Home Based Franchises

Advantages of Home Business Franchise

If your looking to establish your first business, you may want to consider a franchise.  There are a few that are available for home based businesses.

All franchises are highly regulated.  Before they can sell a franchise in your state they must file extensive reports on their operation before they are approved.

The biggest benefit with a franchise is the training that you receive with most.  The training can be quite comprehensive, taking you step by step through their system of delivering the product or service.  They also have their office and accounting procedures set up for you. 

Franchises do provide some name recognition and they will often help you with advertising.  These companies often run national ads and pass the leads onto the franchisee.  There may also be co-op advertising.  Let us not underestimate the value of professionally prepared advertising. 

Another important benefit is the support system that is generally in place. You will normally have help just a phone call away.  Often you will have visits by a company rep to see how you are doing and to offer advice.  If the company also offers regional or national meetings, that will be something you would want to take advantage.  It is at those events that you get to meet with other franchise owners and share experiences with them.

Other Considerations

A franchise cannot guarantee success! 

It is possible for your business to fail, it is possible for the franchisor itself to fail.

A rule of thumb is that you will have to invest five times the amount of money that you want to make.  So, if want to earn $50,000 a year, you will most likely have to invest $250,000 into your new business.

The franchisor generally requires you to have a given amount of money for working capital, and have a certain networth before you are approved. That will vary by the franchisor.

The franchisor also normally will charge you a royalty on your sales.  That is how they make their money, provide the support services and pay for thenational advertising.

The royalty that you pay can be a very important consideration.  If your competing against non franchise busiesses they will often have a price advantage.  If for example you pay a 6% royaltyto the franchisor,  that is a 6% cost of doing business that your non franchise competitor does not have to pay.

When looking at franchises, take into consideration what you are buying. To best illustrate the point is to give an example.  When someone buys a fastfood franchise, the name and quality is very important.  The customer knows that if they walk into one in California or Maine, they know what is on the menu, and what it will taste like.  To the franchisee, that is important, because that creates an extended loyal customer base for you.

For other franchises, brand ldentification is not high, and there is not a consistent product or service amongst all the franchisees.  When weighing one of these, carefully consider what you are getting for your money.  Will the benefits of the franchise out weight the added startup cost and royalties that you will have to pay.

While having a franchise support team behind you, can be very beneficial, you must also remember that you will often be giving up a lot of control of your business.  The franchisor will be telling you much of what you can and cannot sell, how you must present your product, what advertising you can run.  

They will also tell you how to keep your books, what your hours of operations are, and the type of employee you can or cannot hire.