Franchise Business Models:

Area Development Franchises

The area development franchise license usually grants the franchisee the right to open a certain number of franchises in a given area. There is usually a production schedule where the franchisee must open a certain number of franchises during a certain period. As the franchisee stays on track in opening the franchises in the area, she has the exclusive area where no other franchisees can be allowed to open a franchise. As the franchisee acquires an area and eventually pays royalties, usually there are reduced franchise fees in the beginning and reduced royalties ongoing. Buying a franchise area developer territory requires that you are a “people person” since you will be working with franchisees in your territory and prospective franchisees.

Territory: The area development franchisee maintains an exclusive geographic territory as long as the opening schedule is maintained. The territories range from a small city to parts or all of a larger city.

Level of participation: The area development franchisee will be very involved in the beginning of the first store to make sure it is successful. Another important function will be to look for qualified real estate to open the next few locations. Once several locations are open, the franchisee will need additional assistance to manage several units.

Typical liquid capital required: $60,000 to $120,000 initially to secure the area development franchise area, pay all franchise fees and have additional start-up capital. The franchisee will then need to be able to finance the rest of the start-up costs for each franchise as it opens. These are general numbers and may vary significantly for some opportunities.

Master Franchises

A master franchise allows the franchise company to expand in a specific territory, often a major market or in one or more states. Sometimes called a regional developer, a master franchisee has all the rights of an area developer and usually takes on a larger area. The main difference is that the master franchisee in addition to opening franchises at a much reduced franchise fee and royalty can also sell unit franchises, multi-unit franchises and area development franchises and make a nice return on the sale. Buying a franchise master usually receives a part of the royalty paid by each franchisee. There may be additional income available from distribution of products through the franchisees in the area and possibly even some real estate interest. The master becomes almost like a franchisor in the area without having to experience all the trial and error the original franchisor went through. The master franchisee will usually want to open at least one unit internally to operate for income and use as a training ground. Master franchises are rare. Most franchisors do not offer them. When they are available they are usually sold quickly. The income available from a master franchise can be extremely lucrative. The initial investment is low compared to the type of value you can build in the master franchise asset. The flexibility is also the greatest at this level.

Territory: Most franchises usually cover a large metropolitan area, an entire state or even several states or country. It is an exclusive area and will remain exclusive as long as the master franchisee meets the development schedule of franchises in the territory.

Level or participation: The master franchisee will usually set up at least one unit internally and use a manger to manage it while working on selling other “subfranchises” and helping them to operate properly. Very rarely is a master franchisee “hands on” in a unit franchise. They tend to spend more of their time operating like a business consultant or coach to their franchisees to help them become successful.

Typical liquid capital required: $100,000 to $250,000 is needed to acquire the master franchise territory and for initial liquid capital to start the area. Financing will be secured for the start-up of the unit franchise. Again, these are general numbers and may vary significantly for some opportunities.

Franchises work by increasing profits for large companies by having someone else pay for the starting of a business, and in turn offering the franchisee proven systems of success and a name brand. It also takes hard work, dedication and commitment to make a success of it – just as it does with any business idea.

What do you need to know before purchasing a franchise:

• The advantage that you have in franchising is that you are leveraging the brand of a bigger organisation and benefiting from the input that they can give you – in the form of design, advertising, marketing, sales advice and training.
• Find out who else operates this franchise. Has anyone else made it succeed? Are they successful and are the costs and revenues anticipated by the franchisor realistic? You should be able to see the financial records of the franchisor’s business and see how it works.
• Compare the opportunity you’re having with those available elsewhere. Does the product you’re going to be selling compare well with the opposition? How difficult will it be to find customers? Are other franchisees operating successfully?
• Is the business viable? Is it legal and ethical? There are plenty of scam ideas around, with fraudsters offering vast sums of money for ‘work at home’ franchises. These are not proper franchises and, in many cases, are simply a ruse for separating you from your money.
• Does the business appear capable of supporting the marketing, advertising and training that it has promised you? Don’t panic if you don’t have the requisite product skills. What does matter is that the franchisor provides training to get you up to speed.
• Budget carefully. Some franchises make clear what your maximum revenues are likely to be. Check the financial projections carefully because your stage payments to the franchisor will be going out anyway. If your business isn’t making sales targets, you’ll find yourself massively out of pocket if you’re not careful. Get your accountant or lawyer to check the numbers in detail.

When choosing a franchise avoid:

• Purchasing a franchise that does not offer adequate training or support.
• Spending several weeks of your precious time and effort trying to find the perfect franchise, but never finding it.
• Settling for the wrong franchise, when one of their competitors might have been a better investment.

So, before you spend a tremendous amount of time searching endlessly for that perfect franchise, make sure you are right for the business model itself. If not, don’t despair. There are other ways to “own what you do.”

Franchising is not an easy option and it can fail just like any other unsuccessful operation. If you’ve invested your home in it, you could lose it just as if any other business venture was financed by putting your home on the line. You should be prepared for a lot of hard work to make it succeed. Remember also that you won’t be the only person sharing in your success if everything goes to plan.

What makes a good home based business opportunity? Most important is whether it is the right opportunity for you. There are many different reasons why people want to work from home. Some may be tired of the daily commute. Some may be living in a remote part of the world where jobs are few and business opportunities even fewer. Some may be more interested in work at home opportunities to allow them to earn extra money while they have to take care of children or elderly relatives. Others may be looking for a way to start their own business and home seems the ideal base from which to start off their enterprise.

You can make a full-time living with your home business if you setup correctly, get started right, and choose a business at which you are likely to succeed. To do that you should look and all the business opportunities that are available to you. There are very many home business opportunities and you want to be sure that you’re making the right choice.

If you are now looking for a business, doing market research, or just wondering if you can find a home business that would be good for you, we recommend these:

1. Internet home based business. An Internet home business will give you the flexibility to work where you want to, when you want to, so you can control your working hours and mix it in with your daily home routine. There are many business opportunities online that promise to bring you riches beyond your wildest dreams.The lifeblood of any Internet business is traffic. Without it you have no business. There are many ways to drive traffic to your site and you should investigate all or most of them and pick a method that suits you. Then focus on that method until you get good at it. When you identify your home based business opportunity it is good to use pay per click ads which is the fastest way to get traffic if it’s in your budget. You should also be using search engine optimization tactics to help the search engines find your site and bring you free traffic.
2. Affiliate marketing. Affiliate marketing has the potential to make you rich, and the best part, your allowed to be creative all day long. If you are looking for a great home business opportunity but don’t know where to start, consider affiliate marketing. Many people decide they want to work at home on the Internet or even start their own online business but don’t know what steps to take. You may have considered joining a company such as the Pampered Chef or Avon or Mary Kay and selling items for a living, but realized the party hosting, door to door lifestyle just isn’t your thing. If you want a home business that can be done without any public interaction, definitely consider affiliate marketing. With affiliate marketing, you promote someone else’s product and when you make a sale, you get part of the profits.
3. Network or multilevel marketing (MLM). Network marketing by definition requires building up a down line of other sellers who earn you money from the additional members you recruited and from the products they sold. Having a down line is really great because it allows you to earn passive income, money that you don’t have to work for to receive. Some of these programs requires fees to join them. The fees can often times be very excessive and the company will usually try to up sell you into buying additional products like training materials and samples. These materials are design to help you promote their products or services.
4. Sell Products online. One most common way of earning money is by selling products in the internet. In order to succeed, you must pick one product that customers are willing to buy. In addition, you should have a site and you must have techniques on how to attract visitors to your site.
5. Create web content. Another method of Internet home based business is article marketing. Creating compelling web content (articles) is essential for success online. All Internet surfers, shoppers, workers and researchers turn to the Internet as a source f information and news in the first instance. Their secondary action is to buy/ sell/ recommend or sign up. You need to ensure that you are providing great content first and then directing your reader to an action.There are a great many ways to put content on the web. Ensure the information that you are putting out there is informative, original, correct and useful and you will find the increase in the traffic to your website. Web content is information about a particular subject that is written in a concise, knowledgeable and professional way. It can be presented in the form of a webpage, blog, article or forum post. All of these mediums all for other Internet users to search for and find your content – particularly if it is based around a specific keyword. If you write your content well, include a link back to your original blog/website and SEO your content well, you will have an excellent library of content on the web that continually links back to your website/blog. With article marketing you write articles that have links back to your site and submit them to article directories. This will build links pointing to your site and over time will drive traffic directly from the articles.
6. Click On Some Freebies. The freebies that may suddenly appear through your screen may cause annoyance, however, you can actually earn some money from them. So, click some freebies that you may encounter while surfing because who knows you might just earn the amount you need without ever costing you a penny.

When you are pursuing a home business opportunity you do not have to spend a lot of money to start your business. There are very many things at you can do to make money with your home business without having to spend a lot of money on an Internet store, in a web site, or expensive inventory.

Start working on your own personal wealth and stop working on the clock. Earn what you’re worth and make that change TODAY!

Before You Begin.

1. Preparation. Starting a successful business requires a great deal of preparation.

2. Planning. It helps to begin with a plan. A business plan is a blueprint of every aspect of your business. Sales, marketing, advertising, promotion and location are just some of the aspects of creating a plan.

3. Select Your Business Name. Choose a business name. A sole proprietor may conduct business under their own name. When you are ready to select a business name or assumed business name for your business, check for name availability.

4. Choose a business structure. Select a business entity type from the following list for a brief overview of the principal types of legal business structures. A legal representative and accountant should be consulted before making a determination as to the type of business entity to form.

• Sole Proprietorship
• Corporation
• Nonprofit
• Limited Liability Company
• Limited Partnership
• General Partnership
• Limited Liability Partnership

5. Register Your Business. Ongoing Registration Requirements. Now that you’ve established your business and fulfilled the initial requirements, you will want to make sure that you keep your reporting and registration obligations current.

6. Understanding Tax Obligations. Understanding your tax obligations is an important consideration for any business. Learn about requirements to report personal property to your county assessor’s office. Also check on other taxes that may apply to your business.

7. Check Licenses. Many occupations and business activities require special licenses, permits, or certifications from state agencies or boards. Check with your city and county government to determine the license, permit, or zoning requirements for your area. Many occupational or business licenses require annual renewal. Check with the specific licensing agency for specific requirements.

8. Protect your idea. Learn about registering Patents, Copyrights, Trademarks, and Service Marks.

9. Check with the Department of Environmental Quality. Some business activities will require you to contact the Department of Environmental Quality.