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So what is a ‘business package’?

There are some organisations which enable the budding entrepreneur to start in business by providing the necessary equipment, expertise or training to do so within a package. For example, you need to start a business manufacturing garden ornaments. The package may includes a number of moulds and tools, the materials and a day’s training to show you how to use them. But then what happens… ?

So, ‘Business packages’ are not ‘franchises’.

So what is a ‘franchise’?

The term ‘franchising’ covers a variety of arrangements in which the owner of of a product, process, service or even just a name (in the terms of a celebrity) allows someone else to use it in exchange for some form of payment.

It is a method of starting a business which minimizes risk by using or emulating a tried and tested ‘business formula’. A contract is forged between ‘the franchisor’ – (the organisation that supplies the franchise) and ‘the franchisee’ – (the party that purchases the franchise).

The franchise package supplies most of the things that one needs to launch the business successfully: training, licence to use franchise name, customer base, supplies and raw materials, equipment, promotional material etc.

In addition to a set-up fee, the franchisor may charge an ongoing fee based on the percentage of sales or profits of the business.

The key point is that it should be a proven business system that is offered – not merely the right to sell a product or service.

Franchises generally fall into one of two categories;

• a ‘job franchise‘ (in which the franchisees actually do the work that provides the service to the customers)
• a ‘management franchise‘ (in which the franchisee is mainly organising others to do this labour)

It is important to appreciate the difference between the two categories because it will help you to find a franchise that suits your skills.

In order to prevent franchisees within the same organisation competing for the same customer base, territorial limits are often stipulated within the franchise agreement. Also, the franchise agreement may stipulate certain standards regarding the quality of service or products supplied by the franchisee, thus upholding the brand image.

When choices have to made, we tend to go for the ‘familiar’. Thus, a company can win business by ‘branding’ a product or service to make it more familiar to potential customers.

A franchise opportunity enables you to buy into this brand image and win custom that would otherwise go elsewhere.

Comments and Advice.

For many people franchising is an excellent way of starting up in business. It is in the franchisor’s long term interest for you to succeed and so there is often continuing support at hand, unlike buying an existing business or starting from scratch on your own.

You may feel that the restrictions stipulated in a franchise contract-with regards to your choice of suppliers, recruitment policy or products- may contradict the ethos of ‘working for yourself’. However, in the majority cases, these are in place to uphold the franchise brand name and are part of a successful business formula.

You may also find it painful to see a small percentage of your hard earned profits being diverted towards the franchisor. Again, in most cases, the majority of this money is spent on advertising and/or marketing and benefits the group as a whole.

When considering a franchise, try to understand why they are offering you the business in the first place. Very often, franchising is an extremely quick low-risk method of expanding a successful business across the world. The franchisee has the local knowledge and takes on the majority of financial risk. In return the franchisor is offering a successful business formula that has been proven to work. But before you go ahead, ask yourself whether the support, training, stock, experience and brand name justifies the investment asked.

Finally watch out for companies that create franchises as an ‘end product’.

Be aware that some companies use the term ‘franchise’ to describe what is really a commission agency, network marketing opportunity or other form of start-up. Don’t think that these are any good or real.

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The survey also suggests a third of consumers in the UK think they will be worse off this year than last.

It also suggests that more than five million consumers spend more than they earn, and of those nearly half are using overdrafts to make up the difference.

“Consumers face a double threat – the government is toying with measures such as raising taxes to reduce the public deficit, which will have a direct impact on personal finances,” said Ann Robinson at uSwitch, which commissioned the survey. “When coupled with lower than anticipated salary increases, it can only mean that we are in for a bumpy ride, and the situation could get worse before it gets better.”

The online survey was conducted during February among 4,235 adults.

Editor… better get into business!

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This set of circumstances is leading people to look at alternatives to traditional employment with “Owning my own business” becoming more attractive. Past success, ready capital and the widely-held dream of “One day being my own boss” team up to make this route seem very attractive; becoming more so each day that passes without  any response to the many calls they have made or the many CV’s they have sent out. Increasing numbers of people in this situation are now thinking: “Well, nothing else is happening. I guess I should look at having my own business”.

However, theses very circumstances that lead these people to self employment should be at least a caution flag for the following the Warning signs:

They “know” what they want. They say they want a coffee shop, a consulting business, a cafe; restaurant or maybe a bar or any number of other opportunities.

They are supremely confident. Put very simply, if they are not scared, they don’t know enough.

Remember, these are all very successful people. People who are over-confident tend to do less due diligence [“I understand business!”], are more likely to ignore a successful business model [“I know a better way!”] and will almost always downplay how hard it will be [“If it normally takes 5 appointments to make a sale, I know I can do it in 3!”] .

Money is no object. Obviously, if they have always succeeded, they cannot imagine their money running out. They have made money and are proud of it. The cost of an opportunity takes on too little importance, since they know they will succeed.

The only antidote for those who exhibit these signs is education and perhaps the only way to drive that point home is to politely begin making them aware of what they don’t know. The list of questions we can raise is limitless but such basic things as:

• “How well is that type of business holding up in this economy?”
• “What will be your total investment including working capital?”
• “How many people in that business have you talked with?”
• “How does the lifestyle inherent with this business match with what you and your family want?”

Fail to plan and you plan to fail

People should be saying: “I’ve investigated and I have found I can afford it, the lifestyle it provides seems to coincide with what I want for me and my family and I feel it gives me the opportunity to use my business and personal skills to good advantage”.  Lacking the response, we need to patiently and politely lead them into a process of education; a process that gets them to document exactly what they are trying to achieve, both personally and professionally, and then, once that is done, do a careful search for opportunities that are proven to truly provide those core values.

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