Buying a Franchise is Serious Business…Essentials of Franchising from Tiare Rath, for About.com

1. Initial Investment Fees

You will probably need to pay initial fees to your franchisor. The median initial investment cost in 2006 was $25,150, according to the International Franchise Association. About 75 percent of businesses have set initial fees, while 25 percent have ranges for the fees, the association reports.

The National Federation of Businesses says most franchisors expect you to pay one-third of the fees in cash. The rest can be financed through the franchisor or on your own. Franchisors may help you get loans through their financial institutions.

The fee allows you to use the brand name, and often includes training, marketing and other services. The franchisor will determine what exactly the fees cover.

2. Startup Costs…You may still need to buy or lease a property, which is usually the largest cost for franchises, purchase equipment and hire staff. These are traditional startup costs for any small business and can also apply to franchises.

3. Royalty Fees…You'll need to continue paying a percentage of your income to your franchisor for the right to use the brand. This fee can range from 4 percent to 12 percent, Naddaff says, and can also be used by the company to help your store with marketing and promotions or to have corporate site visits.

On its Web guide for buying a franchise, the Federal Trade Commission notes that "even if the franchisor fails to provide promised support services, you still may have to pay royalties for the duration of your franchise agreement." Before buying a franchise, be sure to ask franchise owners about the services and support they've received from their royalty fees.

4. Additional Costs…You'll be responsible for ongoing operating costs such as payroll. You also may have to pay for your own advertising, depending on the services your franchisor bundles into the agreement.

Research the Market…Franchises shouldn't be too young, nor should they be too well-established. If a franchise is either, you may be heading into a risky investment.

"You can be too soon on something or too late," Naddaff warns. "So I try to find things on the cutting edge."

Think American coffeehouses are booming? So do other companies, which is why the market has already been tapped, Naddaff says. He sees more growth in restaurants offering health and ethnic foods.

Find out what's missing in your community and how similar businesses are performing in comparable communities.

From The State of Wisconsin: Department of Financial Institutions…A Brief History of Franchising

• They say it began in the 1850's when I. M. Singer & Co. inadvertently created the first embryonic franchise network in an effort to distribute and sell its sewing machines to a then-skeptical public.
• As the United States became more industrialized in the late 19th century, national brands and nationally known vendors came into being and reworked the American economic landscape. Supply followed demand: as economies of scale and consumer demand for uniform products merged, more and more national chains appeared.
• Despite its early roots, franchising did not truly come of age until the late 1950's and the decade of the 60's. Before that, with one major exception, only automobile manufacturers, soft drink bottlers, and gasoline companies used franchising on a regular basis as the prime vehicle for marketing and distributing their goods. The exception was Howard Johnson. In the early 1930's, in the midst of the Depression, he established a chain of 25 Howard Johnson roadside stands.
• In the 50's and 60's, however, the giants appeared. Holiday Inns, Roto-Rooter, Dunkin Donuts, McDonalds, Burger King, H. & R. Block, Lee Myles, Midas, 7-Eleven, Dunhill Personnel, Baskin-Robbins, Wendy's, Kentucky Fried Chicken, Pearle Vision Center, Sheraton -- they all geared up and franchised out.
• Beginning with those chains and continuing today with franchise networks, two hallmarks may be identified: a trademark and a uniform product or service. Most people still assume that the McDonald's Corporation actually owns all McDonald's restaurants. In reality, though, most McDonald's restaurants are owned by independent franchisees. Yet, the Big Mac tastes the same in Maine as it does in California; the restaurants look the same in Arkansas as they do in Toledo; and the name outside is always the same around the globe. The public demands uniformity and, through franchising, gets it.
• Sidebar & Personal Note: Keep in Mind, during the 50’s and 60’s Franchising, as a way of doing business, was much looked upon like MLM/ Network Marketing has been looked upon during the 60’s and 70’s; in fact, I have read that Franchising, as a legitimate way of doing business, passed congressional approval by (1) vote.

Let Me Just Give You A Couple of “Appetizers” from Her E-Book “How I Made $436,797 In One Year Selling Other People’s Stuff Online (From The Super Affiliate Handbook)

• After working for twenty years as an air traffic controller, Rosalind Gardner wanted out. She was sick of working long hours to pad the pockets of corporate fat cats. She decided to find a way to work from home online, but she knew she would have to make enough money to live comfortably and pay for her retirement. So she dreamed big, and the rest is affiliate marketing history.
• In 1997, while she was still working her day job in air traffic control, she slowly but surely got together enough knowledge to launch her first website. It was devoted to gardening. When she was approached by a banner ad company that wanted her to advertise a dating site, she realized the opportunity available for profits with affiliate marketing. In her first month, she earned a whopping $10.99, but by the end of her first year, she was making $5000 each month. By the time she started clearing $10,000 a month in 2000, she was ready to bid farewell to her day job.
• " The title of her most famous marketing manual, “The Super Affiliate Handbook: How I Made $436,797 in One Year Selling Other People's Stuff Online," says it all. That was her annual income in 2002. In a short time, Gardner learned how to make online marketing work for her. Klaus Dahl's website, The Direct Marketing Review, says this about The Super Affiliate Handbook: "This is a fantastic book! One of the absolutely best books I’ve ever read on Affiliate Marketing – maybe even the best."
• Today, she is the CEO of Webvista, Inc., as well as an acclaimed author, public speaker and business consultant.
• Sidebar/ Personal Note: If you haven’t purchased and read her book yet, I encourage you to google her name and/or the title of her book and get started Today…hcwjr

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