Franchise Companies Come and Go
Each day we hear of companies entering the franchising industry. This is good news for America, right? Well, yes and know. Yes, because franchising is the closest thing to the spirit of free enterprise as any other method of doing business and because franchising offers small business people advantages that they would not normally have in pursuing their American Dream. However it is unfortunate but true that the average Franchisor failure rate is 5:1 in five years. Meaning they are gone out of business in that short amount of time. This is horrific news really. Why is this? Well most often it is due to over regulation, junk lawsuits, under capitalization or greed. Having played in the franchising industry I have seen it all.
Recently I had, had enough of the crap of beating my head against the wall, sure the money is excellent if you have a good concept and we certainly do; www.CarWashGuys.com ; but we found it was easier to make more money and keep more by not growing thru franchising. In franchising you can grow faster, in a 4-year period we went from 4 states to operations and franchised outlets in over 23 states. My point is that there are just too many lawyers and regulations for one to actually believe that anyone in government actually believes in free enterprise, to think they do is a bogus notion indeed.
In our company we are not currently offering franchises to the public. Our focus is to set up company owned units across the US and eventually the world and since I have retired the team will have to do it on their own, sure a few phone calls here and there for moral support or advice, but it just is not worth dealing with that level of bureaucracy and over lititigiousness. We may franchise in other countries but the United States being regulated by the Federal Trade Commission has their heads up their asses and it makes no sense in America anymore. Generally this business decision was made due to many following factors, some of which are listed below:
Sarbaines Oxley Law and Accounting Reporting Cost Increases,
Over Regulation in Franchising and Litigation,
Multiple State Franchise Registration Laws Out of Sync,
Disclosure Laws Hurting Company Proprietary Information,
Required Disclosures which Might Help International Terrorists,
Disclosure Laws, which Require the Giving Out of Personal Information About Franchisees.
Litigiousness of Franchising and Absence of Tort Reforms in the US and Canada,
Higher Profit Margins for the Company Running Our Own Units,
More Efficiency to Corral Our Competition,
More Latitude to Take on New National Account Business,
Better Service Standards for Current and Future Car Wash Customers,
More Control of Business Model and Less Red Tape
We have chosen a new strategy along the lines of a Starbucks, Home Depot, Enterprise Rent-A-Car, Federal Express type scenario where we can exert more control and less red tape to insure higher standards and smoother business operations. Regretfully this does impact the small business community, franchise model and those who dream of owning their own franchise business. Over regulation usually does hurt the little guys and stifle competition and creates barriers to entry.
We are not the only franchisor who feels this way and if the failure rates for franchisors in our country are 5:1 it would behoove new entrants to the franchising industry to think long and hard before getting into the franchise game. If you do not have a million dollars going in, you should not go. If you have not proven your concept in many markets over various business cycles forget it. Additionally you may want to look at alternatives to franchising, because with all this over regulation you are not going to have any fun doing it. Think on this.
"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs
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The Customer Analysis section of the business plan assesses the customer segments that the company serves. In it, the company must 1) identify its target customers, 2) convey the needs of these customers, and 3) show how its products and services satisfy these needs.
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Many times small businesses want to expand their businesses and are not sure when the best time to do that might be. The key of course is cash flow. Will your current and brand new accounts afford you the cash flow to expand? Let us run thru a scenario with you and just so you know this is good advice, I own the Truck Wash Guys and have been doing this a while. Each time a franchisee wished to expand and ask for advice, I would look at their situation and determine if it was a wise idea. Sometimes it was, but often it was not. So let us look a hypothetical scenario for a moment:
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Q: I will be retiring this year at age 60 and intend to fulfill my lifelong dream of owning my own business. I'm too old to start from scratch, so I'm looking at several franchise opportunities, including fast food, auto parts, and an accounting service. What should I consider before choosing one?Anthony R.
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Contrary to popular belief, small businesses can survive a crazy economy by taking some proactive steps.Provide spectacular customer service -- every time. Have a friend or colleague visit your business and provide feedback from a customer's perspective. This person should be unknown by your staff and willing to provide a candid assessment.Make sure your front and back office work like a well-oiled machine. Are the front line and the back office telling your customers the same thing?Manage your customer relationships -- return customers take the least amount of effort -- use that to your advantage. Keep in touch often.Review your strategic plan monthly (weekly is even better). Make sure you're doing the things that will get you where you want to go. Adjust your strategic plan as necessary. Your "smallness" makes you more flexible. Communicate, communicate, communicate -- with your employees and your customers. Nurture those relationships. Ask for feedback often.
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