Franchising- Franchise Services and Failure Rates

When contemplating a possible franchise arrangement, it is important for the entrepreneur to consider what will be provided by the franchisor. The services provided by a franchisor to a franchisee can vary greatly, but at the very least include the use of a name. It may also include an entire marketing or business system consisting of advertising, products, inventory systems, accounting systems, and procedure manuals and guidelines. The value of these things to a franchisee is tremendous, since the franchisee would not need to develop them independently. Independent development of these items could be an expensive and frustrating task for the entrepreneur.

Failure rates are lower for franchises than for independent businesses for several reasons. First among these is the fact that most reputable franchise providers put each potential franchisee through an extensive screening process. This process includes a requirement for a certain level of capital availability. There are also business knowledge and training requirements which further reduce the likelihood of failure. This is not to say that a franchise agreement is a guarantee of success. Some franchises fail anyway due to unreasonable expectations in a given market area. It is ultimately up to the franchisee to look into all the circumstances of the prospective agreement, particularly if they are new to business, and get educated second or third opinions before making the leap into a purchase.

Franchising

Franchises are a great way to get into and start a new business. A franchise is an authorization to sell a company's products or services, usually within a defined geographic area. Firms that offer franchises can offer franchise branches to individuals and can operate company-owned branches as well. Some do both, while some concentrate on one or the other. A franchisee usually pays a predetermined fee up-front for the franchise and then must pay an ongoing percentage of revenue periodically. A company owned store within a franchise is simply owned and managed by the company itself. Franchisees may be limited in how far they can stray from established company rules and procedures.

Although individual situations can vary, it is understood that franchised stores are generally more profitable than company owned stores. So a franchisee is required to operate within a framework of rules provided by the franchisor, but has the ability to enjoy substantial profits as a reward. Company owned stores are sometimes caught between the two worlds; the franchisor may see running at least one store as a necessary part of relating to its franchisees, but may not desire the day-to-day staffing and management demands that this entails.

The ability to grow rapidly with a relatively small staff and small payroll requirements is one of the great attractions of franchising. A company owned store goes against this, requiring additional staff and commitment.

http://www.franchise-chat.com/resources/franchise_versus_company_operations.htm

Personal Considerations in Starting a Small Business: Life, Parents, Job Loss, Education

Life experiences can play a large role in determining success in a small business. Parental influences are one aspect of this; children of parents who owned small businesses may be more inclined to do so themselves. The values that parents impart on their children can lead them to be more, or less, inclined to start a small business. The desire of a person to be the master of his or her own destiny is something that can clearly be absorbed from parents who live their lives this way. The ability of a person to take the risk of starting a small business may also be behavior that was learned from parents who behaved in a similar fashion.

Career displacement can be an additional impetus for starting a small business. There are undoubtedly thousands of newly jobless individuals who are formulating some type of business plan at this very moment! The success or failure of these businesses can depend on how determined the individual is to make the business truly successful. No one starts a business with failure as their goal. But a person who has lost a job later in life may see no other options. This may be the only hope for them to continue providing for their family, finish sending their kids to college, and have a pleasant life during retirement. Suddenly losing your livelihood can give an intense focus and concentration that was not there before.

Education may or may not have an influence on success in small business. Certainly it can for some people, but the available statistics do not yield a clear answer. Obviously education in general is far superior to ignorance, and can give a broad basis for success in any field. However, the educational system in the US may not be capable of producing enough entrepreneurs to keep us on top in today's global economy. Steven D. Strauss, a specialist in small business and entrepreneurship, states it this way: "We need an educational system that, while teaching math and science and reading and writing, also stresses creativity, initiative, risk analysis, and thoroughness; namely, the same sorts of traits that help make one a good entrepreneur and an informed, smart citizen. We are living in an entrepreneurial age, and that will only increase as the century progresses."

http://www.usatoday.com/money/smallbusiness/columnist/strauss/2006-06-26-education_x.htm