Tag Archives: hot franchise

8 Reasons To Consider A Lease For Your Franchise

A lease for your franchise?

When you’re buying a franchise you probably need money – most buyers do – and numerous lenders are lining up, especially at franchise expos, to be of service. One option that buyers often overlook is leasing, and it’s worth your time to check out the possibilities.

If you’re investing in a franchise that includes equipment, such as a POS system, or ovens and appliances for the kitchen, or if you need a truck, such as a van, you may be better off leasing than borrowing. Leasing equipment is the equivalent of “renting” the equipment, which means that you won’t take money from your working capital to buy the equipment.

With a lease, you get to use the equipment and pay monthly, and at the end of the lease you can acquire the equipment, or upgrade it and roll the package into another lease.

Here are eight reasons why you should consider a lease when you start a franchise:

·      Hold on to your working capital. Cash on hand is a huge advantage.

·      Claim a tax benefit. Section 179 of the U.S. Internal Revenue Service Code allows you to write off a percentage of a monthly lease payment.

·      FICO requirements are usually lower for leasing. There’s less risk with a lease so credit rating requirements may be lower.

·      There are no prepayment penalties. If it turns out you’ve got extra cash on hand, pay off the lease without a penalty.

·      You can choose the terms: 24 to 60 months. This helps you keep the payment amount in line with your cash flow.

·      If you’re expanding your business by opening a second unit, you may be able to use the first business to guarantee the lease and not have to sign a personal guarantee.

·      Securing a lease may be faster than securing a loan – especially if you’re leasing an equipment package or a vehicle that’s recommended by a franchisor. Leasing companies like franchise deals.

·      Closing costs are minimal: almost always less than $500.

There are few disadvantages to a lease. Of course, you still need to provide personal financial information and provide a variety of documents to the lender, but this is all the easier when you’re buying a franchise. Savvy franchisors develop relationships with leasing companies to expedite franchise sales and development.

You’ll find more information about franchise financing in my Amazon best-seller: 12 Amazing Franchise Opportunities for 2015. Chapter 2 is titled Funding Your Franchise Acquisition.

 

 

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Prospective Franchisee: Do You Have This Skill?

How To Franchise Your Business | Best Franchise

Recently I wrote about What To Do Before Buying A Franchise and I suggested a couple of questions that you could ask yourself before deciding if franchising, as well as business ownership, made sense for you.

I pointed out that it takes skills to operate a business or a franchise and I also said that franchisors will teach franchisees the skills needed to succeed in business — of course, that’s relative to the franchisor and the situation. Remember that not all franchisors are created equal; some do a better job than others when it comes to training and other operational issues.

The Must-Have Skill

But then I said there’s one skill that can’t be taught. In fact, this skill will make or break your success in franchising. Without this skill you do not have much chance of succeeding in franchising and, in fact, without this skill you should not invest in any franchise.

What’s the skill?

The ability to follow direction!

Sounds simple, doesn’t it? But not everyone possesses that skill.

Is THAT A Skill?

In fact, some people would argue that that’s not a skill. Call it what you want (it’s a skill!) if you don’t have it, you’re not cut out for franchising.

If you’re a regular reader of this blog, or you’ve read my books, or you’ve heard me speak about franchising at a public forum or over the airwaves, you know that I’ve described franchising as a series of systems.

It’s All About Systems

Systems lead to success in business and especially in franchising. There’s a system for marketing. A system for sales. A system for operations. If a franchisor doesn’t have these systems, do not invest in that franchise!

Even if the franchisor has the systems, no matter how good they are, if you don’t have the skill of following direction, do not invest in that franchise, or any franchise!

Franchisor May Say “No”

If you do lack the skill, hopefully a franchisor will discover it and not accept you as a franchisee — but, once again, not all franchisors are created equal. Some need the money that comes from selling franchises, so they may let you slip by and hope for the best.

If you cannot follow direction (or you just don’t want to), how do you expect to succeed in a franchise? If you’re the type of person who wants to reinvent the wheel, or you need to ask Why? when you’re told to do something, franchising isn’t for you. Franchisors know that — now you do, too.

 

Is a Subway Franchise a Good Investment?

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It’s one of the most popular questions for every experienced franchise author/speaker. Perhaps because it’s the largest franchise in the world (in terms of units, not retail sales), people want to know if a Subway franchise is a good investment.

And because many of my readers and seminar attendees know that I wrote Start Small, Finish Big with Subway’s co-founder, and I sold a major franchise business to him, they think I have special insights about Subway. Really, I don’t.

“Is Subway a good franchise investment? . . . Can you help me get one?”

While those are important questions to ask about Subway, they are important questions to ask about any franchise that you think you might want to buy.

In answering the questions, here’s what I tell people.

Subway must be a good franchise investment for some people because many of the franchisees have been with the company since almost its inception, and (now answering the second question) it seems impossible to “get one” in the USA.

Of course, neither answer is really what you want to know, but you’re not asking the right person!

If you really want to know if Subway is a good investment, franchisees are the people to ask. They can also tell you how to “get one”!

You can easily find Subway franchisees either by looking into the company’s disclosure document (where you’ll find their contact information), or simply stopping at a Subway and talking to a franchisee.

Franchisees are usually willing to discuss their experiences with prospective franchisees, and if they have insights as to how to “get one” they’ll tell you. However, it seems to me that few Subway franchisees own just one unit — they own multiple units (it would be a good idea to ask them why) and so they may not be too eager to help someone buy a unit unless it’s far from where they’d like to own another one.

For those of you (and there are many) who would like to skip the start-up phase of business and buy an established franchise, that may be easier to do with Subway, except that the existing franchisees get first dibs on available units. And that’s because a franchisor would rather sell a unit to an experienced franchisee than to one who knows nothing about the business.

Meanwhile, you’re asking the right questions, and keep in mind that there are at least 2,500 franchise concepts in North America alone looking for new franchisees . . . don’t limit your questioning to Subway. Ask the same questions of other viable concepts such as those included in my most recent eBook: 12 Amazing Franchise Opportunities for 2015.

4+ Questions To Help You Buy A Franchise With Confidence

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Some prospective franchisees admit they do not know what to ask existing franchisees, and others say they know what they’d like to ask, but they don’t know how. Don’t let either scenario stop you from thoroughly investigating a franchise opportunity. Here are 4+ questions to ask, worded in a way to help you get the information you need.

#1 “As an existing franchisee, knowing what you now know, would you buy this same franchise again?”

Some experts will tell you never to ask Yes/No questions, but in this case you must because you want a definitive answer. If you ask ten franchisees of the same brand that same question you want to add up the “yeses” and “nos” at the end of your interrogation and decide if this is a franchise you should buy. If the majority of existing franchisees tell you “no” then you probably need to look for another opportunity. There could be exceptions, but you’ll want to understand what they are before you go ahead.

The answers to Question #1 logically lead to other questions. Whether the franchisee says yes or no, ask: “Why” If the franchisee answers no, ask “Under what circumstances would you change your answer to a yes?”

The answers to Question #1 logically lead to other questions. Whether the franchisee says yes or no, ask: “Why” If the franchisee answers no, ask “Under what circumstances would you change your answer to a yes?”

#2 “Do you find the business as satisfying today as you did when you first got started?”

Satisfaction is an important consideration in the life of a franchisee. In fact, many people explore franchise opportunities to get away from an unsatisfying job. But in this case, you’ll pay a fee to go to work. Do you really want to work at something that you don’t find satisfying after a year or two?

It’s another Yes/No question, but again the answers lead to other questions: “What happened to change your degree of satisfaction?” . . . “What could you or the franchisor do to make the business more satisfying?”

#3 “What’s the secret to the success of the top franchisees?”

It’s an open-ended question that can reveal important facts for you to consider. For example, if the franchisee answers, “Location!” you need to zero in on where to open your franchise. If the answer is “sales skills” or “management skills” or “accounting skills” you need to evaluate your own skills, or your ability to hire those skills.

Of course, if you’re not questioning a top franchisee, you may get the wrong answer! That’s why you should always ask the franchisor to give you a list of the top performing franchisees, i.e. the franchisees who won awards at the last three annual conventions. (A franchisor that won’t do that or can’t do that may not be worthy of your consideration).

#4 “If I invest the money the way the franchisor suggests (i.e. in training, advertising, location, etc.) and I work the business as well as you have, how much money can I expect to earn my first year as a franchisee? The third year? The fifth year?”

That’s what you really want to know, isn’t it? “How much money will I make?” The franchisor probably won’t tell you, but the franchisees will if you ask in a non-invasive manner. If you’re expecting to earn six figures annually, but no franchisee ever has with this brand, you need to know that upfront. It may mean you’ll have to buy more than one unit to meet your financial goals.

While these are some of the questions you should ask existing franchisees, you’ll find more in my book 101 Questions to Ask Before You Invest in a Franchise.