Advice From Franchisees Who Have Been There
Many of the franchisees we talked with had to make a decision first on whether they would open an independent business or a franchised one. A few of their stories follow.
Before a New Jersey man decided to buy a fast-food franchise, he asked himself this question: "How comfortable do I feel about going into the unknown?" He answered, "Not very." Although he was familiar with engineering, manufacturing and construction work, he knew very little about the food business. Even so, he purchased a snack foods business. Now, after nearly ten years of operation, he is ready to give up on the franchise. His current goal is to open and operate five independent stores that carry similar products. Not only has the ownership of the franchise system changed several times, but he believes that "the franchise system squashes the creativeness of the individual. You can be prohibited from bringing anything new into the system."
Barry Pasarew is a Voice-Tel franchisee in the high-tech voice message business. The business utilizes sophisticated equipment and elaborate service networks. Pasarew says, "It would be close to impossible to do this business on your own because of the necessity of a network. The franchise system allows you to get started immediately. It saves dollars and time so you can focus on selling and developing."
Jim Gendreau owns an independent distribution company, but he was still drawn to franchising. He owns multiple units of the Cost Cutters franchise in the hair salon business. When asked why he didn't start the business independently, especially since he was an experienced businessperson, he said, "The big difference between an independent and a franchise is the marketing and advertising clout and expertise the franchise brings. Secondly, all the bugs are out of the system by the time you buy it."
Linda Moore, a Ledger Plus franchisee, considered both an independent and a franchise business after leaving a position in a large corporation. She says, "Unless you have a very unique business idea, it's almost foolish not to buy a franchise. Success rates are not as good for independents. Most people have skills in one or two areas, but with a franchise, you can get help in areas outside your expertise."
Ken Wisotzky had an independent ice cream store prior to owning a Gloria Jean's and a My Favorite Muffin. The ice cream business was going well, so why didn't he continue? Wisotzky says, "The mall developer wouldn't renew the lease on my store. They wanted a 'name-brand' tenant." According to him, many developers, realtors and landlords consider franchises stronger tenants, and so the franchisee can get better space.
Bernie Wolff ran an independent photography studio in Florida before he took on two franchised units with Glamour Shots. Even though his day-to-day responsibilities have only changed slightly, he's happy he made the change. He says his old business had monthly sales from $16,000 to $18,000. When he switched to the Glamour Shots franchise in 1992, his monthly average for the first four months was $38,000 to $40,000. He attributes the increase to the impact of the franchise name.
When faced with making a decision on buying a mobile laundry and dry-cleaning franchise, Patrick McClune's wife and friends advised him to "do it himself." They told him, "You're smart and resourceful and you shouldn't pay for a logo that's not very well known." McClune asked the franchise system what he was getting that was proprietary. They said that he would receive training, the system for doing business and the logo. So, McClune went with the franchise and now concludes that the franchise did give him a "jump-start" and a good system for conducting business.
A Break Down of Franchise Royalty Fees
When you first start your franchise you typically pay a franchise fee upfront. This will cover a variety of things that depend on the franchise you're dealing with, but often it will go towards initial training, marketing, and the rights to use the franchises logos, names, systems, and products. But that's not the only fee that franchisees will pay to a franchise. In addition to the initial franchise fees, the vast majority of franchises will charge their franchisees royalties that can come in one form or another. These royalties will often go towards ongoing training, sales of goods directly from franchisor to franchisee, and advertising and marketing efforts. The exact terms for these royalties are set out in your franchise agreement, but they come in a few common forms.
How Franchisees Can Grow Their Sales
However, once the ribbons come down and time passes, franchisees begin to recognize the challenge ahead and that, in many ways, they're on their own: regardless of the amount of support their franchisor provides, the franchisee is ultimately responsible for generating sales for his or her new business.
Cottage Inn Gourmet Pizza Expands Midwest and Offers New Franchise Opportunities
Famed Ann Arbor pizza brand, Cottage Inn Gourmet Pizza, a family brand founded in 1948, recently announced its plans to expand in to the Midwest and offer new franchising opportunities, as it enters a new phase of aggressive growth. By the end of this year, Cottage Inn Gourmet Pizza hopes to launch 10 new locations in Ohio, Illinois and Indiana. The group also has international ambitions, with plans to open up to 200 new shops in China within the next 15 years. The company currently operates over 50 establishments in Ohio, Florida and Michigan.