Blog Hotspot for Franchise News ...

Has the business world even been so reliant on the innovations of young entrepreneurs? As the corporate world adapts to the revolution in communication and technology spurred on by the internet, it leans more and more on the input and direction of millenials, as they are now known, who came of age in a world of social networking and instant messaging.

Time was, the experience of young entrepreneurs was limited to dog-walking and lemonade stands. Now, many of the most important companies of the past 10 years have been started by people younger than 25. Facebook founder Mark Zuckerberg, the patron saint of young entrepreneurs, was a sophomore at Harvard when he launched his now-famous social networking experiment. The founders of Google were college students at Stanford when they decided to launch their own search engine. The list goes on.

For franchisees, the meteoric rise of the young entrepreneur creates both great opportunity, as well as a few challenges. Many ideas from young entrepreneurs come from right outside of the box, and unlike the blue-chip, tried and true franchise models, their business ventures often include an element of risk.

That said, franchisors should not feel in the dark when dealing with young entrepreneurs. There are networks to tap into. Many of America’s top business colleges, like Wharton College at the University of Pennsylvania, boast their own entrepreneurial centres. Other colleges have carved a niche out of entrepreneurship. Babson College in Massachusetts, the alma mater of Arthur Blank, the co-founder of Home Depot, consistently ranks first in polls as national undergraduate entrepreneurship programs. The Johnson Centre for Entrepreneurship and Innovation at Indiana University is another top ranking entrepreneurial program.

It is clear that young entrepreneurs have changed the business world irrevocably, and as the largest generation in American history with over 80 million people, the changes are only beginning. The businesses that survive will be the ones that adapt the fastest. Today’s young entrepreneurs would rather go it alone than feel stifled in a stale office environment. Equally, tech-savvy entrepreneurs do not see a division between work and the social innovations like Facebook that define their lives outside of the office.

Business owners and franchisors will have to shrink the generation gap in order for young entrepreneurs to flourish. But recent history of business tells us the next billion dollar idea is right under our noses. The challenge is to find it.

Owning and operating a successful business can be a very satisfying way to earn a living. But are you prepared for the responsibilities associated with owning a business? You should carefully consider the self assessment checklist below before starting your own business. It lists the personal attributes and factors which increase your chances of success.

Personal Qualities

I am prepared to work hard and give full-time commitment to the business.

I have the necessary persistence and tenacity to stick with the business through thick and thin.

I have a strong desire to be self-reliant.

I believe that I will be successful through my own efforts.

I am physically and emotionally resilient.

I can work independently.

Your Attitude to Risk

I am prepared to risk my own money and assets in the business.

I recognise the importance of professional advice and guidance before I invest my money in the business and during and after business start up.

Your Family

I have the full support of my family.

My family will cope with the demands of the business on my time.

Business Skills and Know-How

I have a clear market focus with a specialized service or product that fills an ongoing need.

I have specific skills or know how in the product or service area I am contemplating.

I have previous hands-on business experience in business.

I am well organized and efficient.

I have a basic knowledge of accounting and cash flow management.

I feel comfortable selling to people.

I can organize and motivate others to get things done.

Finance

I can raise the funds required  to get a business off the ground and survive the initial start-up phase.

I have sufficient reserves of working capital should the business be slower to grow than expected.

Everything you’ve ever wanted to know about the legalities of franchising are now available in An Introduction To The Laws Of Franchising, an exhaustive, 452 page tome authored by attorneys David J. Kaufmann and David W. Oppenheim of Kaufmann, Feiner, Yamin, Gildin & Robbins. By all accounts, this book is an essential companion for franchisors.

The book includes all the latest state requirements for franchise, tips for acceleratingthe  franchise registration process and a variety of information intended to help franchisors achieve compliance.

Click here for more information on purchasing the book.

It was an encounter that changed the history of food and franchising. In 1956, entrepreneur Ray Kroc paid a visit to a thriving burger joint run by two brothers from California, Bill and Mac McDonald. A couple billion hamburgers later, McDonald’s has not only changed the way the world eats, but it also revolutionised the franchising capabilities of people hungry to start a business.

As eating habits change - from tacos to subs to organic food - the soaring popularity of food franchises remains constant. The statistics speak for themselves. There are over 945,000 restaurants in the US, and according to the National Restaurant Association, restaurant revenue for 2008 is forecast around $558 billion. Restaurant revenue is expected to grow 4.4% in 2008, as it makes up 4% of America’s gross domestic product.

So given the competitiveness of the market, why do people who are starting a new business so often turn to food franchises?

Clarity: There is a reason that when people think of the word ‘franchise’, their neighborhood Taco Bell or Dominos is the first thing they think of. Food franchises thrive because they represent the best in what franchise investment should be. The most successful food franchises have a clear concept and a proven and profitable track record. They are generally popular as well as cheap and easy to operate.

Necessity: We all have to eat, and with work occupying more and more people’s lives, the reliable pizzeria or fast food chain has become increasingly important to our social structure. Investing in a business that people actually need to live is a good starting point for any entrepreneur.

Popularity: Try as you may, you will find it very hard to find someone who does not like a piece of pizza or a sub. One of the main reasons that food franchises make up the largest percentage of franchised businesses in the world is that they give people something that they crave.

Still, food franchisees should be under no illusions. The hours are hard and the challenges of building a highly-profitable food franchise are many. And the economic downturn hardly helps matters. According to a survey by the National Restaurant Association, almost half of the people who own chain restaurants think things are going to get worse in next six months.

Yet against these glum forecasts, many food franchises remain highly popular. It has always been the brave entrepreneur willing to task a risk on a novel idea and put in the hard work to grow the business who succeeds in franchising. And that, like the popularity of a slice of pizza, will never change.

When an independent business proves itself successful, and poised to grow even more, it is only natural to think about expansion. Franchising is a logical means to achieve that expansion and offers several advantages.

Franchising though is not an automatic step to success. First of all, the potential franchisor has to have a proven concept that can be duplicated over and over again. Perspective franchisees are going to carefully scrutinize the business operations, profit and loss statements, and the market potential and competition before investing. A new business with a short history is going to be a harder sell than one with a long established track record of success.

The first and most obvious benefit of franchising a business is that the owner/franchisor can leverage other peoples’ money – the franchisees’ investments – to grow the business. Instead of borrowing money to obtain other locations, buy supplies, hire and train more staff, the franchisor focuses on recruiting qualified franchisees. Of course, the franchisor does have initial costs to cover – recruitment advertising and screening, training, legal fees, creating an Operations Manual and setting up an operational support system.

Finding good prospective franchisees will take considerable time and effort too. Each has to be screened regarding their business experience and financial status to ensure they are qualified. Though many potential franchisees may want to invest, only a select few will actually make the grade.

Once franchisees are recruited, they are highly motivated to make their businesses successful. Unlike paid employees, franchisees are driven to reach financial goals and profitability as quickly as possible. The franchisor reaps immediate returns in the forms of royalties and other fees. Though these revenues are only a small percentage of each franchise unit’s gross income, the profit margin for the franchisor is typically much higher than the net profit margin achieved in the franchisor’s original single unit business. And the revenues are recurring, building multiple streams of income as each new franchise unit begins operating.

By franchising the business, the owner reduces the need to constantly find, pay and retain good employees. The franchisor bypasses many of the complicated regulations that govern employer/employee relations.

A franchised business also offers the advantage of brand recognition. This helps to build a base of loyal customers, who know they can rely on the consistency and quality of products and services offered.

Franchising a business is a recognized means to build wealth. However, there are risks too, and any business owner who wants to expand through franchising should first review the operations and Franchise Agreements of other similar businesses, then consult with an experienced franchise attorney and an accountant for legal and financial advice.