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Is it Time to Turn Your Business into a Franchise?
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Is it Time to Turn Your Business into a Franchise?


By Shelly Sun

After creating a successful business, many wonder what options there are to grow in today’s business climate. Without access to significant capital, it’s challenging to contemplate growing from a few locations to hundreds or thousands.  You’ve most likely invested plenty of dollars to build your business, secured trademarks, developed your brand, documented processes, implemented technology and hired staff, all resulting in a solid foundation. But in this economic environment, it can be difficult to know when is the best time to expand in the smartest, risk-controlled way.

Here are five reasons why now just might be the best time to expand:


1. Expand Your Thinking on Expansion: You have a product or service that customers want. Eventually there comes a point when you begin to wonder how to reach more customers. The traditional approach involves raising capital to allow you to open more locations. This can grow your brand, but it also means expanding your business is all up to you. You will be securing and signing for the debt or outside equity, ultimately taking on the increased risk of expansion.

Another avenue for achieving growth in revenues and customers, with limited capital and less risk, is through franchising. Franchising is a great vehicle to help you reach more customers, promote your brand, and increase your visibility and credibility as a brand.  However, opening additional locations on your own could take hundreds of thousands – if not millions –of dollars that are not easy to access through traditional financing today.


2. Know the Leverage Effect: In thinking of ways to leverage the large investments you’ve made already, franchising can be great to scale your brand to more markets, building upon those investments and years of fine-tuning that made your business a success. Franchising links your expertise and investments with capital and personal oversight to replicate your model in a new geographical market. You may want to expand regionally, nationally, or globally, and franchising is often a less capital-intensive (and proven) way to do so, with less risk and more upside than many other methods of brand expansion.

Opening more company-owned locations requires significantly more capital than opening locations through franchising. Given that lenders are facing a stricter regulatory environment, record high and long-lasting unemployment rates, and less business collateral, creativity and innovative ideas are required to figure out the best way to expand with limited access to capital. The beauty of franchising is that the geographical expansion into new markets also uses the capital of the franchisees, in essence allowing the brand to expand using other people’s money.


3. A National Strategy – Creating Jobs Locally: In addition to taking less risk in terms of capital investment, franchising mitigates the challenge of trying to take your local business and manage it in the next state – or six states away.   Franchising spreads the risk between the franchisor and the franchisee. By experiencing mistakes and fixing them to develop a solid business model that franchisees can replicate, the franchisor has developed and protected the brand and the systems that the franchisee can license and use in its business.

4. Succeed and Grow Together: Franchisees invest capital to grow their local business while spending less time and resources to figure out the business. As a franchisor, you’re licensing your knowledge to the franchisees. In doing so, you will leverage the investments you have already made in your brand and in your systems. In return, you earn a stable revenue stream.


Franchising is also a powerful mechanism for accelerating growth. Franchisees provide new sources of passion, ideas, and capital. Franchisees work hard to build local businesses and spread the word for the brand and bring great ideas back to make the business model stronger for everyone.


5. Franchising: Be In Business For Yourself, Not By Yourself: To be a franchisee is to be in business for but not by yourself. When done right, franchising benefits the company that wants to expand geographically and benefits the franchisee who gets to learn the business and execute the model at the local level.


Launching a franchise system is a big step – it requires evolving your leadership and growing your business from a successful local one to a larger regional, national, or international brand. You will be the ambassador within your organization who will set the tone and the passion for the opportunity that franchising can provide when it is done with absolute commitment to the interdependent relationship with your franchisees.  Franchising provides a means for you to grow and expand your business, reach more customers, empower others to own their own businesses and create countless jobs. 


Shelly Sun is a Certified Franchise Executive and CEO and Co-Founder of BrightStar Care®.

 
The Case for Collateral PDF Print E-mail

By:Angus Loten, -business reporter for the Wall Street Journal.

Craig Holman is betting the farm on his new business -- literally. After getting laid off from a high-level job in the steel industry, the 58-year-old engineer put up his share of the family farm as collateral for a loan to open an emergency home cleanup service in Columbus, Ohio. The hardwood tree farm has been in Holman's life for years.
It's also the key to Holman successfully opening his AdvantaClean franchise. Small-business loan brokers say collateral is now king among risk-averse lenders. Loans to small companies have decreased by some $60 billion since the 2008 financial market crisis, according to the Small Business Administration. Much of that decline reflects the near extinction of unsecured loans, which were fairly common among small-business borrowers before the recession.

Holman's $85,000 loan -- along with part of a severance package from his former job -- enabled him to pay a one-time franchise fee to AdvantaClean, buy a truck and purchase equipment for water-damage recovery, mold removal, duct cleaning and dryer vent cleaning. He also hired one full-time and three part-time workers and an office assistant. He now gets three to four calls a day from homeowners with flooded or moldy basements. About a third of the calls translate into paid work. While prices vary, a typical mold-removal job can bring in $3,000, he says.
Banks now divide small-business borrowers like Holman into two groups: those with collateral and those without it. Collateral is any tangible asset -- typically a home, factory or property, or even equipment, machinery and inventory -- that can be put up as security for repaying a debt. In the event of a default, lenders can seize these assets to recoup the funds through sales or auctions. According to BoeFly.com, an online marketplace that matches lenders and borrowers, most of the lending institutions on its site now favor asset-heavy borrowers, such as restaurants, retailers, hotels and manufacturers.

An analysis of 250 small-business loan applications conducted by a Philadelphia-based lending brokerage, found nearly half were deemed ineligible due to a lack of collateral, despite good credit scores and cash flow. Instead, these businesses were limited to more costly alternatives, such as factoring, cash advances or peer-to-peer loans. "I can find a loan for 90% of the small businesses that want to borrow. The question is can they afford it". "Without collateral, it's really the wild, wild west out there".
One of the most common forms of collateral entrepreneurs use is their home. But this strategy is becoming more difficult. Since the housing market crash, small-business owners have struggled to tap real estate for business financing amid plummeting home prices. Lenders typically apply a 20% to 25% discount on the net value of the property -- that is, the total value of the property minus any outstanding mortgage. The discount can be as high as 50% of undeveloped land, equipment or machinery. What's more, home equity lines of credit have declined by $31.5 billion since the housing bubble burst, eliminating some $7.9 billion in credit available to business owners, according to estimates by the Federal Reserve of Cleveland. Ironically, the slumping housing market has been a major boon for Holman's business and a key source of revenue to pay back his loan. Real estate agents looking to clean up foreclosed properties, most of which are left without power, are some of his biggest customers. Typically, he'll waive the $50 inspection fee for these jobs because so many convert into paid work. During major storms, calls can come in around the clock and his crew will work through the night. "Every situation is an opportunity," says Holman.
So far this year, business has nearly doubled compared to 2010. Holman says he's now planning to invest in new equipment and looking to expand
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Medical Equipment New & Used PDF Print E-mail

Leasing medical equipment is a wonderful alternative to purchasing such pricey items! Do you need medical equipment supplies or capital to purchase medical equipment? Do you need to modernize or upgrade your existing medical equipment? Franchise Leasing offers affordable Medical Equipment Leasing and Financing options, for NEW or USED equipment, ideal for medical practice start-up and for established healthcare practices looking to upgrade. Doctors starting their own medical practice can enjoy the benefits of medical equipment supplies, including lobby furniture, hardware, software and signage leased through our Financing services. Also see our services through !

Take advantage of our medical equipment leasing program and receive:

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Diamond Financial Services PDF Print E-mail

Diamond Financial is the nation's #1 source for business loans and with over 50 years of combined experience and established relationships in this industry we can creatively structure and package your loan to allow the best possibility of financing. We are your direct source to the nation's largest and most aggressive SBA and conventional lenders.

Financing solutions can be applied to business acquisitions, franchise purchasing or start-ups, building and leasehold improvements or expansions, equipment purchases, debt restructuring, working capital, franchise fees or the buying out of partners.

Offering complete turnkey services from pre-qualifying loan applications, professionally
packaging and presenting them, to securing commitments and providing ongoing assistance throughout loan closing. Our success rates are high, for we understand what our lenders require to insure proper review and considerations of the loans we submit. Our expertise and guidance has provided dividends to applicants, business brokers and franchisees alike, around the country.

Put our reputation, expertise and loan volume to work for you and find out why we’re the nation’s Number One source for business loans.

 
5 Myths of Franchising PDF Print E-mail

1. You Have to Quit Your Job Buying a franchise doesn’t always mean that you have to quit your current job to begin pursuing your entrepreneurial dreams. Many franchises offer alternatives to becoming an owner operator. Franchisors recognize that not everyone can dedicate all of their time to the business, at least right away, so they came up with a plan to accommodate that. Franchise Solutions President Matt Alden said, “Owning and operating a franchise business is certainly a full-time job, however there are many franchises that allow you to keep your job while you ramp up your new business. Also, policies for absentee ownership - where you own the business but hire a manager to handle day-to-day operations - vary from one franchise to the next.” In fact, many franchises give you the option to hire someone to run your franchise. Americlean is one example, stating “absentee ownership viable – if an operating manager is appointed.”

2. You Have to be an Expert in That Field Not only do you not have to be an expert, but most franchises don’t require you to have any experience in the field. Most franchises are looking for business savvy people with the passion to own their own business and the drive to succeed. Most franchises have comprehensive training programs and offer continued support to keep you up to date and knowledgeable about the business. For example, Homewatch CareGivers offers the franchisee extensive training and unlimited support, and “The Homewatch CareGivers University provides over 2,700 hours of professionally developed online training to guarantee your caregivers are premier in the industry, by increasing skills and knowledge, improving capabilities and instilling confidence.”

3. You Have to Have a Ton of Money There are a lot of low-investment opportunities out there. The FranchiseSolutions.com Franchise Finder shows 22 with investments up to $10,000 and jumps to 60 in a search for up to $25,000. In addition, some organizations offer financing options and incentives to help get started, buy additional locations or to aid special groups, such as veterans. When you talk to franchise representatives, ask about these programs and offers. There are plenty of other franchisors that offer low down payments as well as payment plans to help you start a business.

4. It’s Easy Just because a franchise provides everything you need, doesn’t mean it’s easy to own or operate one. Success takes drive and determination so your success is up to you. It’s the old “you can lead a horse to water” adage. Alden points out that “Yes, a franchise business provides you the toolbox and road map to operate a successful business. Use the tools and follow the road map - and work as hard or harder than you ever have - and you'll likely succeed. Building a business isn't easy. Franchising gives you the structure within which to apply yourself versus going it on your own.” Although most franchises require no experience in the field, that means you have to train. They offer comprehensive training and support, so the franchisee must take advantage of that in order to prosper.

5. You Need Passion for the Product and a Popular Brand The most successful businesses are not necessarily the most glamorous. As Alden says, “Oftentimes the least glamorous businesses on the surface can be the most attractive under the surface. Take residential cleaning. Who wants to clean toilets? It's important to understand what drives a service business - marketing and sales to acquire and retain customers is your primary role in this type of business. Passion for your business should be as much about what your business can do for you as it is about what exactly your business does.” The cleaning industry is an example of non-glamorous businesses with high success rates. As stated on FranshiseSolutions.com, according to the Maid Brigade franchise disclosure document, “32% of our franchisees average more than $1.2 million annually.” Also, brand recognition does not mean instant success, and a younger company could offer a better opportunity. “By the time a franchise business is a household name it's likely that few prime locations or territories remain,” Alden said, “Also, many mature, branded franchise systems go in the direction of selling multi-store deals only and commanding higher initial and ongoing fees. A younger franchise that's out to become the next big brand in its space can provide an opportunity to compete against 'the big buy' in a prime territory with proven demand for the product/service.”

 
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