Running a Franchise from Home - Is it Right for You?
The U.S. Labor Department's Bureau of Labor Statistics recently conducted a survey of home-based businesses and estimated that there are just over four million self-employed, home-based workers. (The number of franchised businesses in this total was not calculated.) However, the National Association of Home-Based Businesses, in Owings Mills, MD, puts the number at closer to 50 million people. Whatever the accurate number is, it is a number that everyone agrees will only continue to rise.
So you will undoubtedly make a choice between a home-based business or an office or storefront. Even with the growing popularity of home-based businesses, analyze this option very carefully. To be sure, the usual gut reaction today when considering working from the home is, "Great! No more commuting, no more traffic jams, no boss, no time clock." Working from homes seems to appeal to many people, but, like most of the other choices you'll make, this one requires careful thought. Working from the home is certainly not for everyone.
Some of the franchisees we interviewed had home-based businesses which ranged from business services (e.g., Leadership Management, Inc.) to cleaning services (e.g., Jani-King) and computer learning (e.g., Comput-ertots). Their reactions to the home-based experience were mixed.
Sandi Vettle, a Leadership Management franchisee, and Fred Banty, a Padgett Business Services franchisee, both believe that an office environment is more conducive to business. Vettle began her business in her home and then switched to an office building where she found that a professional office setting improved her productivity. "Working from the home is fine only if you are a very disciplined person," says Vettle. Fred Banty also feels that an outside office is better for business, yet he remains home-based so he can be close to his three small children. Banty believes that an outside office would help with franchise name recognition and would present a more professional image. He also thinks there would be fewer distractions and business would increase if he moved out of the home.
On the other hand, Mary Cunningham, a Decorating Den franchisee, staunchly supports the home-based option. She doesn't feel that her productivity at home is lessened. "I am very disciplined and usually work seven days a week," says Cunningham. She adds that she likes "working from the home better than from an office. I still deal with people all the time, but I don't have to put up with all the personality problems in the office."
Before making a decision on a home-based business, you will need to examine your personality, lifestyle, work habits and motives. These are some of the questions you should ask yourself:
- Am I self-motivated? Without the fixed structure of a workplace, you will
need a good deal of discipline and motivation to set goals and objectives on a
daily and long-term basis.
- Do I have a reason for wanting to work out of my home other than just
saving money? If saving money is your only motive, then you're not really
choosing a home-based business. Chances are the money saved won't be enough to
make you happy working at home, and it might be better to look at
alternatives. Valid reasons for working at home include family obligations
requiring flexible schedules, physical disabilities which inhibit movement,
and a desire for a more independent lifestyle.
- Am I multi-talented and resourceful? Although all franchises require many
skills, a home-based one will require even more juggling of duties. You'll be
the one to type the letters, send the faxes, make the sales call and handle
- Am I comfortable working alone? If you need to have people around you all
the time to be happy and effective, the home-based option isn't for you. You
should feel confident working on your own.
- Does your house have the necessary space and facilities for operating a
business? You must have a permanent work area with sufficient space and
- Will your family support your decision to operate a home-based franchise?
With your family space overlapping business space, the entire family must
understand that some areas will be out of bounds and that the privacy of the
business area must be respected.
If you become part of the trend of operating a new, small business from your home, you will have an increasing variety of businesses to choose from. Businesses that can be started from a home location include financial services, residential and commercial cleaning services, direct mail, computer classes and publishing businesses.
How Much Money Can My Franchise Make?
With a basic grasp of accounting, a willingness to read through FDDs, and the ability to perform some simple arithmetic, you can build a basic set of financial projections (your mini business plan in numerical form) to estimate the potential profit of your franchise investment.
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.
Why Doesn't White Castle Franchise?
The answer is actually pretty simple and proves that rabid customer loyalty and a consistent menu, while not sufficient for world-beating growth, can still take a brand a long way.