Tag Archives: small business

Why Starting Your Small Business from Scratch Makes Sense

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Why Starting Your Small Business from Scratch Makes Sense

For the independent-minded entrepreneur, starting a small business from scratch makes a lot of sense. Relative to buying into an existing franchise, achieve several important advantages when going it alone.

Complete Control of the Operation

Within legal parameters, you have much greater control over your successful or failure as an independent business owner. Franchisors put strict rules of operation in place for franchisees. As an independent owner, you make the rules for your company. You decide your internal policies, the products and services to sell, the prices to charge and how to promote. For entrepreneurs who desire to prove their own business model works, or that just want autonomy in operation, this advantage is important.

Control of the Brand’s Reputation

Along with control of your operation, an independent owner has complete authority over the company brand. On the downside, you do not get the value of an established franchise brand. However, you also do not suffer like a franchise owner when the brand goes sour or other owners fail to live up to standards. Control the evolution of the brand image from day one.

No Franchise Fees to Pay

Most start-up companies have costs of entry. However, you decide what to invest as an independent owner. With a franchise, you pay an upfront franchise fee as well as annual royalty fees to the franchisor. Starting from scratch saves you as much as hundreds of thousands of dollars in initial franchise expenses.

An independent owner pays for any building, equipment, inventory, supplies, licenses, services, employees and operational costs. However, you budget these expenses in accordance with your financial resources and anticipated revenue from the beginning.

Local Support

Typical consumers do not distinguish a franchised chain store from a corporate chain store. Therefore, a local business owner may not benefit from community support with a recognized brand name. Many small-town residents “buy local” as a philosophy. It is easier to garner that community support if the business has a distinct name, or one that is associated with a prominent resident.

Conclusions

A franchise setup appeals to people who want external support. For aggressive entrepreneurs who want the highest ownership control, an independent operation makes more sense. Develop your brand from scratch, generate local support and avoid franchise fees.

 

What is Social Franchising?

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The success of franchising comes from the transfer of knowledge and experience from one successful enterprise to another. With an established business concept, as well as support and training, a franchisee can quickly become successful thanks to the foundation upon which his or her business is built. While with most commercial franchises the goal is to maximize profits, social franchises use the principles of franchising for a social goal.

What is social franchising and how does it differ from commercial franchising?

Social franchises are driven by social goals, rather than profit. While the franchise does make profit, this profit is used to develop its social aims. Social aims can include food security, poverty alleviation, or environmental conservation. According to the European Social Franchising Network (ESFN), a social franchise should be a social enterprise, and  have the four following characteristics:

  1. An organization that replicates a social enterprise business model – the social franchisor.
  2. At least one independent social franchisee that has been replicated by the social franchisor.
  3. A common brand under which the social franchisees operate.
  4. An interchange of knowledge between members.

Social franchises can operate in various ways, but generally a social franchisee pays the social franchisor a fee for their support. Differing from other non-profit charities and foundations, where most of the funding comes from grants and personal donations, social franchises use the sales of their successful business model to create a better world.

For example, Community Renewable Energy (CoRE), a European social franchise, helps communities develop their own renewable energy systems to generate community income and address climate change. The franchise does so through working in partnership with a specific community, where the community is not charged for CoRE’s work, but rather as a stakeholder in the the renewable energy systems, where they take a share of the profits. This share is then used to help the next community. The social franchise essentially supports their members by providing “technical skills, shared services, and replicable models for developing renewable energy systems.”

Are you familiar with any social franchises in your area? Please feel free to comment below!

Franchising Flummoxed by Obamacare

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Franchises are flummoxed by the Affordable Care Act. The new healthcare law continues to evolve, leaving a lot of confused small business owners in its wake. Which aspects of the employer mandate are franchisees responsible for complying with? How can they remain solvent without reducing their workforce and losing valuable employees?

 

The IFA has created www.MakingSenseofHealthCare.org to help businesses understand their compliance responsibilities and share testimonials and stories about how they’re dealing with the process.

 

Regardless of your political inclinations the Affordable Care Act is a big deal. The mandated health care coverage is expensive and small businesses are struggling to maintain profitability– which includes franchises.

 

According to the IFA, over one-third of full-time franchise jobs could be cut back or lost completely due to the Affordable Care Act. That’s over 3 million jobs. While Obamacare doesn’t take full effect until 2014, owners of fast-food, restaurant and service company franchises are urging Congress to make major changes to the ACA in order to save jobs and keep them in business.

 

One of the biggest components of the healthcare overhaul that’s causing grief is the discrepancy as to what constitutes a full-time work week. Obamacare says 30 hours; while most in the franchise industry believe 40 hours should be the standard. If Congress doesn’t amend the law franchises will be forced to cut employee hours back to below 30 hours per week.

 

Franchise business owners aren’t the only ones facing higher costs as a result of the Affordable Care Act. A 2011 Hudson Institute study shows that the franchise industry could see its costs increase $6.4 billion, much of which would be passed on to consumers.