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Global Resorts: Perpetual Leverage or Franchise Ownership?
By Bob Matthews | November 22, 2008
“I’ll take one pound of ham and one - no make that two - pounds of thinly shaved smoked turkey,” said a slim elderly woman who was little higher than the full cart of groceries she had pushed over to the meat counter.
Sam sighed as he picked up the remaining pair of latex gloves. It was a warm, busy day. And he was relieved that Mrs. Habersham was his last customer. Usually he didn’t mind filling in after butchering for the day, but today seemed so long and boring.
While driving home, Sam began to muse over the situation. How could he make more money? What skills did he have other than butchering?
Then while stopping at the last intersection light, his eyes focused on a scene at his local sandwich shop. “Look at that guy’s carryout bag - must be dinner for the family,” he thought. “And that elderly group is heading in for dinner.”
Scrutinizing the place, Sam thought, “It’s fairly well kept, and business is solid. Moms, dads, kids, and managers - all sorts of people - bustle outside with their dinner. They are satisfied. The owner is, too, and boy do I wish I were the owner!”
Perhaps Sam’s fantasy is quixotic, but he has it, nonetheless, and he’s probably not alone. How about you? Has the thought of owning your own fast food restaurant, auto body shop, or retail store ever crossed your mind?
In order to know whether or not franchising is for you, ask some of the owners of your local franchises what the dislike. (Bring a notepad and marker.) To help you get started, here are a few cons as compared to an average home business.
First, let’s compare average investment requirements. Franchise investments generally run from $60,000 to $500,000. This includes basic things like your land, building, machinery, and office equipment. But that’s still a lot of capital, especially in today’s financially difficult times.
A small but solid home-based business will cost you considerably less because you won’t have the added expenses of land and building. Start-up cost is typically between $1,500 and $3,000.
Second, let’s compare standard operating expenses. In a franchise you have to pay employee payroll, payroll tax, workers compensation, insurance/inventory, liability insurance, utilities, freight/postage, ad valorem tax, licenses/permits, advertising, telephone, franchise fees, depreciation, and sales tax just to keep the lights on.
For an online home business, your expenditures are minimized but, nonetheless, still exist. You still must pay for liability insurance, utilities, telephone, advertising, and depreciation (e.g., office equipment).
Third, here are a few additional things to consider: Your gross franchising profit generally averages 30-40% with a net profit of around 5-10%. You will work at least 50 hours per week-closer to 70 and maybe even more. You shoulder 100% of the risk factor and leverage none of the compensation from others-that’s what you’re doing for your chain store. You will have tax advantages, but these will be offset by your unchangeable time commitment, need to supply products, and confinement to a fixed location as well as limited income potential which averages out to $35-85K.
With a good home biz, you can make more gross and net profits working a flexible schedule and leverage your income to unlimited potential.
The light turns green. As Sam pushes the accelerator, what would you tell Sam to do?
Topics: Marketing |
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