PROS:
Brand recognition
Many well-known franchises have national brand-name recognition. Buying a franchise can be like buying a business with built-in customers. This will amount to great savings in customer acquisition costs and allow for more time in the overall operation of the business.
A brand communicates specific information about an organization, product or service and distinguishes it from others in the marketplace. It makes the products or organization unique. Furthermore, the brand is the identity of a specific product, service, or business and can take many forms including a symbol, name, sign, etc. Today, great brands are realizing that people don’t necessarily distinguish categories. What actually matters is that the brand has a point of view on the world that asks people to embrace them.
WHY IS BRAND IMPORTANT?
A brand communicates specific information about an organization, product or service and distinguishes it from others in the marketplace. It makes the products or organization unique. Furthermore, the brand is the identity of a specific product, service, or business and can take many forms including a symbol, name, sign, etc. Today, great brands are realizing that people don’t necessarily distinguish categories. What actually matters is that the brand has a point of view on the world that asks people to embrace them.
A business concept: track record for success
When you buy a franchise, you are buying an established business model that has a proven track record. Statistics show that franchisees stand a much better chance of success than people who start independent businesses. The whole point again of the franchise model is that it’s been proven to work already both domestically as well as internationally. The roadmap has already been done so all you have to do is follow it. As franchise companies state, you're in business for yourself, but not by yourself.
Management training
When you buy a franchise, you get all the equipment, supplies and instruction and training needed to start the business. You also get ongoing training, and help with management and marketing. Your franchise will reap the benefit of the parent company's national marketing campaigns, creative materials, national spokespersons, technical trainers, on-line training, webinars, etc. This is the most important part for entrepreneurs as business owners don't plan to fail, rather, they fail to plan.
Proprietary methods and processes
From day one, you have cutting edge systems and technology right at your fingertips that you didn’t have to invent or put any resources in to.
Marketing and advertising plan to follow
Brochures, radio and television commercials, yellow pages, newspapers, flyers, coupons, direct mail campaigns; This is another huge time saver as you just have to pay for what you need and you’re ready to go. Hence, marketing will be more interesting and challenging area as it is made up of many coherent ideas that consistently repeat the big idea or brand message. By continually repeating the same television commercials and weekly coupons, the brand continues to build awareness.
Recruiting and staffing
Finding good employees is crucial to the success of the franchisee. A franchise business with a recognized name will have greater recruiting pull than an unknown business entity.
Purchasing power
The collective buying power of a franchise group allows for lower costs in purchasing inventory and equipment. There is power in numbers!
CONS:
Start-up costs
The average initial franchise investment is $250,000 which excludes real estate.
1. Hampton Hotels (Mid-priced hotels): $3,716,000 - $13,148,800
2. Ampm (Convenience store & gas station): $1,786,929 - $7,596,688
3. McDonald's (Hamburgers, chicken, salads): $1,057,200 - $1,885,000
4. 7-Eleven Inc. (Convenience store): $30,800 - $604,500
5. Supercuts (Hair salon): $112,550 - $243,200
6. Days Inn (Hotels): $192,291 - $6,479,764
7. Vanguard Cleaning Systems (Commercial cleaning): $8,200 - $38,100
8. Servpro (Insurance/disaster restoration & cleaning): $127,300 - $174,700
9. (Submarine sandwiches & salads): $84,300 - $258,300
10. Denny's Inc. (Full-service family restaurant): $1,125,609 - $2,396,419
2. Ampm (Convenience store & gas station): $1,786,929 - $7,596,688
3. McDonald's (Hamburgers, chicken, salads): $1,057,200 - $1,885,000
4. 7-Eleven Inc. (Convenience store): $30,800 - $604,500
5. Supercuts (Hair salon): $112,550 - $243,200
6. Days Inn (Hotels): $192,291 - $6,479,764
7. Vanguard Cleaning Systems (Commercial cleaning): $8,200 - $38,100
8. Servpro (Insurance/disaster restoration & cleaning): $127,300 - $174,700
9. (Submarine sandwiches & salads): $84,300 - $258,300
10. Denny's Inc. (Full-service family restaurant): $1,125,609 - $2,396,419
Less Freedom
Franchisees are required to share financial information and conform to uniform operating procedures. You have to stay within the rules and guidelines that the franchisor sets or you could easily lose your franchise.
Royalty Payments:
Each and every year franchisees are required to make royalty payments in return for support in operations and advertising. Some franchisers may not provide all the necessary resources for the success of your particular location. Talk to other franchisees for feedback on the level of support they receive.
FINANCIAL REQUIREMENTS
For Example:
McDonalds
Investment: | |
| Minimum Net Worth: | $ |
| Cash Investment: | $500K |
| Total Investment: | $1.1-1.8MM |
| Average Total Investment: | $1471K |
Fees: | |
| Initial Franchise Fee: | $45K |
| Average Franchise Fee: | $45K |
| On-Going Royalty: | 12.5% |
| Average Royalty: | 12% |
| Advertising Fee: | 4% |
Investment: | |
Minimum Net Worth:
|
$
|
Cash Investment:
|
$500K
|
Total Investment:
|
$1.1-1.8MM
|
Average Total Investment:
|
$1471K
|
Fees: | |
Initial Franchise Fee:
|
$45K
|
Average Franchise Fee:
|
$45K
|
On-Going Royalty:
|
12.5%
|
Average Royalty:
|
12%
|
Advertising Fee:
|
4%
|
Hampton Hotels
Investment: | |
| Minimum Net Worth: | $ |
| Cash Investment: | $500K |
| Total Investment: | $1.1-1.8MM |
| Average Total Investment: | $1471K |
Investment: | |
| Minimum Net Worth: | $40K/Rm. |
| Cash Investment: | $50K |
| Total Investment: | $3.7-13.1MM |
| Average Total Investment: | $6800K |
Fees: | |
| Initial Franchise Fee: | $50K |
| Average Franchise Fee: | $50K |
| On-Going Royalty: | 5% Gross Rm. Rev |
| Average Royalty: | 5% |
| Advertising Fee: | 4% Gross Rm |
Investment: | |
Minimum Net Worth:
|
$40K/Rm.
|
Cash Investment:
|
$50K
|
Total Investment:
|
$3.7-13.1MM
|
Average Total Investment:
|
$6800K
|
Fees: | |
Initial Franchise Fee:
|
$50K
|
Average Franchise Fee:
|
$50K
|
On-Going Royalty:
|
5% Gross Rm. Rev
|
Average Royalty:
|
5%
|
Advertising Fee:
|
4% Gross Rm
|
A&W Restaurants
Investment: | |
Minimum Net Worth:
|
$1MM
|
Cash Investment:
|
$
|
Total Investment:
|
$1.0-1.6MM
|
Average Total Investment:
|
$1300K
|
Fees: | |
Initial Franchise Fee:
|
$30-50K
|
Average Franchise Fee:
|
$40K
|
On-Going Royalty:
|
6% Gr. Receipts
|
Average Royalty:
|
6%
|
Advertising Fee:
|
4% Gr. Rec.
|
Denny's
Investment: | |
Minimum Net Worth:
|
$1M
|
Cash Investment:
|
$350-$400K
|
Total Investment:
|
$1.178-2.4MM
|
Average Total Investment:
|
$1618K
|
Fees: | |
Initial Franchise Fee:
|
$40K
|
Average Franchise Fee:
|
$40K
|
On-Going Royalty:
|
4%
|
Average Royalty:
|
4%
|
Advertising Fee:
|
4%
|
Supercuts
Investment: | |
Minimum Net Worth:
|
$300K/100K Liq
|
Cash Investment:
|
$111-239.7K
|
Total Investment:
|
$97-208K
|
Average Total Investment:
|
$152K
|
Fees: | |
Initial Franchise Fee:
|
$22.5K
|
Average Franchise Fee:
|
$22K
|
On-Going Royalty:
|
4% Yr. 1/6% succ. Yrs.
|
Average Royalty:
|
5%
|
Advertising Fee:
|
4
|
1 comment:
"Some franchisers may not provide all the necessary resources for the success of your particular location."
Funny quote from Maaco
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