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Starting a Business with Franchise Opportunities

by Jared Newnam
July 6, 2012 South Source looks into franchise opportunities as a way to own a business.

Many people with an entrepreneurial spirit have a lifelong dream of starting a business. Buying into franchise opportunities can provide the chance to own part of an already successful business, without having to build it from the ground up.

“A big advantage of buying a franchise is customer awareness of the product or service,” says Louise A. Miller, an Accounting instructor for South University – Online. “Building a customer base from scratch is not necessary, so this can lead to a faster return on investment.”

Miller says the odds of failure are typically higher when starting a business from the ground up, compared to buying into an existing franchise business.

Joel Libava, The Franchise King® and author of Become a Franchise Owner! The Start-Up Guide to Lowering Risk, Making Money, And Owning What You Do, says franchisees have the potential to dominate their local market area quickly, because of the brand recognition provided by the company.

“If you do a startup, you don’t know how long it’s going to take,” Libava says. “With a franchise you can pretty much know how long it’s going to take to break even and make money, because there are other franchisees to talk to.”

Libava suggests that when looking for franchise opportunities, it’s a good idea to talk with other franchise owners in the company while doing initial research on the business.

“One way to tell a really good franchise company is how open the owners are,” Libava says.

He says when owners are friendly, happy and eager to offer information about their experience working with the company, prospective franchisees should take this as a sign that it’s a good company to work with.

Choosing the Right Franchise Opportunities

“Extensive research of the many different franchises available needs to be done prior to making a decision on which franchise to purchase,” Miller says. “One needs to consider costs and which type of business is the best match for the franchisee’s interest, experience, and skills. Analyzing competition is important too. If there are 50 doughnut or sweet shops in an area, it probably wouldn’t be a good idea to consider that type of franchise.”

She says, as with any new business, franchisees must be willing to work long days, weekends, and holidays.

“A willingness to do whatever it takes to make the business succeed is essential,” Miller says.

Building a customer base from scratch is not necessary, so this can lead to a faster return on investment.

Libava emphasizes the importance of finding the best type of franchise to match the traits of the owner.

Libava says people should consider their strengths and personality traits and how they can be applied to different types of franchise opportunities.

For example, he says a person who is good at sales and marketing might become bored easily by owning a retail franchise and instead should consider purchasing a business-to-business franchise.

Cost of Starting a Business

“According to the International Franchise Association, almost 75% of new franchise owners can get into business for a total investment of less than $250,000,” Miller says. “The typical investment is usually in the $100,000-to-$200,000 range.”

When starting a business, Libava says franchisees shouldn’t expect to eat much of a profit during their first year of operation.

 “Most people think they’re going to make money right away, but the most important part of the startup once you’re up and running is to break even,” Libava says. “I always tell people forget the first year, you’re probably not going to make any money. If you’re looking to replace your income by starting a franchise, you’re not going to right away. Make sure you keep some money in your sock drawer.”

Libava says that franchisees commonly fail during the first year if the owner is depending on profits from the business to fund living expenses. He says it is important to have another source of income to live on while the business is just getting started.

“If you choose a good one that is a good fit for you and you have the financial wherewithal to make it through the first year, everything is there for you,” Libava says.

Inside Menchie’s Frozen Yogurt Franchise Company

Miller says CNN Money cites the most popular franchises as businesses such as Subway, Quizno’s, The UPS Store and Cold Stone Creamery.

Opening a self-serve frozen yogurt franchise is another business venture that has become very popular with both people looking to own a business and with customers.

Menchie’s, a self-serve frozen yogurt company, currently has more than 190 franchise locations across the world. CEO Amit Kleinberger says this number will rise to 300 franchise locations by the end of 2012 and nearly double to 580 by the end of 2013.

Kleinberger says immediate brand recognition and the ability to use systems and platforms that have been developed for years as two major advantages to opening a Menchie’s franchise, instead of an independent frozen yogurt store.

“Over $20 million dollars of investment went into these platforms,” Kleinberger says.

He says it is much better for franchise owners to enjoy those platforms rather than build a business from the ground up.

It costs around $375,000 to open a Menchie’s frozen yogurt franchise, Kleinberger says.  This cost includes yogurt machines and restaurant equipment, store build-out/construction, a franchise fee, furniture, and other items and services a franchisee would need to open a store. Amounts can vary depending on location and square footage of the store.

Franchise owners collaborate with Menchie’s in a site selection process to choose the best spot in their area for the store location.

Kleinberger says Menchie’s also provides training to franchise owners, to teach them how to run their store before it opens.“We’re big on education,” Kleinberger says.

He says new franchise owners attend a 14-day training session at the Menchie’s global headquarters in Los Angeles. The company also provides four days of training at each franchise location, before its grand opening.

In addition, Kleinberger says Menchie’s offers established franchise owners ongoing educational opportunities.

He says one key area that franchise owners are educated on is the importance of providing consistency within the brand.

Kleinberger says Menchie’s works to make sure the experience is uniform across all locations by providing education to franchise owners and ensuring quality.

He says that each Menchie's frozen yogurt franchise offers the same exact product offerings, though the flavors of yogurt offered do rotate.

Menchie’s also employs area leaders that visit each store approximately once every six weeks to ensure that quality standards are being met.

Each Menchie’s frozen yogurt franchise is meant to be a fun place for customers to visit and enjoy themselves, Kleinberger says.

“We are all about making people smile,” he says.

Tags: starting a business franchise opportunities frozen yogurt franchise

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