Starting a Business? Consider Buying a Franchise
Franchising, although more expensive initially than starting a new business, is also a most-likely-to-succeed business worth looking into. In a Palm Beach Post article, the IFA Educational Foundation says more than 90 percent of franchises renew their agreements. “With contracts averaging five to seven years, that means the rate of success is much higher than small businesses as a whole”, said Matt Haller, spokesman for the International Franchise Association.
Pizza, frozen yogurt, bagel shops. Child day care, indoor playgrounds, tutoring. Hair salons and home health care. If you want to, you can get into just about any kind of business.
But the advantage of a franchise is not in the variety of options, but the benefit of buying into a company that has an established reputation and customer base.
“Because it’s all been researched and developed,” United Franchise Group CEO Ray Titus said. “It’s being used successfully by people in the business.”
The West Palm Beach-based corporation has 1,400across five types of businesses and was recently recognized by the governor’s office and Enterprise Florida for business diversification.
More than 90 percent ofrenew their agreements, the IFA Educational Foundation found. With contracts averaging five to seven years, that means the rate of success is much higher than small businesses as a whole, said Matt Haller, spokesman for the International Franchise Association.
U.S.Administration statistics show that seven out of 10 new businesses – ones that hire at least one person in addition to the owner – survive two years, but only half survive five years, Haller said.
Buying into a franchise is an excellent opportunity, said Dick Shon, who retired to Boca Raton after running Midas Muffler shops in the Milwaukee area for more than 30 years. Ultimately, he owned six stores.
“I bought into it knowing entirely from Day 1, I had potential customers,” Shon said. If he had opened Dick’s Muffler Shop, he would have been an unknown foundering among a crowd of auto repair shops, he said.
The pros? You have someone to go to for advertising, promotions and business operational support, Shon said.
As far as costs go,have upfront fees, monthly royalty fees and sometimes other required costs, such as mandatory training or buy-in to promotional programs. And companies often set a minimum net worth and require an amount of cash available for operating costs
can be expensive to start, which is probably the biggest disadvantage, said Georgia Abbott, director of the Alden B. Dow Center for Creativity & Enterprise at Northwood University. Think $70,000 to $500,000 just to buy in, she said.
“That can be a very difficult amount of cash for an upstart buyer,” she said.
Abbott is talking about a regular person or couple who wants to start their own business or maybe open a franchise as an investment.
United Franchise Group’s opportunities also provide entry points for people who would otherwise open a mom-and-pop-sized business. Titus said initial investments range from $25,000 to about $50,000. The company requires owners to have working capital of $30,000 to $50,000 for retail businesses and about $20,000 for home-based businesses.
Manyare available to middle-income people who are looking to open their first business.
Starting as a franchise can be dramatically different from starting an independent business.
Jack Siney started several businesses “from scratch” long before he and wife Stephanie bought the Plato’s Closetin Royal Palm Beach and Boca Raton.
The franchise system takes care of the processes, the infrastructure such as a computer system and marketing, and often gives you a network of fellowto work with for discount ad rates, he said. That leaves the business owner able to focus on success.
“If someone’s going to start a business and it’s not super-unique, I don’t know why they wouldn’t try a franchise model,” Siney said.
In many franchise systems, new owners attend training with other newand form networks for support and shared advertising.
Photo by Plato’s Closet