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.

SWOT Analysis

You can use business SWOT analysis in two ways – as a simple icebreaker helping people get together and “kick off” strategy formulation, or in a more sophisticated way as a serious strategy tool. If you’re using it as a serious tool, make sure you’re rigorous in the way you apply it:

• Apply it at the right level – for example, at product or product line level, rather than at the much vaguer whole company level.
• Make sure that options generated are carried through to later stages in the strategy formation process.
• Only accept precise, verifiable statements
• Ruthlessly prune long lists of factors, and prioritize them so that you spend your time thinking about the most significant factors.
• Supplement it with other option-generation tools – none is likely to be completely comprehensive.

Used in a business context, business SWOT Analysis can help you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities.

What makes SWOT particularly powerful is that it can help you uncover opportunities that you are well placed to exploit. Whether by understanding the weaknesses of your business, you can manage and eliminate threats that would otherwise catch you unawares.

More than this, by looking at yourself and your competitors using the SWOT framework, you can start to craft a strategy that helps you distinguish yourself from your competitors, so that you can compete successfully in your market.

Business SWOT Analysis can help you carve a sustainable niche in your market

How to Use the SWOT Analysis Tool

To carry out a SWOT Analysis, answer the following questions:

Strengths:

• What do people in your market see as your strengths?
• What advantages does your company have?
• What unique or lowest-cost resources do you have access to?
• What do you do better than anyone else?
• What factors mean that you “get the sale”?

Consider this from an internal perspective, and from the point of view of your customers and people in your market. Be realistic: It’s far too easy to fall prey to “not invented here syndrome”. (If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!)

In looking at your strengths, think about them in relation to your competitors – for example, if all of your competitors provide high quality products, then a high quality production process is not a strength in the market, it is a necessity.

For example, a strength could be:

• A new, innovative product or service.
• Your specialist marketing expertise.
• Quality processes and procedures.
• Location of your business.
• Any other aspect of your business that adds value to your product or service.

Weaknesses:

• What factors lose you sales?
• What could you improve?
• What should you avoid?
• What are people in your market likely to see as weaknesses?

A weakness could be:

• Damaged reputation.
• Lack of marketing expertise.
• Location of your business.
• Poor quality goods or services.
• Undifferentiated products or services (i.e. in relation to your competitors).

Opportunities:

• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?

Useful opportunities can come from such things as:

• Changes in technology and markets on both a broad and narrow scale.
• Changes in government policy related to your field.
• Changes in social patterns, population profiles, lifestyle changes.

A useful approach for looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities.

Alternatively, look at your weaknesses and ask yourself whether you could create opportunities by eliminating them.

An opportunity could be:

• A new international market.
• A developing market such as the Internet.
• Moving into new market segments that offer improved profits.
• Mergers, joint ventures or strategic alliances.
• A market vacated by an ineffective competitor.

Threats:

• Could any of your weaknesses seriously threaten your business?
• Are the required specifications for your job, products or services changing?
• What is your competition doing that you should be worried about?
• Is changing technology threatening your position?
• Do you have bad debt or cash-flow problems?
• What obstacles do you face?

A threat could be:

• Price wars with competitors.
• Competitors have superior access to channels of distribution.
• A new competitor in your home market.
• A competitor has a new, innovative product or service.
• Taxation is introduced on your product or service.

Carrying out this analysis will often be illuminating – both in terms of pointing out what needs to be done, and in putting problems into perspective.

Strengths and weaknesses are generally internal to your organization. Opportunities and threats often relate to external factors. For this reason the SWOT Analysis is sometimes called Internal-External Analysis and the SWOT Matrix is sometimes called an IE Matrix.

It is not simply enough to identify the strengths, weaknesses, opportunities, and threats of a company. In applying the SWOT analysis it is necessary to minimize or avoid both weaknesses and threats.

Threats should be converted into opportunities. Strengths and opportunities should be matched to optimize the potential of a firm.

You can also apply business SWOT Analysis to your competitors. As you do this, you’ll start to see how and where you should compete against them.

After you’ve analyzed your strengths, weaknesses, threats, and opportunities, you should use that information to plan how to market yourself.

What qualities do someone has to posses before he or she can regarded as an successful entrepreneur? Being an entrepreneur is more than just starting a business. It is about having attitude and the drive to succeed in business. All successful entrepreneurs have a similar way of thinking and posses several key personal qualities that made them so successful in business.

All successful entrepreneurs have the following qualities:

• The main quality is “inner drive” to succeed. They are very ambitious people and always try to implement their ambitions in life. Entrepreneurs set real goals for themselves and is focused and determined to achieve their goals and try to achieve them regardless of the obstacles they see on their way.
• Entrepreneurs have a really strong belief in themselves. Every successful entrepreneur believes completely in their ability to achieve any goal. Their self optimism can often been seen by others as flamboyance or arrogance but entrepreneurs are just too focus and don’t spend too much time thinking about smbd’s un-constructive criticism.
• Successful entrepreneurs always search for new business ideas and innovation. All entrepreneurs have passionate desire to do things better and to improve their products or service. They are constantly looking for new ways to improve.
• They have a spirit of competition in their blood. Successful entrepreneurs thrive on competition. The only way to reach their goals and live up to their self-imposed high standard is to compete with other successful businesses.
• And lastly, they are highly motivated and energetic. Entrepreneurs are always on the move, full of energy and highly motivated. They are driven to succeed and have abundance of self-motivation.

All successful entrepreneurs know how to generate business ideas:

1. They always read and study as many things as possible. You need to investigate specific information of what you are going to sell. For example, if you want to be involved in real estate business, you have to study everything about your subject matter.
2. After you have done your study, think hard about the solution to that specific problem. Then stop and relax. Let your subconscious mind works for you. The idea or solution will come to you at much unexpected moment. For me, idea or solution comes to me when sleeping.
3. Refine your raw idea until it is up to your satisfaction. You can always do your own research on the raw idea by asking questions to target market to test the feasibility of the idea and how to improve the idea further.