Surprising as it may seem, if you have been considering a business of your own, buying a franchise now can make a lot of sense. OK, perhaps if you were planning to buy into an expensive full-service restaurant worth millions and your budget is tight, it would definitely pay you to work through the numbers again, but let’s assume you are looking at something a little more down-market, a business that in a few years can support your family and give you the independence you want.
The biggest hurdle may well be funds as banks have definitely tightened up their lending policies, but even here is a silver lining. Firstly nobody is going to trust their hard earned money to a fund manager for a while. Also fixed deposits are not going to be interesting for quite a while either, but there are plenty of people around who will be willing to invest in something as tangible as a business run by somebody with a gritty determination to succeed. Also there are quite a few people walking around wondering what to do with their severence package. So just because the financial industry turns out to have been built upon a house of cards, doesn’t mean you won’t be able to get the money you need.
Assuming you need any… There are some inexpensive ways to get into business and while not all of them are franchises, franchising does have some major advantages for the wannabe business owner. Firstly there is the “Branding”. Never underestimate the pulling power of a professional logo and tag-line. Brands that are recognised across the country are trusted far more than the one-off “Bill’s Windscreen Repair” shop that you whizz past everyday on your way to work. Secondly, the fact that there is more than oneof a certain business suggests that there is something successful about it and if there are many of them, then you know that the business does indeed work and the business name already has established a fair amount of credibility. Franchising splits up business functions nicely; the franchisor is responsible for conceiving the business model, product development, branding, marketing and purchasing. The franchisee is responsible for operating successfully in his local community. It really is a win-win situation.
So… back to financing. The present economic climate doesn’t mean you wont be able to find investors but it does mean you ought to be able to negotiate much better leasing arrangements, lower rents, lower payrolls, lower capital equipment costs and now fuel prices are crashing through the floor. Looking for talented people? There are more around now than there have been for many years and you can bet they are hungry for success. Also, try negotiating a better deal with your franchisor. Can they reduce the fees? Can they help with financing?
There have been many businesses which started up during tough economic times. Hewlett Packard, Microsoft and Hyatt are some big ones, Coffee news and Candy Bouquet are some smaller ones, but you get the point. It has been done many times before and it can be done again during this crisis. What about reduced business activity? Don’t worry… services will continue at about the same pace, fast food businesses may see an increase and the remainder may well have a quiter time than they would like, but this is a good time to settle into your new business, iron out the wrinkles and position yourself for when the good times return!
I wrote earlier about an on-line scam masquerading as a legitimate business selling tiles. The business actually does exist, but I am very sure they had nothing to do with the business proposal being offered. It turned to be a way to launder money and would have put any respondent in a difficult legal position.
I thought it might be a good idea to write about other common scams as some of the visitors who frequent this web site might be vulnerable to them.
Here they are in no particular order:
Recruitment Schemes
These schemes have been going on for a long time. In its simplest form it is something like this:
“Buy my book which tells you how to make a million bucks”. You send off some money and you get in return a document that tells you to recruit people to “buy my book which tells you how to make a million bucks”.
There are many variations on this theme. The actual product may be a physical book or an e-book. The methods of marketing may be through email, newspaper advertisements, stickers on lamp posts… anything.
Probably the easiest way to spot this one is by the extravagant claims of easy money. Also it is usually fairly apparent when you read their literature carefully that they don’t have an actual product to sell. Just scammy advice.
Directories or Lists
Another fairly common scam is paying for a list of opportunities.
The people running these kind of schemes ask you to pay for a list of companies which offer work to home workers. After sending the fee you receive their famous List. Often this is just a poorly cobbled together collection of names from the Yellow Pages or the Internet. Sometimes the companies don’t even exist, or if they once did, are now no longer in business. The ones that are real usually have no interest in employing home workers.
I’m a bit embarrassed to admit it, but I was taken in by something similar once. It wasn’t a money making venture. I’d just taken a new job in a new town, accommodation was tight and hotels were expensive. I was anxious to find an apartment quickly, but it seemed just about impossible. In the newspaper I saw an advertisement for a list which, it was promised, would be full of apartments available for either short or long term rent. I raced over to the agent and bought the list. Every lead on it was a dud, I was furious, but what was my recourse? The publisher of the list just shrugged and said most people are able to find a vacant apartment out of the list. It wasn’t his fault that it was a particularly busy holiday season. The other thing that it had in common with the scams you see these days was a long list of testimonials. Very convincing ones too, from happy shiny smiling people gushing about how good the list was and how much time and effort it saved them in finding an apartment.
Cottage Industry Kits
I actually have some personal experience of one of these. Quite some years ago a friend responded to an advertisement offering to teach how to make artificial silk flowers. She bought an expensive kit from the manufacturer who also promised to buy the flowers once they had been made. I saw some of the first bouquets that she made and to me they looked exquisite.
I never did find out what went wrong, but soon after the start of this venture, it was over. I suspect that the flowers which she sent to the company were classified as “inferior” or the price given was a pittance. This is a typical strategy: You are asked to pay for expensive raw materials, you put in loads of your own time, but when it comes time to collect your reward, nothing is forthcoming.
There are many variations on this theme. Sometimes the tasks are described as being very simple, such as cutting out shapes repetitively which will be used in some industrial process. The story is usually the same, however. You pay a lot for very cheap materials and don’t get the kind of money you were promised.
Agencies
Watch out for companies who ask for an upfront “Area License” fee to allow you to sell their products in an exclusive area. This is a reasonably common strategy and shares a few similarities with franchising. Typically the company you have paid to represent has little interest in how well you sell their products. It is the upfront fee that they are really after. In fact if you give up quickly it is even better for them as then they can sell the area license to someone else. Even if you don’t give up so easily you may find that the geographical boundaries are poorly defined or even that yours and neighbouring areas have huge overlaps. Another common problem is that the area you have bought is too small to support you. Of course your Licensor has a solution… buy another area license.
Taking legal action against the organiser of the scam would probably consume too much energy, or money, or both and anyway no doubt there is something in the fine print which will get them of the hook.
Auctions and Other On-line Purchases
You purchase goods at what appear to be bargain prices but they are never delivered. Or they are shoddy and worth a fraction of what you paid.
The best defence against thiskind of scam is to only buy from reputable sites. Many sites have “buyer’s feedback” on the sellers and this adds quite a bit of a safety factor.
Well this post is getting quite long and I think I had better split it up. More scams next post!
Here is an interesting list gleaned from the ‘Net. It is a list of the franchises whose franchisees have the highest number of loan re-payment failures.
In alphabetical order:
AllTune and Lube
AtlantaBread Co. Bakery
Blimpie Subs & Salads
Carvel Ice Cream
Copy Club
Cornwell Quality Tool
Cottman Transmission
Country Clutter
God Father’s Pizza
Golf Etc.
Golf USA
Hair Color Express
Lady of America
Lee Myles Automotive Transmissions
Matco Tools
Obee’s Soups Salads & Subs
Philly Connection
Pickerman’s
Quizno’s
Roly Poly Rolled Sandwiches
Smoothie Factory
And here is another list. It is of the franchises most commonly chosen by Vets.In order of the number of uptakes:
The UPS Store - 145
Matco Tools -126
Meineke Car Care Centers - 48
PostNet Int’l Franchise Corp.- 41
Aire-Serve Heating & Air Cond.*- 37
CruiseOne - 33 Sport Clips - 31
Maui Wowi Hawaiian Coffees & Smoothies - 29
Dunkin’ Donuts -27
Mr. Electric* - 26 (tie)
Mr. Rooter* - 26
Notice that Matco Tools has the honor of making on to both lists.
It is interesting to ponder these two lists for a while.
Obee’s and Quizno’s have a talent for attracting bad press, especially for how badly their franchisee’s are treated.
I am happy to say that the AUTOsurf feature on the Every Franchise site has finally been repaired.
I think this feature is quite unique. It’s purpose is two-fold:The first one is to allow surfers who are interested in a particular category in the database, to watch something like a slideshow of all the companies’ web site home pages.
There is no need to click your way through every listing, instead just watch the pages scroll by and when you see something that interests you, click the icon which will open that site in a new window. The slide show displays the web sites within that category randomly.
The purpose of being random is so that if you stop the slide show for any reason and then restart it again later, you don’t have to sit through the same sequence that you watched before.
Right from the outset I wanted to keep Every Franchise lean, fast and minimalist in design. That is why it is light on graphics. I am aware though that a company’s logo next to its listing helps people find the business they are looking for. The AUTOsurf feature makes up for the lack of company logos and in fact takes the process one step further. Finding a franchise or business opportunity is easier and more pleasurable than ever. You can even read a book, on how to start a business perhaps, while keeping one eye on the AUTOsurf window.
As an Administrator, this feature is a boon. The site’s ‘back end’ is able to find dead links and remove them fairly easily, but it is not able to tell if a once active domain has been ‘parked’.
Similarly, domain names are often sold and the new owner’s business may be completely different to previous owner.
The most humourous example of this was with pickupsplus.com. It used to be about pickups, but now it is a site about how to pick up girls!
The Every Franchise site was hacked into sometime around the beginning of this year. It took weeks to sort out the mess and the AUTOsurf feature was the last and hardest thing to fix. It certainly feels good to have it running again.I hope you make full use of the feature and that it can save you time and clicks.
Speaking Roses has just been added to the Every Franchise Directory. It is a business which prints messages on freshly-cut flowers.
They have a beautiful professionally crafted web site and their product also looks very up-market and classy.
I like their catch phrase of “A business in a box”. It suggests a quick start up, with everything supplied, a bit like bringing home a piece of IKEA furniture perhaps.
Their claim of having patented technology and the warnings on their web site about others with similar but, according to them, illegal offerings, prompted me to do a quick search on this technology… and wouldn’t you know it? There are quite a few companies offering the equipment to print on flowers.
So imagine you start up a “Speaking Roses” business in your town, you work hard to get the product accepted in your market and after months of cold-calling and countless sales meetings you see the business beginning to grow. You have return customers, you have a few contracts with local companies and you just begin to feel that perhaps the venture was worthwhile afterall when you hear of a competitor.
Your planned business strategy most likely would have been to keep the technology exclusive so that you were the only one in your area able to provide this service. What do you think your new competitor’s strategy will be?
If I were him, I’d flood the market by offering my service to every florist in town, or if I was a hit-and-run kind of person, I would market the equipment plus some rudimentary training to whomever wanted it.
The very next thing you know every other florist in town is telling their customers that they too can print on flowers and some people start doing it from home. When this kind of situation occurs and the exclusivity of the product evaporates, the whole concept becomes de-valued to such an extent that it becomes just another option; like the colour of the tissue around the bouquet.
This is certainly one opportunity I wouldn’t jump into, but if you are interested you canread all about it here
As a long time user of draughting and design software, this franchise has a business model I like.
It is a CADD (Computer Aided Design & Draughting) training franchise. It has a reasonably low entry level ($20K - $30K) and would be fairly quick and easy to set up. Perhaps the most challenging part of the business would be to find good trainers, but with a good curriculum provided by the franchisors it should be OK, I think.
Specialised software like CAD changes rapidly and if you are an operator struggling to just keep up with the daily deadlines, you don’t really have time to explore the new features with each version. Sometimes design offices decide to hange over to a new software package, going more high-end to take advantage of CNC machining or of robotics, for example.
One ought to be able to keep the overheads down to a minimum while taking advantage of the high fees you can charge for this type of service.
The software packages they have training for are:
Pro/E, Catia, Solid Edge, Solid Works, 3DS Max, PC Schematic EL Automation, Staad, Pro, ANSYS, MSC Nastran, AutoCAD, ArchiCAD, GT, Strudl, Microsoft Project, Primavera, F2D, Cadian. Rhino 3D is one notable omission and if I were to consider this franchise I would certainly negotiate either for Head Office support for its inclusion or permission to develop one’s own Rhino training material.
The professionals you would target are:
Engineers, architects, interior designers, garment designers, modelling artists, animators and others.You can find out more about it HERE
As I was walking around the exhition I was suddenly struck by the number of Singaporean companies who appeared not to be represented. The first one I thought of was “Old Chang Kee“, the iconic purveyour of curry puffs in Singapore. If you haven’t tried a curry puff yet, you should do something about it quick!
I don’t really know where the “puff” part comes from but they consist of pastry (not puff pastry) folded over a curried potato, pieces of boiled egg and chicken filling and then deep fried. Best with an ice cold Tiger beer.
Old Chang Kee is a Singaporean as Chicken Rice. It is listed on the Singapore Stock Exchange and has over 50 outlets in Asia.
As it turned out Old Cheng Kee WAS there, but they were promoting their new franchise. It is called “Pie Kia“.The concept consists of selling pies, salads, soups and drinks from outlets in food courts. They have done a good job of the branding.Pie Kia is characterised as a boy drawn in the Anime style. Here is his story, lifted from their brochure:
”When friends discovered this shy young man had a passion for cooking, their first reaction was to snigger at his ‘unmanly’ exploits. But just one bite later, they dubbed him ‘Pie Kia’ - an affectionate moniker acclaiming his gift for creating the most delicious pies they ever tasted!”
As I was beginning to get used used to in this exhibition, there were no samples to try, so until I manage to hunt down an outlet somewhere, I will just have to take their word that their pies are delicious.I wish them luck and with the energy and experience of Old Cang Kee behind them and the snazzy branding, they will probably do well.
A few days ago I visited the Franchising and Licensing Asia 2008 exhibition held in Suntec City. It was a fairly quiet affair and I wasn’t sure if it was due to the current economic uncertainty, or if it was just the nature of the show. Afterall it is hardly the kind of thing you would take the wife and kids to.
Apparently previous shows have resulted in high-quality leads for the exhibitors. For example 7-Eleven said that they signed up 22 new franchisees at the last event and Mr Steve Lim, Franchise Director of Waraku International Pte Ltd.said “The response to the Waraku brand at FLAsia 2007 was overwhelming. We generated a lot of interest, including genuine investors from Indonesia, Thailand, China, Malaysia and the U.S., who were interested in bringing our concept to their respective countries. As a result of our participation at FLAsia last year, we signed up one master franchisee in Indonesia, entered into a joint-venture with a Malaysian company, opened our first overseas’ Pasta de Waraku in Kuala Lumpur. FLAsia has proven to be an excellent platform to source for high quality investors, business partners and franchisees and we look forward to participating again this year.”
Many of the exhibits were rather poor, some consisting of a few company reps sitting at a desk loaded with brochures.One of the least interesting exhibits, but possibly the most interesting concept was called “Funky Fish”. It is a retail outlet aimed at young teenage girls HERE and sells ‘pop gifts’ and accessories. The photos of the stores showed hip-themed merchandise with the predominant colour being hot pink. It looked fun.
I’ll mention some of the more interesting exhibits in future posts..
We all suffer in varying degrees because of of it. It’s all over the ‘Net, it’s in everyone’s In Box, it’s as reliable as the sunrise. It is spam.
One email I received this morning claimed to have my contact details from an on-line jobs database and were offering me a job. It sounded perfectly legitimate, it was a real company which sold ceramic tiles. They claimed that their overseas sales volume was expanding rapidly and they needed a Sales Manager to handle the work. A reasonable salary was offered and a commission based on sales. I had to have a bank account into which the proceeds from overseas sales would be deposited and I was to forward those funds on to the Head Office, minus my commissions.
Sounds pretty good, doesn’t it?
Too good in fact. It turns out that this ‘opportunity’ is a way to launder money and they need a ‘money mule’ whose bank account they can use and who will forward the money on to a third account.
It’s illegal, of course and getting involved in it probably would result in a lengthy and messy legal tangle while trying to prove your innocence.
What rang the warning bell for me was that I have never submitted my name to any employment web site. I get lots of submissions every day to the Every Franchise directory that are little more that poorly-disguised scams. It’s bothersome to read through the claims of instant wealth, all of which sound pretty much the same. Probably only one in ten submissions are legitimate business opportunities or franchises and here-in lies, I suppose, the main advantage of directories such as these. The filtering has been done, the scams tossed out, the links checked and the businesses validated.
A few weeks ago my wife told me she had heard about a company in town from which toys could be rented. The shiver of fear that started to run down my spine changed to hope when she continued on to say that they also BOUGHT second hand toys.
My daughter, at seven years old, has a lot of stuff she is no longer interested in and most of it is made of plastic. My least favourite item was a play house which was kept inside her bedroom and took up far too much room, besides she always preferred to play on its roof rather than inside it.
We piled lots of unwanted toys into the car and headed off to the place. The building was an uninteresting warehouse but we were quite surprised when we entered the shop. It was spacious, bright and comfortably air-conditioned. Toys were neatly stacked on shelves all the way to the high ceiling. much of the floor space was taken up with bigger items such as playhouses, play gyms, wading pools filled with coloured plastic balls, cribs, strollers and bikes. In one corner was a small office and in another corner a coffee machine, some sofas, cushions and a bookcase filled with second hand children’s books.
We found out that they also organise children’s events such as birthday parties and hold them inside the premises. It seemed an excellent idea, especially considering how many toys there were available for the kids to play with.
The place was busy with half a dozen sets of parents doing some kind of business there. Mostly renting, it seems. Anita, who ran the place with her partner Rose, was there with a couple of school kids helping out. She spent a lot of time with each customer and was very happy and cheerful. It took a long wait before she could finally deal with us. My wife had earlier sent photos of the items we wanted to sell and we had been given an indicative amount that Anita thought she would pay. She inspected the items, asked us not to bother assembling them as they would need to go for cleaning and gave us the full sum even though some parts had been left at home. We came back later with the missing parts.
My daughter was happy as the money went into her piggy bank. I was happy as I had got some plastic junk out of the house and my wife was happy as she knew that the toys would make other children happy and not end up in a landfill.
There was a student there doing a study of the business model as a school project. He asked us some questions like “is it your first time?” “Would you do it again?” and “would you do it more often if it was closer?”
We left the place impressed with what these two ladies have achieved. I like the “worthwhileness” of the business. It’s a good business which results in everyone being better off in some way.
There is only one business like this in the Every Franchise directory. It is called Baby’s Away, you can find it here: http://everyfranchise.com/cgi-bin/links/jump.cgi?ID=141 There used to be similar one which had what was perhaps my favourite business name in the whole directory. It was called ”Hire for Babe”, but I remember having to delete it a few months ago when a routine check found that the link was dead. And perhaps there is a lesson there. No matter how sound the business concept, no matter how many “feel-good” qualities it has, success can never be guaranteed. But I certainly wish Anita and Rose success and who knows, in a few years they could be franchising and there will be an outlet near you.
