1. Not thoroughly reading, understanding or asking questions about the disclosure document. Carefully read the documents and keep notes on the sections that are confusing or unclear. Give the cost reduction franchisor the benefit of the doubt and first ask him/her to explain the sections in question. If there are remaining issues then run the questions by your lawyer. One of the most common problems between new franchisees and the franchisor is a misunderstanding as to responsibilities.
2. Not understanding or having an inaccurate or incomplete interpretation of the cost reduction franchise agreement and other legal documents to be signed. It’s always a good idea for you and your attorney to carefully review the franchise agreement. First, make a list of questions to go over with your attorney, then present your concerns to the cost reduction franchisor. Get the franchisor’s clarifications in writing.
3. Not seeking sound legal advice. Locate and retain an attorney, preferably one experienced in franchising.
4. Not verifying oral representations of the cost reduction franchisor. Some prospective cost reduction franchisees prefer to tape-record all meetings with the franchisor. If you ask permission to do so, it is generally admissible in court if the need arises later. It also lets the cost reduction franchisor know that you are tracking their word. Send a registered letter to the franchisor memorializing your notes with a request for their response to any items you want clarified.
5. Not contacting enough current cost reduction franchisees. Ask the franchisor if you can randomly make contact with cost reduction franchisees other than the ones recommended. Ask them if the cost reduction franchisor has held up his/her end of the obligations regarding ongoing support assistance and training?
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A recent article by Crain’s Detroit Business reports that about half of local businesses expect the economy to remain about the same next year, while 28 percent expect it to get worse and 24 percent are optimistic that things will improve. The primary strategy for many businesses will be to save expenses by consolidating.
That’s actually good news for a cost containment franchise business since their main focus is to help clients identify opportunities to reduce expenses. One business owner who participated in a survey of 300 area businesses, conducted by Lansing-based Epic-MRA in late October, said containing costs will be the focus of his automotive and construction engineering business over the next year, along with marketing and trying to bid on new work. Nearly 22 percent of businesses surveyed identified cost-containment as the most important focus for 2010.
But 45 percent of companies, the highest percentage in the survey, said increasing revenue with existing products and services would be the most important focus for next year.
Anyone considering starting a new small business may want to take a good look at the opportunities offered by a cost containment franchise.
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In our previous blog, we provided 5 initial advantages of starting a cost reduction franchise as apposed to an independent start-up business. The reasons included minimal risk, providing immediate brand awareness, providing a proven turnkey business, negotiating better prices, and continuously offering ways to fine-tune your business. Here are 5 more reasons:
1. Cost Reduction Franchises Offer Strong Lead Generation Support. All franchises are committed to local marketing, and can often pool resources from franchisees to develop effective, local lead generation programs. Independents stand alone, and their funds won’t buy any significant marketing needed to generate new business.
2. Franchises Allow You To Start Selling From Day One. A cost reduction franchise gives you a proven road map for developing a solid business plan for your cost reduction business. This saves you many of the common hassles, mistakes, and supplier problems that the independents face before they even open.
3. Cost Reduction Franchises Provide A Network Of Colleagues. A cost reduction franchise offers the immediate resource of a network of professionals who provide a steady flow of encouragement, tips, advice, and best practices. The independent has to stay self-motivated which can become quite a challenge.
4. Cost Reduction Franchises Are Easier to Finance. With the lower risk factor, banks are simply more willing to lend money to a franchise than an unproven independent business. That can be a big issue in today’s economy.
5. Franchises Are Easier to Sell. Selling your small business is a common exit strategy for many owners. This strategy is easier and often more lucrative for a successful cost reduction franchise than an independent business owner. Buyers know that independents are higher risk, and they know that they don’t have the same support system as a franchise.
When considering any business venture, most of us focus on two things: Minimizing risk and maximizing returns. The research is very clear achieve both goals is more likely for cost reduction franchise than an independent business.
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Once you’ve decided that it’s time to branch off on your own the next question to ask is, “Should I buy a cost reduction franchise, or launch my own independent business? Here are the five initial reasons to consider a cost reduction franchise:
1. Cost reduction franchises are less risky than other franchise models. Risk-of-Failure is usually what keeps most of us locked in our 9 to 5 regular jobs. A cost reduction franchise reduces the risk because it provides you with a proven brand and business formula. Research shows that franchises are far more successful than independent start-up businesses after 5 years. An independent business offers no business plan, no support and no “safety net”.
2. Cost Reduction Franchises Provide An Immediate Brand. An established brand immediately helps you create credibility for your business. Independents seldom have the time, experience or money to develop their own Brand. That why Independents are always vulnerable to strong competitors moving into the market.
3. Franchises Provide A Proven Turnkey Business. Cost reduction franchisees come right out of the gate a comprehensive roadmap for running their business which includes thorough training and support. Independents must work out all marketing, operations and administrative issues/problems as they arise.
4. Cost Reduction Franchises Negotiate Better Prices. Here’s the sad truth: Independents will seldom get respect when sourcing product for their business. That’s because suppliers reserve their best support (and prices) for volume purchase buyers, like cost reduction franchises.
5. Franchises Continuously Fine-Tune the Business. Cost reduction franchisors are always re-discovering and re-inventing their brand to keep their franchisees successful long-term. Independent business owners are hard pressed to continually research the market and develop new cost reduction services, technologies and marketing programs to keep their business cutting edge and competitive.
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Cost Reduction franchises provide a complete, turn-key business formula that makes it possible to launch your own business in a short period of time. Franchising is ideal for individuals who lack the sufficient entrepreneurial experience to start a business on their own. Owning a cost reduction franchise avoids the common pitfall of investing a great deal of time, effort, and money into a “start-up business” that only has a slight chance of succeeding. Franchising is a fast rack escape from the boring 9-5 daily-grind jobs that so many people face today.
Unless you were born in the “Silver Spoon Club” where you can simply take over the family business, or draw on family wealth it can be very difficult to break out of the mundane work environment and start your own endeavor. If you have a strong passion to succeed and you know that with the proper opportunity, good support, comprehensive training, a thorough business plan and sufficient financing, then a cost reduction franchise can be the perfect solution to achieve your business dream.
Franchising enables you to own your own business, be the boss, control your destiny and make as much money as your potential and circumstance allows. Franchising makes it possible to develop your business potential and build personal wealth beyond your dreams.
Yes, there will always be unexpected bumps along the road, and you have to be prepared to navigate your cost reduction franchise business through the challenges every business faces. But to a great degree, franchising gives you the power and the means to drive your business-success through any economic situations and as far as you’re imagination can take you. Those who are successful in franchising will tell you that with franchising, anything is possible. If you experience limitations, they would say that they are most often self imposed.
Be thorough when exploring your franchise opportunities but if you have a background in accounting you should seriously consider a cost reduction franchise. Search the internet for the right cost reduction franchise that fits your situation and chemistry. Talk to cost reduction franchise owners and most of them will tell you that franchising offers you a shot at the greatest gift of all…..”Financial Freedom”. You may be closer than you think to your next career move.
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It’s always wise to carefully research a franchise specializing in expense management (which are generically referred to as an expense reduction franchise or a cost containment franchise) before signing on the dotted line. Your initial interest may start after reading an article suggesting that owning a franchise is the best and easiest way to achieve financial independence. There is certainly no problem with making money a high priority on your list. But, just make sure you know in advance if operating an expense reduction / cost containment franchise is right for you.
Here are 5 points to consider:
1. Understand the Guidelines
Even though you’ll own the business some guidelines and decisions have already been established by the franchisor. Franchise standards and formulas offer many benefits such as avoiding the risk of trial and error. But, if you are more of a maverick and need the freedom to go in your own direction, you should think carefully before signing that agreement.
2. Do the Time. A franchise specializing in B2B expense reduction works as well as the effort that’s put into it. Franchising provides a proven business system, but it’s you, the owner, that provides the drive to run the business. A B2B expense reduction franchise requires a 24/7 work ethic. But even though you’ll work hard, the franchise allows you to work “smart”.
3. Commitment to Sales. Yes, franchising provides a proven business formula and plenty of support from the franchisor, but it still requires a strong commitment to selling. Successful B2B expense reduction franchisees have strong “people skills” which is a basic requirement to being a good salesperson. Make sure you have the right personality and skills sell yourself and your services.
4. Passion is a Required Ingredient. Successful B2B expense reduction franchises need to be passionate about their franchise brand and cost reduction services. This positive attitude spreads to every level of their business. Building a successful franchise is more than just making a quick sale. It’s more about providing a positive experience for every customer. This can typically be achieved by delivering more than the client expects and that takes passion.
5. Respect the Brand. Another key factor to creating a successful B2B expense reduction franchise is to remain loyal to the franchise brand. Never take shortcuts pertaining to the procedures, customer service policies, or product quality. Remain in total compliance and understand that your actions can impact the overall brand image plus the future success of the franchise.
Every successful franchisee specializing in B2B expense reduction or cost containment didn’t necessarily consider these 5 factors when they first started looking to purchase a business. But each one was motivated to make the leap into owning an expense reduction / cost containment business. And they were committed to doing whatever it took to be successful. All would agree that if you are you willing to make these commitments for the sake of making your B2B expense reduction /cost containment franchise a success then this is definitely a good option for you to consider.
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For obvious reasons, one of the main motivations for purchasing a franchise business is to make money. If you are considering a cost reduction, expense management, or cost containment franchise it may very well be the very first question you ask the franchisor but since so many variables exist it’s an impossible to give an exact answer. The franchisor may be able to provide you with a range of annual revenue but he/she doesn’t want to mislead you by stating unfair expectations. In addition, the Government takes this matter very seriously. The Federal Trade Commission (The F.T.C.) has very tight guidelines for what a franchisor can and cannot disclose to a prospective franchisee. These guidelines are designed to protect everyone involved from the disappointments and potential litigation that can result from franchisees not making the money they expected to make. It is imperative that franchisors comply with these guidelines.
It’s important to have an open conversation to discuss the potential earnings opportunities but like any new business venture you can’t expect to receive guaranteed results. Why? Because the franchisor of the cost reduction business can never be sure what happens once the franchisee is trained, licensed, and on their own. Perhaps the franchisee is not quite the operator that everyone expected. Will they follow Company standards consistently, offer stellar customer service or commit the time and energy to local marketing?
Passion, dedication, and commitment are the keys to a success of a cost reduction franchise or any business for that matter. The keys to success are often based on a solid professional sales background, existing connections to “C-level” prospects, a good five year plan, and the discipline to follow that plan. So ask yourself, “What is your level of passion?” Are you willing to commit yourself 100% to your business? Are you a natural at providing stellar service to your customers? When you know how you’ll perform, it’s much easier to predict how your cost reduction business will perform. If you’re convinced that you will be a good fit for this model, then it’s time to ask yourself, “How much money can I make with my cost reduction franchise?”
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Are you thinking about investing in a franchise? Would you make a good candidate? Don’t forget, you are purchasing the rights to use THEIR business concept. This is THEIR “baby”.
You must follow the rules! Using their systems and detailed operations manuals that were written to help things run smoothly. The marketing plan is already planned and ready to go. Pre-set advertising templates have been created and you will need their permission to do anything additional. Keeping the franchise uniform and consistent, both operationally and in the consumers eye, is very important.
Think you are ready – take the quiz! :
- When your supervisor asks you to do a project, do you tend to follow the way it has been laid out? Y or N
- Do you consider yourself a good team player? Y or N
- Are you comfortable using your employer’s business systems? Y or N
- Do you consider yourself a flexible person? Y or N
- Are you a good idea person? Y or N
- As you look back on your work life, would you consider yourself a rule follower, or one that tended to make your own rules, to achieve the desired results? Rule Follower or Rule Maker
- Are you thinking about getting a franchise of your own, because there is already a system in place? Y or N
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In this troubled economy, franchisors are experiencing the effects of a double edged sword. Is now a riskier time than ever to start a business? Or is it the perfect time to take the plunge?
Assuming that a franchisee can find all of the necessary funds to open up shop, they will need to determine what they need most to stimulate their business. Most franchisees will say that sales and easier access to financing are the most vital to success.
Franchisees that have made it through the lowest points of this year are “battle-tested,” and have come out stronger.
Some have said that this recession may ultimately be thought of as something that was good for small businesses. “It was a very sobering wake up call,” said Hector Barreto, SBA administrator. Perhaps, Main Street will come out of the recession stronger than ever.
Prior to the recession, a conversation with a small business owner may have been similar to this:
SBA : You can save money if you do this.
Biz : Oh, it doesn’t really matter.
SBA : But it’s $75,000.
Biz : It’s a lot of hassle to change my process now.
You can bet that business owners are going to come racing out of this recession stronger, smarter, and better than ever. They’ll make decisions like they should have made years ago.
Cost reduction franchises can be the helping hand behind these decisions.
“They are committed to succeeding. We’ve never been here before, but it’s a very dynamic time that will result in a even more battle-tested small business sector,” said Brian Burch, HP’s director of SMB marketing.
Burch continued with, “Many people are out of a job who are incredibly business savvy with money and means to invest. When we come out of this it could be a freight train.”
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These are scary times for business owners. Demand for products and services is slowing, equity values are plummeting and it is becoming more difficult to gain access to working capital.
So what are your plans to maintain or grow profitability in this climate? Raising prices could put your business at a competitive disadvantage. Delaying or canceling capital equipment purchases risks creating inefficiencies. Or you can reduce expenses, which offers many benefits if you avoid the pitfalls.
Although laying people off is an immediate way to reduce costs it risks destroying morale, reducing productivity, and could create an enterprise that can no longer attract and keep the best talent.
Another solution for cutting costs is the adoption of best practices in purchasing.
When times get tough, reviewing your procurement practices may be the best and quickest way to free up the cash flow necessary to sustain your business.
Industry analysts suggest that each $1 in procurement cost savings has the same impact as $5 in new revenue. Using that ratio, $100,000 in savings would replace $500,000 in lost sales. This savings frees up cash flow, increases borrowing power, and boosts equity values.
The same is true for not-for-profit organizations. Every dollar of cost contained replaces $5 lost through attrition in donations, grants, endowment income and fund raising activities.
So why doesn’t every CEO implement an across the board cost cutting initiative in the procurement arena? Because identifying cost savings involves solving unforeseen challenges making procurement more difficult than it may appear. Here are some ways for executives serious about reducing procurement expenses to consider:
- The CEO or business owner must make procurement a top priority. Providing strong leadership and on-going support to the cost containment effort throughout the organization is critical.
- Review all expenses. Every dollar matters. Sometimes the greatest overall cost savings come from the multitude of mundane, non-strategic expenses like office supplies, telecommunications and printing.
- Oversee a fair evaluation of supplier alternatives. Leverage your annual spending across each expense area and initiate a competitive bidding process that is fair, equal and arms length.
- Consider new suppliers and never allow incumbent suppliers preferential treatment in a competitive bidding process. Your company must be willing to terminate longstanding, “sacred cow” vendor relationships if there are lower cost alternatives elsewhere.
- Challenge assumptions about supplier service and quality. Low price and high quality are not mutually exclusive. Don’t accept the myth that low cost always means poor quality. Don’t accept assumptions that are not based on facts.
- Monitor compliance. Once the suppliers have been carefully qualified and selected, limiting purchases only to these preferred suppliers. “Maverick spending” to non-qualified suppliers will reduce the performance leverage, pricing advantage and soft cost reductions.
- Treat your suppliers as clients. Clearly articulate your expectations in a way that is fair and understandable. Also, be sure to thank suppliers who meet or exceed your expectations. A little appreciation from the CEO can really stimulate extra effort.
Whether you adopt this new purchasing process internally or through the assistance of third-party cost management consultants like Alliance Cost Containment, implementing a cost control regimen using best practices like these will almost certainly result in the easiest revenue enhancement your company will realize in this difficult economic environment.
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