The powerful advantage of a franchise is that management help is provided by the owner. For example Subway, the second fastest growing franchise in the country does not want the franchise to fail. Subway has regional development agents who do the research to find good locations for Subway’s sandwich outlets. The subway franchise also provides two weeks of training at company head quarters and ongoing operational and marketing support. Franchisors provide an established name and national advertising to stimulate demand for the product or service. Potential disadvantages are the lack of control that occurs when franchisors want every business managed in exactly the same way. In some cases franchisors require that franchise owners use certain contractors or suppliers that might cost more than others would. In addition, franchises can be very expensive, and the high start up costs is followed with monthly payments to the franchisor that can run from 2 per cent to 15 percent of gross sales.
Entrepreneurs who are considering buying a franchise should investigate the company thoroughly. The prospective franchisee is legally entitled to a copy of franchisor disclosure statements which include information on 20 topics, including litigation and bankruptcy, history, identities of the directors and executive officers, financial information identification of any products the franchisee is required to buy, and from whom those purchases must be made. The entrepreneurs also should talk with as many franchise owners as possible, since they are among the best sources of information. Exhibit lists some specific questions entrepreneurs should ask about themselves and the company when considering buying a franchise. Answering such questions can improve the chances for successful career as Franchisee
Sample questions Incubator
Questions about the Entrepreneur:
1) Will I enjoy the day to day work of the business?
2) Do my background, experience and goals make this a good choice for me?
3) Am I willing to work within the rules and guidelines established by the franchisor?
Questions about the Franchisor:
1) What assistance does the company provide in terms of selection of location set ups costs, and securing credit; day to day technical assistance; marketing and ongoing training and development?
2) How long does it take the typical franchise owner to start making a profit?
3) How many franchisees changed ownership within the past year, and why?
Before Signing the Dotted Line:
1) Do I understand the risks associated with this business and am I willing to assume them?
2) Have I had an advisor review the disclosure documents and franchise agreement?
3) Do I understand the contract?
Participate in a Business Incubator:
An attractive innovation for entrepreneurs who want to start a business from scratch is to join a business incubator. The business incubator provides shared office space, management support services and management advice to entrepreneurs. By sharing office space with other entrepreneurs, managers share information about local business financial aid and opportunities
This innovation arose about two decades age to nurture start up companies Business incubators have become a significant segment of the small business economy; the number of incubators nationwide jumped from 385 in 1990 to about 1,000 in 2001. During the dot.com boom, there was a tremendous jump in the number of profit incubators but many of them went out of business as the boom went bust. The incubators that are giving are thriving primarily not for profits and those that cater to niches or focus on helping women or minority entrepreneurs. These include incubators run by government agencies and universities to boost the viability of small business and spur job creation. The value of an incubator is the expertise of an in house mentor, who serves as an advisor role model and cheerleader. Incubator gives budding entrepreneurs a chance to network and learn from on another. Incubators are also an important part of the international entrepreneurial landscapes.
Source: New Era Management