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Why is the Failure Rate Lower for Franchisees Than it is for Independent Businesses and What Advantages Does That Convey to the Nascent Entrepreneur?

Why is the Failure Rate Lower for Franchisees Than it is for Independent Businesses and What Advantages Does That Convey to the Nascent Entrepreneur?

Franchisor support services vary widely from franchise to franchise.  Some things such as the method of doing business, use of the established brand name, and training programs are common amongst all of them.  These by themselves can be extremely useful to the budding entrepreneur.  For someone who may have never owned a business the exact procedures and methods of running one are probably elusive.  Owning a franchise provides a proven and successful way of learning.  Franchise support services generally require full training before purchase and as an ongoing exercise throughout ownership.  This can be the single biggest hurdle for any business owner let alone the greenhorn.  Use of the brand name is also valuable not only in and of itself.  For the grooming entrepreneur seeing how a nationally recognized company targets its market and cares for its brand can have enlightening results in the event that the franchisee/entrepreneur ever decides to create a brand of their own one day.  Additionally franchisors may or may not offer additional value-added services.  The list includes but is not limited to; financing, networking, sales assistance such as sales leads or training, ongoing education or additional educational services, on-sight support and/or support via other communication mediums, and last but not least experience.  Obviously the more support a franchisee can get from a franchisor the better.  This is one crucial area the entrepreneur should do research on prior to committing to any franchise. In regards to some of the additional services franchisors offer let’s take a look at the financing options.  Some franchisors offer financing in two different ways; direct financing which is rare but does happen occasionally and third-party financing.  Direct financing allows for the franchisor to not have to come up with any cash up front.  The franchisee and the franchisor come up with an agreement on how the franchisee will pay the franchise fees over a period of time.  Third-party financing is more common and the franchisor usually has lenders that they work with and point the franchisee to them.  The Small Business Administration is one of the lenders that are pointed to for they usually offer better financing terms and additional support.   How important is it for the aspiring entrepreneur to have in-house financing as an option or be led to a lender who has a strong relationship with a particular franchise?  Pretty important I would say. Some additional benefits might...

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Differences Between a Franchisee and a Company Owned Store Within a Franchise Chain

Differences Between a Franchisee and a Company Owned Store Within a Franchise Chain

Franchising is a “business opportunity by which the owner (producer or distributor) of a service or trademarked product grants exclusive rights to an individual for the local distribution and/or sale of the service or product, and in return receives a payment or royalty and conformance to quality standards”(1). Whereas a company owned store within a franchise chain is owned and operated by the actual franchisor who in this case decides to manage the store themselves, for reasons I will further discuss. There are a number of reasons why one might be a manager as opposed to a franchisee. One reason might very well be the amount of money needed to become a franchisee. A potential franchisee would need to come up with $408,600 to $647,000 in order to own their own McDonalds(2). Obviously not everyone who would like to be a business owner could afford to come up with this kind of money . This doesn’t even include the franchise fees and royalties that a franchisee would also be obligated to pay on a monthly or yearly basis. McDonald’s does allow for potential owners to lease the property for three years before deciding to purchase but not all franchisors offer this kind of program(2). Someone wanting to own their own business might want to go the route of franchisee because the failure rate is significantly lower for franchises than it is for individual’s starting a non-franchised type of business. Franchises have an immense amount of training and support for their franchisees including a proven track record for picking winning locations. Some claim such as Subway say they have a less than 2% failure rate(3). But that is not the case and is far from the truth according to one source. Franchisors are being sued by scores of people right now who are filing suits that the failure rates that some franchises are putting out aren’t even close. The SBA lists several failure rates of franchises that they had lent startup money to and the rates ranged anywhere from 0% to 85%(4). McDonald’s franchisee’s like Allen Whitehead did fantastic for years when franchising was in its golden years but he said after McDonalds allowed four more franchises to open up in his area he saw his sales plummet due to over-saturation of the market(3). So there is potential for franchising to be a safer bet but selection is key and before...

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Is the Need for Achievement Necessary for Success in Small Business?

Is the Need for Achievement Necessary for Success in Small Business?

The question of whether the need for achievement is necessary for success in anything is a more relevant question.  Of course we must also define how we measure success for this is a relative term defined by the observer.  I have contemplated this question for days and still I find it difficult to grasp all of the possible scenarios and circumstances that may lead to success in business other than the need for achievement, and alternative definitions of what success means to each of those who would define it in their terms of measure.  I find it beyond me or any one man or woman, limited to genius IQ, to give any universally definitive answer.  Since I am limited and not by any means genius I am constrained to answer the first part of this question relative to my experiences, who I am, my values, and what I believe success to be, reserved to small business. I leave it up to the readers to juggle my viewpoints with this philosophical debacle and agree or disagree with any or all parts of it.  The first issue is the various ways in which success can be measured, in relation to small business anyways.  One could say that to most people, I propose, success would be defined strictly by monetary aspects.  How much money do I make or how much money have I made?  Perhaps the measure of success does not lie in how much money is made but in the longevity of the small business.  Then again success might also be the impact that the business had on the world whether it made any money or lasted very long.  Napster is a perfect example of this case because it went bankrupt and lasted for a short period of time but its impact devastated the music industry and forever changed it.  Shaun Fanning believed his vision to be a success but measured by monetary or longevity standards others would call it a failure.  Now that we are on the same page as to some ways I have thought up that define success in business it will be far easier for me to convince you that achievement lays at the foundation for each of these potential success stories.  Yes for without the need to achieve an individual would not even venture to start a business or build a product, to make money, run...

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