Starting a Business
Example by
Mr. Roeshink
Type of Business
I have elected to try and open a franchise.
Why a franchise? What are the benefits?
1. Track Record of Success
2. Strong Brand
3. Training Programs
4. Ongoing Operational Support
5. Marketing Assistance
6. Real Estate Assistance
7. Construction Assistance
8. Purchasing Power
9 & 10. Risk Avoidance
Disadvantages of a Franchise
• Franchises can be costly to implement. Also, many
franchises charge ongoing royalties cutting into the
profits of franchisees.
• Franchisors usually require franchisees to follow their
operations manual to a tee in order to ensure
consistency. This limits any creativity on the part of the
franchisee.
• Franchisees must be very good at following directions
in order to maintain the image and level of service
already established. If the franchisee is not capable of
running a quality business or does not have proper
funding, this could curtail success.
Weigh the options
• After considering the possibility of failure and
success rates of most entrepreneurs, I elected
to go with what I felt would yield a higher
level of possible success
Which franchise did I choose?
• I decided to conduct research on the start up
costs associated with opening a Dairy Queen
in our local area.
Two formats to choose from
DQ & Orange Julius
or
DQ Grill & Chill
Decided to go with DQ Orange Julius
• Originally I thought that opening a DQ Grill &
Chill would be a more profitable venture,
however the costs to open one are
substantially higher than opening a DQ
Orange Julius.
• Therefore, obtaining start-up capital for the
Grill & Chill would prove to be difficult.
Why not DQ Grill & Chill
• Dairy Queen requires a franchisee to have
$400,000 in liquid assets with $300,000 as
cash equity, and a minimum net worth of
$750,000. It will cost $895,000 to 1,195,000
for 2048 sq. ft. building that seats 48, and
$1,080,000 to $1,370,000 for 2709 sq. ft.
building that seats 78. Check out the website
to see available states.
DQ Orange Julius
• Mall location study:
• In 2006 total mall start-up and build out was
$325,000
• In 2009 revenues exceeded $329,000 and
have had sales of over $300k per year since
opening.
• $8k-$10k a week in sales.
Franchises: 10 Reasons A Franchise
May Be The Viable Business Choice
Mr. Roeshink – Financial Operations
What is a franchise?
• Franchising is the practice of using another
firm's successful business model.
• Essentially, and in terms of distribution, the
franchisor is a supplier who allows an
operator, or a franchisee, to use the supplier's
trademark and distribute the supplier's goods.
In return, the operator pays the supplier a fee.
3 Basic Types of Franchises
• 1) Distributorships, which grant the right to
sell their parent company's product(s) such as
auto dealerships (Toyota, Ford, Mercedes,
GM, etc).
Trademark/Brand Licensing
• 2) Trademark or brand name licensing, which
gives the licensees the right to use the parent
company's trademark or brand in conjunction
with the operation of their own business ie.
beverages (CocaCola) and sport franchises
(Miami Dolphins, New York Yankees, etc).
Business Format Franchise
• 3) Business format franchises, the type most
people are familiar with (Subway, Meineke
Muffler, Circle K)
Top 10 Franchises for 2013
Hampton Hotels
Subway
Jiffy Lube Int'l. Inc.
7-Eleven
Supercuts
Anytime Fitness
Servpro
Denny's Inc.
McDonald's
Pizza Hut Inc.
Let’s look at the most popular
franchise format…
• Business Format
– Business format franchisors offer to their
franchisees the license or right to sell its goods or
services and/or use its business techniques.
Cont.
• The franchisees usually pay an initial fee to
acquire this right, and thereafter pay a
percentage of their gross sales to the
franchisor throughout the term of their
franchise contract. In return for these
payments, franchisees gain privileges,
including the right to sell a proven and
recognized product or service, to use the
franchisor's business practices, and to receive
initial training and ongoing support.
Additional Responsibilities
• Additional responsibilities can and usually do include:
• Requirements to meet a variety of quality controls for
products and services sold.
• Restrictions on what they can sell or how they can operate
using the company's name.
• Specifications for their business location and site appearance.
• Prohibitions on the operation of any similar businesses during
or after the term of the franchise agreement.
• Franchisees usually have an advantage over their
nonfranchisee competitors, since they have the rights to use
the franchisor's: Brand names, trademarks, copyrights, trade
secrets, and patents.
Additional Responsibilities
• Uniform logos, storefronts, and interiors.
• By following the franchisor's business practices and offering
products that meet the company's standards, franchisees can
consistently provide customers with quality goods and
services.
• Research has shown that the success rate of new franchisees
is much higher than that for other new business start-ups.
Why Franchises Work…
• So why do franchises work?
• Here are the top 10 reasons…
1. Turnkey Business
• There are many entrepreneurs that have exactly what
it takes to run a successful business but don’t have
what it takes to get their business up and running.
Whether it be financing, negotiating lease terms or
even the confidence it takes to quit their job and start
their own business.
Buying a franchise eliminates all the hard work: finding
a location, negotiating a lease, hiring reliable
contractors and doing all this on-time and within
budget. When you buy a franchise you are buying a
complete turnkey business.
2. Proven System in Place
• When you buy a franchise you buy a system.
All franchises have an already-established
system in place that you must follow. These
systems are designed to improve the overall
productivity and increase sales of each
franchise. Having a proven system already in
place eliminates the guesswork and errors a
common business owner would normally face.
3. Higher Likelihood of Success
• Buying a franchise is very different from
starting a mom-and-pop business. Since there
is an already established system in place,
there is a higher likelihood of success. If you
follow the system the franchisor has put in
place, you should be on your way to running a
very successful business.
4. Corporate Image and Brand
Awareness
• If you buy into a franchise system that is
already established the corporate image and
brand awareness is already recognized.
Customers are usually more comfortable
purchasing items they are familiar with and
working with companies they already know
and trust.
5. Easier to Obtain Financing
• Lenders are usually very comfortable financing
the purchase of a franchise because they
already have a proven track record. Bankers
usually look at successful franchise chains as
having a lower risk of repayment default and
are more likely to loan money based on that
premise. In addition, some franchise systems
even provide in-house financing and/or
leasing options.
6. Training
• Most franchise companies offer a 1-4 week
training program that is usually held at their
corporate offices or at an actual franchise
location. This is what makes franchises stand out
from every other business or business
opportunity. The franchisor will train you to run
your franchise exactly the same way their other
franchise locations are run. This will ensure that
you are running your business efficiently and will
help to eliminate any common mistakes a new
business owner usually faces.
7. Ongoing Support
• When you buy a franchise you are never
alone. You will always have the support of the
franchisor and the support of knowing you are
part of a growing family. You will always be
able to pick up the phone and ask questions to
the franchisor or even to other franchisees.
8. Marketing
• There is usually no need to worry about
advertising your franchise. The franchisor
usually takes care of handling all of the
marketing. If the franchisor does not handle
the marketing, they will have an outline for
you to follow and sometimes specific vendors
that will have systems in place for you to use.
9. Exclusive Territory
• When you buy a franchise you are also buying
an exclusive territory in which to do business.
Franchisors will only allow a certain amount of
franchises to be open within a certain
geographical region. You will be entitled to a
certain area and no other franchises (within
your franchise system) can be open within
that area.
10. Own Multiple Locations
• Being a part of a franchise system will always offer you
more opportunities to grow within the system. Once you
have become a successful franchise, owner the next step is
to become a multi-unit franchise owner.
After you have one successful franchise open with a great
management team you can focus time on opening a second
location. Multi-unit franchise owners manage more than
one location and are able to sometimes double their
income by taking on more than one location. Owning
multiple franchise locations can be very lucrative.