Independent Start-Up or Franchise?

Mom and Pop Burger in Santa Fe New Mexico

Cowgirl in Santa Fe, New Mexico with sweet potato fries.  Yum!
Cowgirl in Santa Fe, New Mexico with sweet potato fries. Yum! | Source

Independent and Franchise Side by Side

Earl's in Gallup NM next to a Pizza Hut Franchise
Earl's in Gallup NM next to a Pizza Hut Franchise | Source

Bakery Mom and Pop

Manny's Bakery New Mexico where the Dad learned from a German baker and then added Mexican pastries like biscochito cookies.
Manny's Bakery New Mexico where the Dad learned from a German baker and then added Mexican pastries like biscochito cookies. | Source

Independent Start-Up or Franchise?

Have you always wanted your own business? For many people this is their dream. There are two basic ways to own and run your own business. You may start your own ‘mom and pop’ shop or you may purchase a franchise.

There are excellent reasons for both business options. Here are some points regarding these two options. Which one is best for you?

Independent Start-Up: Mom and Pop shop

Funds

Receiving start-up money is the first step for many businesses. In order to receive funds from institutions and start-up funds your business will need a Financial Plan to present. The business plan is required by the banks and other funds but it is also an excellent tool for the business owner. The business plan will force you to think through every aspect of your business. This is the best way to succeed and not loose your own money and time to a business idea that is not workable.

Lack of start-up funds is what stops many independent businesses from starting.

The Financial Plan will require that you have a solid well-thought out business model. A business owner who starts their own independent start-up will need to develop many of their own business models from their background. Many business executives already have experience with financial reports, spreadsheets, marketing, advertising, hiring and managing (and firing) staff. They extrapolate this background into their own independent start-up.

Bricks or Clicks Start-Up?

A retiring department store manager is positioned very well to start their own boutique clothing store. They already have the nuts and bolts operational background. They also understand where to buy the merchandise and the supply chain mechanisms to assure they have a constant stream of marketable timely product. Will this person sell in a store location, on the Internet or a combination?

Operations

Knowing how operations works means you understand the facets of repair and maintenance of your location. You will be responsible for the day to day repair and maintenance as well as seasonal needs for heating, A/C, sewer clean-outs, lighting, and such. You may be doing these things yourself, you may hire a handyman, or you may contract out these services.

The same is true of the Internet. How much do you know about the operations of the Internet? How much can you do hands on and how much support will you need? Many businesses have tried to use the Internet and found the support they hired wasn't all that supportive of what they needed. Write up what you expect your Internet service consultant to provide. Long gone are the days of your computer savvy nephew providing the service you need. When in doubt, talk to other similar businesses that use the Internet well.

Security

Security issues include point of purchase securing of product (security tags and door monitors) as well as security systems during off hours. You will also need to think about whether a camera system is correct for your business and how to place cash wrap and employee stations to reduce shortage (theft.)

Security issues on the Internet are a source of great concern. Will your site be secure? Will the information your customers give you be kept secure? If you choose to use cloud systems (where someone else keeps your information for you), how secure are these systems?

There are excellent credit card secure businesses out there. Pay Pal is one such service. Talk to your bank and other similar businesses to see what they use.


Store or Internet?

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Where do YOU fit?

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Franchise or Not?

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Product

Buying or making your product. This is where you need a passion for your product. If you have that passion you already have a heads up on how to make or where to purchase your product. Please see this web site small business sales strategy (below) for a more in-depth discussion of how to use ‘do what you know’ to create a success story.

What is your supply chain for the product or the parts and pieces to make your product? Do you have a back-up plan if your main supplier has a disaster and cannot supply you basic materials? (The plant was flooded or burned down etc.?)

Many businesses sell items they never actually take possession of. They generate the orders and send them directly down the supply chain to the manufacturer. This means they do not have the costs of warehousing.

Marketing

Marketing and advertising are important. These are the tools to inform and bring in your customer. There will be advertising sales representatives all telling you why you should purchase advertising from them. Be prepared to separate out how you want to market and advertise your business.

Do your customers come to you from publications, Internet sources or both? A neat trick to compare such disparate media forms is to find out how much it costs to reach one thousand customers. CPM, cost per thousand, is what it is called. So, the newspaper reaches 1,000 customers at X cost per thousand and the Internet reaches 1,000 customers at X cost per thousand. Of course, make sure those people in that 1,000 number fit the profile of an actual customer for you!

Marketing also includes customer service. And customers do expect service! Customer service policies need to be codified. Put your service methods in writing. The staff needs to understand these policies and be empowered to provide the level of customer service that you require. Your best customer is the return customer and customer service goes a long way to assuring this return business.

Franchise

A franchise is a proven business model. It also means you are purchasing a job. Franchises have a higher success ratio than independent start-ups.

A franchisee purchases a total business system. As a franchisee you will have at your fingertips all the operations, security, product, and marketing information. You will be able to see what works and what does not work from the history of the franchise. You will also have specific requirements of what you may or may not do in operations, security, product, and marketing. Yes, the restrictions are part of the informational help and business package.

How much of an Internet presence does the franchise company have? Will this be an easy given for your particular business? Most pizzas are now ordered on-line now. There are whole ‘track my pizza’ GPS systems’ operated by pizza companies now. Take a look here for more information;

http://www.informationweek.com/gps-comes-to-high-tech-pizza-delivery-tr/206102079

Who ever said ordering pizza wasn’t rocket science?

What other media smarts does that particular franchisee have in operation? Ask and take a hands-on tour of it.

Since, a franchise has a business model and successful history it is easier to receive start-up funds from money lending institutions and organizations.

You are purchasing a job. Make no mistake; your first franchise will require you to work the franchise as a full-time plus job. You will be sent to a business school operated by that franchise and taught how to make a sandwich, weigh food portion sizes, and make sales etc.

Take a look around at the franchises that you might like to start. Go talk with the franchise owner at these businesses. You will receive a great deal of help from the other franchisees. Just be cognizant of how you seek their help. For instance, do not show up at lunch time on a Friday at a sandwich shop because the owner is very busy at that time. Make an appointment and tell the franchisee why you want to speak with them.

The author knows a franchise owner who purchased a McDonald’s® franchise in the area near Scottsdale, Arizona at a time when the McDonald’s® franchise was just beginning and the potential was unknown. I will tell you that he does NOT work at the store anymore. He also now owns more than one such franchise! He did begin out hands on though.

Not all franchises can expect to have the outrageous success of a McDonald’s® though!

How much does the franchise cost? The cost can range from a few thousand dollars to millions of dollars.

Make sure you understand the franchise legal documents. Much of franchising is controlled by specific laws. You will need to fully understand what you are responsible for doing and paying. There is a franchise purchasing fee as well as monthly or quarterly or yearly fees paid towards the franchise. Will you be required to purchase certain items (paper goods, food stuffs etc.) only from the franchise company?

Franchise companies will tell you the statistics for how many franchises succeed to how many independent businesses succeed. Franchises always have a higher rate of remaining in business.


Which Method is for You?

Passion, Excitement and Fun and Independence

Humans are quirky in how we function. Winners come in all sizes and types.

Many great businesses were started because it was exciting and fun for the person to create. These business owners had a passion for what they wanted and needed total independence. Do not discount these fuzzy human personality concepts when deciding what you want to do with your life!

Only you know how much independence you need. Only you have the beginning belief in your particular product. Do NOT let the above operational issues dissuade you from believing in yourself.

Starting your own business means you will create the atmosphere, the look, the feel, and excitement for your product. This is exactly why many people start their own business. They have worked for others and KNOW they want to do the business their way.

The thrill of creating your own world and the total belief in the product is a very special motivator. Many businesses did begin this way!

When I asked my university students to write papers on whether they would want their own start-ups or a franchise, there were two predominate factors regarding their choice.

One factor was their personality and which system would allow them to flourish. The other was money. Many recognized that they did not have the financial ability to seed their start-up ideas.

Most factored both the passion and the financial needs together. Many said they would start-up a franchise and then parlay that money to begin their own business based on their passion. Many were quite comfortable beginning their business on their dorm room computer or while sitting in their parent’s basement. The dorm room method certainly worked well for Mark Zuckerman and his Facebook® business. Not that we are all going to entwine that much brain power and luck! Yeah, luck, he was in the right time and the right place.

You may be in a position to keep working your ‘day job’ while starting your business during your personal time. What is your situation?

Information is power. Knowing yourself is power.

Here is an article on Small Business Sales Strategies that may be of help to you. http://nmlady.hubpages.com/hub/Small-Business-Sales-Strategies

Good entrepreneurship to you, whether it is your own independent start-up or franchise.

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