
im also gonna start a small biz but for me it would have to be small, unless you think your gonna make million dolla profits, small benifits as to see if you have a niche that people desire, more as an exploriation and to make the mistakes in the begining plus you can always make it into a franchise if it has the room to grow and work out all the crap parts of it you havent even thought of yet, you have to be established and prove your self i think, it all take time , good luck
pros and cons:
Starting your own biz means that you have to learn everything, but it is cheaper and you have more freedom. You do have more problems getting business recognition.
Starting a franchise gives you more instant company recognition and help setting up but gives you less freedom to do what you want and it also involves ongoing costs to the franchisee.
I would research the strengths, costs and feedback on the various sign franchises. Find one you like and can afford and actually supports it’s franchisers.
Research what it will involve and cost to set up your own sign biz.
Sit down with pen and paper and put down all the respective costs, the pros and cons and work from there.
In a highly competitive business area – sometimes product and business recognition is very important. Could you compete in your own biz if a franchised opened up close by?
you can start your own a lot cheaper than going with a franchise. However, you are strictly on your own but you don’t give a good portion of the receipts to the franchise. You also don’t get the backing that a franchise gives you. Depends on how confident you are with the idea.
If you are new to starting a business I would go with a franchise. You will have access to more help and a variety of knowledgeable people. You will be putting in a system that has been proven to work in other areas instead of trying to create your own. You will also have an easier time promoting to and drawing in clientele.
Each has it’s own advantages. with SignaRama there is a built in company, with all the software needed, inventory and a marketing mechanism: you just gotta make sales.
If you start your own, you’ll have more control and can choose the amount of inventory to have on hand. But it may cost you more to invest, and even costlier if you make mistakes.