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Three Things You Should Know Before Buying a Business Franchise

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Business franchise refers to the arrangement entered upon by the owner of a certain business with another party who is interested in running same business under its name. In the agreement, the real business owner allows the use of his registered trademark in exchange for some payment.

Business franchising is a strategy a lot of first-time businessmen take because there is lesser risk surrounding the setup. And more often than not, the franchise package includes everything you’ll need in launching the business. The business owner provides for raw materials, supplies, equipments, and all promotional materials. And because the business already exists, it becomes easier for the franchisee to build up its customer base.

However, there are some things you should consider before you invest your hard-earned cash on business franchises:

1. A percentage of your profit is paid to the franchisor.

You will be forever under the franchisee agreement for as long as you are using the name of their business. Part of the agreement is to pay the business owner royalties and other related fees. There’s no way to go around it.

2. You are allowed to seek support from the franchise owners.

Most business owners are more than willing to provide trainings to their franchisees to minimize errors while operating the business. It is your right as a franchisee to request for meetings with the bosses so they can help you out in certain things you are not very familiar with.

3. The business owner may restrict your choice of territory, suppliers, and employment policy.

Business owners want to have full control of each franchisee’s operation and quality of products. Therefore, franchise owners don’t really have much freedom when it comes to where they can get raw materials, equipments, and supplies for their business. This also means that it can be a little hard to reduce overhead costs.

These are the things that you should consider before you plunge into the franchise market. Try to determine if business franchising is for you. If ever it is, make sure you go with the company that’s tried and tested over the years.

Should You Budget Your Money When You Own A Business?

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One of the most difficult things to do when you start a new business is putting together a budget. Without any financial history on which to base income and expenses, it may seem like guesswork, but as part of any business plan a tentative budget can be established with some thought and anticipation for the future.

In most businesses there are two main categories, income and expense. Under your expense category there can be several sub-categories often falling into two main areas of controllable expenses and uncontrollable. While many business owner claim they can control every expense involved in their business, they are simply kidding themselves as some things such as utility cost, the amount of rent and other so-called fixed costs can, and do change, with the owner having no control.

Other expenses such as payroll, insurance and advertising can be subject to a budget, but they are considered controllable expenses. If the business begins to fall off, you can control some of these expenses by laying off employees and cutting back on advertising. However, living by a budget will help maintain profitability in many respects but can also turn against you in the long run.

Depending on the viability of your business it often is a better investment to bite the financial bullet on employee wages and still provide good customer service to the remaining customers until business picks back up. By trying to everything yourself not only will you burn out quickly, but is no one is taking care of the customers, it will not take long until there are no more customers to care for.

There are two ways to budget your business money and that is through set dollar amounts and percentage of income. Many businesses will budget their controllable expenses by the dollar and non-controllable by percentage of income. Obviously a good part of the ownerÆs time is going to be based on bringing money into the business and how much they have to spend on controllable expenses will be in direct relation to income.

For example, a company earning $20,000 a month in income has budgeted six percent for payroll, providing $1,200 for payroll. If the income level rises to $50,000 the budgeted payroll percent does not change but the dollars available for payroll climbs to $3,000. With an obvious increase in business to create the additional income, the owner will probably need the extra help to take care of business.

There are many other expenses that fall into the payroll account such as workerÆs compensation charges, Social Security tax paid by the employer and paid vacation time or other perks determined by the employer. While a budget may be difficult to establish for a new business, it is a necessary evil for all business owners.

How to Inform Employees When You Sell a Business

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What is the best way to inform employees when you sell your business? Wait until the transaction is a done deal.

After many years of representing people who want to sell their businesses, experience has taught me that complete confidentiality about any thoughts of selling are in the best interests of every business owner. Consequently, the best time to make any announcements about selling will be on the afternoon of the day your transaction closes. That announcement should be well rehearsed and should include a personal introduction of the New Owners.

The meeting should be planned in advance so that 100% of all employees are in attendance. In that meeting, you can explain your personal reasons for selling and that, after a diligent search, you have found the ideal New Owners.

You also can explain that you will continue to be involved in the operation of the business for a period of time in working with the New Owners. Then, the New Owners should explain their background, the reasons for being interested in the business and their desire to do whatever is necessary in order to grow the business and create more opportunities for everyone involved. Last but not least, the New Owners should indicate they plan ôno changesö and want to meet individually with each employee to get their ideas and suggestions about how to best grow the business.

Typically, any person buying your business will want to keep virtually all of your employees, as they represent a significant portion of the value of your business. Jobs will be lost only in those extremely rare instances when a New Owner intends to relocate a business a great distance, and then normally after a period of both notice and transition.

The fact of the matter is that virtually all employees fare better in the future because a high percentage of New Owners come in with additional capital and a desire to grow their new business. This growth typically spells opportunity for employees who want to grow their careers and who welcome working with a New Owner.

How Much Does A Franchise Cost

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How much does a franchise cost? Of course the cost of obtaining and starting a franchise depends on several variables. For instance, the type of industry, size and location are some of the differentiating factors. However, there are some basics that you could keep in mind if you are contemplating becoming a franchisee.

First of all, you will usually have to pay a franchise fee, which averages somewhere between $20,000 and $30,000. However, the fee could be less than $10,000 for businesses such as mobile and home-based businesses, or in some cases could possibly cost $100,000 or more. A few examples of these more expensive franchises include building maintenance businesses and some types of athletic training facilities.

Since you are gaining the advantage of taking part in an already recognizable business name, and usually ongoing support from the franchiser as well, franchisers typically stipulate that a potential franchisee meet other financial requirements. A predetermined amount of readily available funds that are not borrowed is usually a necessity as well as a certain net worth. In order to pay for ongoing expenses that are not covered by revenue you will also need a guaranteed amount of working capital. Depending on the type of business, it is important that the working capital cover a particular length of time, ranging from a few months to possibly two to three years until the business is in full swing. The franchiser typically provides an estimate of the amount needed.

Besides the franchise fee, other up front costs could include professional fees such as legal and accounting services, insurance, and operating licenses. Employee training, inventory, and equipment are usually part of the startup as well. Also plan on, rent and possible leasehold improvements, and other costs involved in setting up a retail location including the purchase of fixtures, signs, and landscaping. You may also incur grand opening and initial promotional expense to get the business going.

Keep in mind that many times a higher initial investment does not necessarily mean a higher return. Often times franchises can be started with a total initial investment of less than $200,000 and sometimes even less than $50,000. Some home-based business such as handyman franchises and marketing franchises provide a decent return with little up front cash.

Ongoing, you will need to be prepared to continuously pay royalties to your franchiser, possibly 4 to 6 percent of your revenue. Also, insurance (liability and health), inventory, and equipment maintenance would be continuous expenses. Of course, there will be employee salary and benefits. Additionally, you may be required to pay into a national advertising fund.

Before making a decision on a franchise, it is important to obtain from the franchiser a copy of the Uniform Franchise Offering Circular (UFOC), also known as the disclosure document. The up front fees are outlined in this circular. The document should describe the initial fee which may be non-refundable as well as the other startup costs. If there are any items that you believe might be a startup costs that are not mentioned in the disclosure, be sure to ask about them.

All in all, you want to be sure your financial situation will cover expenses for you and your family during the time it takes to get the business up and running. This may take several months or a bit longer than that. Keep mind your operating expenses as well as personal expenses for the first year or two in business. In order to have the best chance of success with a franchise, it is recommended you contact a franchise consultant to discuss your goals and finances.

How do I sell My Restaurant Franchise?

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Question: I am tired of running my restaurant franchise. How do I sell it?

Answer: Many franchisors face this same predicament. Not only are restaurant franchises resold every day, but it is very common to see all types of franchises for sale on the resale market.

The absolute first thing that you must do is to contact your franchisor. Do not be embarrassed! Franchisors expect that a certain percentage of their franchisees will someday want to sell their franchise. It is normal. There are many reasons for a franchisee to want to sell a franchise. Your reason for wanting to sell is probably a legitimate reason, something that the franchisor has probably heard many times before.

But probably the biggest reason that you need to contact your franchisor is that many franchisors will impose restrictions on franchise re-sales. For the most part these restrictions will follow closely with their existing guidelines used for recruiting a new franchisee. They just want the ability to approve any new franchisee.

Are you prepared to sell your franchise? Do you know what your franchise is worth? Will you need to carry financing? Is your financial information up to date? Have you talked with your attorney about the correct from of structure for a sale (asset based vs. stock based)? Are there property lease considerations? Will your landlord allow an assumption of your lease?

You have got to know the answers to these questions. Make sure that you are properly prepared to sell your franchise. You will need to research the marketplace in order to establish a price point. You may wish to talk to a Business Broker or other informed expert for guidance. Check with your accountant. He or she has probably seen a business or two that has been sold over the years. Lean on those around you for good quality advice.

Looking at many franchisor web sites over the last few months, many sites include a section on their web site for franchise re-sales. Consequently, your franchisor may be able to help you market your franchise for sale to others. There are other ways to sell an existing franchise. A good old fashioned newspaper ad can work. A more progressive way is to advertise your franchise for sale online with a web site that is designed to market your franchise. An example would be The Business Market which has a number of existing franchises for sale.

So donÆt be embarrassed… be proactive! You can do it!

Don’t Let Passions Rule When Buying A Business

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For many, the American dream of owning a business is in the queue right behind owning a home. I was a teenager when I owned my first business. Since then, I have bought or started many businesses and helped others do the same. Here are some common mistakes I have witnessed or committed myself.

Paying too much

This results from the combination of all other mistakes. Many new business owners set themselves up for failure by paying less, which results in higher loan payments, lower operating funds, and reduced borrowing capacity.

Letting your emotions rule

If you have always dreamed of owning a business, it is easy to get caught up in the strong emotions invoked by seeing those dreams come true. To counteract your feelings, take your time, do your homework, and enlist the help of objective advisors.

Paying for potential

You should only pay for the business as it stands at the date of purchase, not what it could be in the future. You must spend time, effort, and money to develop its potential. The seller chose not to invest in these things, so he does not deserve to be paid.

Not evaluating yourself

Do you have what it takes to run this business? Try to match your strengths to the essential duties you will be required to perform. Running a small business requires the owner to do many things. No one can be good at them all, so make provisions for those areas in which you are the weakest. Some tasks like payroll and bookkeeping can easily be contracted to outside vendors. Your spouse, other family members, or partner could do things you cannot or do not want to do.

Not building a team of experts.

At a bare minimum, you should enlist the aid of an attorney and a CPA. The attorney can prepare and review documents, help structure the deal, and inform you of legal and liability issues. The CPA can provide a financial analysis of the business and advise you about tax and accounting matters. It would help if you considered adding a business valuation professional. The valuation report can be used to determine the reasonableness of the asking price, negotiate a lower price, and provide valuable information about the business, the industry, the competition, and the economic conditions.

Relying on bad information

You should verify all necessary information about the business. Your CPA can check financial information like receivables, payables, and inventory. Your attorney can review loan documents, leases, and contracts. Your business valuation professional can analyze the competition, the industry, and the economic conditions. Use independent appraisers to value real estate and equipment. Get a credit report on the business through your CPA or banker. You can do some of the investigating yourself to save money, but do not cut too many corners û it may cost you in the long run.

Changing too much, too fast

Once you own the business, you will be tempted to start making wholesale changes from day one. You risk alienating long-time employees and customers. Unless the company is in dire financial condition and needs immediate action, it’s better to take some time to get to know the business, your employees, and your customers before making changes. This is a perfect time to solicit suggestions from employees and customers.

Buying a business because you like to do what the company does

One reason restaurants have a high failure rate is people buy or start them because they like to cook. Significantly few restaurant owners spend time cooking. Their time is spent managing staff, ordering supplies, doing paperwork, and handling daily crises. A small business owner must wear many hats û including that of a manager.

Not being interested in the business product or service.

I made the mistake of thinking that because I am a smart CPA, I could own and operate any business. I bought a business that sold high-performance auto parts to young men who drove jacked-up, four-wheel drive pickup trucks and went to the drag races every weekend. I did not do either and never understood why anyone would. I could not relate to my customers and went out of business in about a year.

Conclusion

Buying a business is a complicated, emotional process. By avoiding these costly mistakes, you can prevent turning your dream into a nightmare.

Dogtopia to Be Featured on Dig App

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The nation’s fastest-growing dog daycare is partnering with the dating app that puts dogs first

PHOENIX – What if man’s best friend could introduce you to your romantic partner for life? Dogtopia, the nation’s fastest-growing dog daycare, boarding and spa franchise, announced today its partnership with Dig, a dating app for people who like dogs or have one and are looking to meet someone with the same lifestyle and interests.

The partnership between Dogtopia and Dig allows users of the app to learn special tips and tricks from Dogtopia’s subject matter experts, identify as a Dogtopia pet parent with a badge on their profile, and even locate the closest Dogtopia as a safe spot to meet for a first date. Additionally, Dogtopia pet parents will get an extended free trial of the Dig app, and Dig app users will get an exclusive Meet & Greet offer from Dogtopia.

“We are excited about this collaboration with Dig,” said Toni Teplitsky, Director of Marketing for Dogtopia. “No longer do people seeking dates need to put ‘must love dogs’ in their profiles or worry about where to meet. This app is a great way to bring together dog lovers everywhere and forward Dogtopia’s noble cause of enhancing the joy of dog parenthood.”

As part of the partnership, Dogtopia will share Dig content, incorporate stories into newsletters, and showcase Dig on its Virtual Playroom website. In turn, the app will feature Dogtopia’s name, logo and blog content within their app to encourage users and pet parents to check out their local Dogtopia daycare.

‘Dig builds relationships so dogs and dog-lovers can live healthier, longer, and more joyous lives together with the humans who love them,’ said Leigh D’Angelo, CEO and Co-Founder of Dig. ‘We could not imagine a better partner than Dogtopia, who shares our vision of amplifying the joy and positivity dogs bring into all of our lives.’ 

With more than 170 locations across North America, Dogtopia is the nation’s fastest-growing brand in the pet industry. At Dogtopia, dogs enjoy an open-play environment with protective rubber flooring to ease joints while promoting safe socialization, exercise, and education. Dogtopia’s webcams also provide pet parents with peace of mind and the ability to check in on their pups when they are away. Now with Dig, Dogtopia will also be promoting the socialization of the pet parents raising these furry friends. 

About Dogtopia

Founded in 2002, Dogtopia is an early pioneer and innovator in the pet services industry, offering an experience focused on quality of care, safety and transparency in the market. With an emphasis on education, exercise and safe socialization for dogs, pet parents have the assurance of leaving their beloved furry family members in the hands of trained professionals in an environment created with the safety of dogs in mind. For more information, visit www.dogtopia.com