Inspiration Business

By asking questions before starting an internet income business and finding out what is actually involved in building an online home business will not only prepare you for what lies but speed up your progress as well.

For existing internet income business owners make it your business to keep learning and implementing to keep up-to-date with the ever changing internet marketing environment.

Here are some of the queries recently received and hopefully the brief explanation to each query will help you with your internet income business.

Q: “As I do not have money to spend on advertising are there ways to get targeted visitors to my site for free?”

Absolutely! Some of the most effective internet marketing methods for driving targeted visitors to your website are free, such as article marketing, forum posting, blogging as well as submitting your link to the web directories. Although the effects of this type of marketing take a while to kick-in the huge advantage is that you are creating links back to your website which continue to attract targeted visitors to your website well into the future.

Q: “I have just opened a Google Webmasters Account and I see I have to submit a sitemap of my internet income business website. How to I make a sitemap?”

A great resource that will not only generate a sitemap of your website, but also give you step by step instructions on how to upload it to your server is http://www.sitemapspal.com/.

Q: “I have so many questions that I need answers to, is there a central place I can go to on the internet to find the answers?”

Some of the best places to get answers to your questions are in forums. You ideally need to join a forum that is related to the theme of your business. Do a search for internet marketing forums and join a couple, introduce yourself and spend time going through the posts and see if you feel comfortable in the environment. If you don’t feel ‘at home’ move on and find another forum. If you don’t find answers then post questions yourself. Once you have your answers you will then also be in a position to contribute to the forum by answering other posters questions.

Q: “My internet income business has been up and running for a month now and I have not made any online income yet and really think it is a scam and certainly not a legitimate internet income business.”

It not only takes time to build an internet income business but also persistent and consistent work to build an internet business to the point that it makes online income. A legitimate internet income business is one that has been proven to work by others who are making online income and one that works if you work it like a real business and not a hobby.

Q: “I want to start an internet income business that is guaranteed to provide me with online income.”

There is no magic formula to starting an internet income business and making online income – those that are generating online income are those that are doing the work. There certainly is no guarantee how much income you will make because it is dependent on the work you put in.

Q: “I am keen to start an internet income business but I don’t want to get involved in internet marketing.”

Internet marketing is the best way that a business is going to gain exposure on the internet and therefore something you will need to take the time to learn and implement and continue to learn new skills to keep up with the rapidly changing pace on the internet. If you are not interested in internet marketing then perhaps an internet income business is not for you.

Q: “I signed up for a so-called fully automated e-commerce enabled website, but I have not received any visitors to my site yet.”

A fully automated site is one, for example, that would automatically process orders and payments as well as have an auto-responder installed to send out emails responding to visitor sign-ups and sales. An automated site does not have a magic mechanism installed to attract targeted website visitors.

Q: “I immediately upgraded my membership to the highest level in order to take full advantage of the compensation plan, so when do I get paid?”

In network marketing or multi-level marketing programs you need to start marketing your business and recruit new members into your team. Once those new members either upgrade or sell products you will be paid a percentage of the commission. You will also be paid commission on any sales you make. Some internet income business programs have different levels of upgrades and the higher the upgrade the higher percentage commission you will be paid.

Q: “Can you tell me why it is an advantage to own my own domain name rather that just marketing an affiliate link?”

Owning your own domain name is a must for online success. Most importantly, it gives you total control of your internet income business. You will have full access to the source code enabling you to optimize your website for the search engines with your chosen keywords, resulting in improved search engine rankings. You will be able to promote whatever programs you like on one website. Affiliate links rarely appear high up in the search engine results but own domain names do.

Q: “What will I gain by upgrading my membership?”

Some internet income business opportunities are totally free and you are able to earn commission as a free member, but by upgrading your membership you will receive a bigger percentage of the commission and be able to take full advantage of the compensation plan.

Q: “How can I improve my search engine rankings?”

Firstly, optimize your website for the search engines. Then continually aim to increase the back links pointing to your website. You can do this by writing articles and ensuring that in the author’s resource box you hyperlink your keyword phrase back to your website. Do the same linking in your forum signatures too.

It is highly beneficial while building your internet income business to keep asking questions, learn and take action, because the more knowledge you can gain about marketing on the internet the further you will propel your online home business forward.

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Internet Marketing Agency Make Money Online Business Course

Internet product marketing can be a very great industry, but it takes a lot of knowledge and skill. There are thousands and thousands of resources available to internet marketers that supposedly help you to work online and make money. These are my reviews for the best internet marketing training course that will actually work. These internet product marketing training guides will give you a greater knowledge of internet marketing, whether just starting out or think you know the industry. You will immediately start making more money online with an internet marketing training course.

#1: Wealthy Affiliate University

WOW. Where to start? Wealthy Affiliate University was created by the “Wealthy Affiliates,” Kyle and Carson. After making their millions online, Kyle and Carson started this internet product marketing community to help others do the same. This is a month-to-month or annual membership website, but it is more than worth it.

At Wealthy Affiliate, you will find countless resources and training tutorials with more being added constantly, a private member forum, and your own “Space” where you can find buddies, blog, and talk with and learn from fellow internet marketers. WA also includes free web hosting and website design system. There is also a keyword tool, ClickBank product research tool, a linking cloaker tool that tracks your click-throughs, a NicheQ which gives you all kinds of information on a selected niche, keywords, articles, and much, much more. Here you will learn about free and paid internet marketing techniques. There are available resources about search engine optimization, article marketing, email marketing, website development, web hosting, pay per click marketing, conducting research, keyword optimization, and more. Internet Marketing Agency Make Money Online Business Course

#2: One Week Marketing by PotPieGirl

PotPieGirl is also a very successful internet marketer. She has used her previous experience to come up with strategies for internet marketing that work best and created an ebook from them. One Week Marketing by PotPieGirl will take you from beginner or intermediate internet marketing and put your success in overdrive within one week. You will learn all free techniques to work online and make money with internet marketing.

There are many bonuses included with the One Week Marketing by PotPieGirl internet marketing training course. You will receive step by step checklists so you know you are doing everything you are supposed to before moving forward. There is also a special bonus called A Conversation With Nick that will answer every question you may have about internet product marketing and the techniques you will learn. You’ll also get One Week Marketing by PotPieGirl Mind Maps which show you how everything you do fits together to benefit your career as an internet marketer.

If you are still learning about the internet marketing industry the One Week Marketing by PotPieGirl internet marketing training course is for you. It is a fail-proof system that will teach you everything you need to know about internet product marketing and take you along the right path so you will be able to work online and make money while doing it. Internet Marketing Agency Make Money Online Business Course

In the internet, we would have some chances to do some shopping activities. We could click the sites to find some stuff that we needed to have. Surely, it would be excellent if we could find the perfect site that would give us the excellent stuff that we needed. There are so many online stores that would be ready for us. We could get many kinds of things that we might need by clicking the sites in the internet.

One perfect site that we should consider is the Shopwiki.com. This site has been well known as the most completed site to get many kinds of things. We would have some chances to get many kinds of things that we needed by clicking the site above. We could get many kinds of stuff, starts from small stuff to some big stuff such as the home appliances as well. Perhaps, this time we needed to get the Sunglasses.

In the site above, we would have some chances to get the excellent options of it. We could click the site above to find the Sunglasses for Safety info. That wouldn’t be all. We could click the site that would give us some chances to find some more information that we needed to get it. We could get some Safety tips as well.

Which part of the auto business is of interest to you and do you have enough money to pursue that interest. This is the first question that people thinking of getting into an auto related business must answer for themselves. There are many auto related businesses that a person can consider. The range can start with auto repair or care and go to a new dealership. There are several areas that are different and yet are some how auto related.

The business types that fit into these categories have significant differences in start up cost. A new car dealership will cost more to buy than a small repair shop. A used car dealership may have a lower start up cost than a large multi-bay repair shop. A brand name muffler shop can have a large price tag if started from scratch. With these money considerations a person that wants to own a business in the auto field must be realistic about those areas they can afford to start or buy. There is a huge difference in the price tag of these different operations. The prospective owner of one of these businesses must make an early decision of what they can afford that they also would like to do. If is not logical that a non-mechanic would do well in with a repair shop. A non-sales person is not likely to own a car dealership. The point is that personal traits, likes and dislikes will lead a person to the likely businesses that they should consider.

How do you find auto businesses are for sale

Business brokers as a group are very good sources of businesses that are on the market. There are brokers that specialize in certain types of business, who would be very good people to contact about auto related businesses. The Internet is an excellent source for finding brokers and businesses that are for sale. Any large city is going to have brokers that specialize in buying and selling existing businesses. Brand name auto related businesses could also be contacted to see where and what they have to offer. If you have a passion for hot cars or just making them run right, maybe a car repair shop or a custom car shop could be your cup of tea. The cost to start one of these shops would be less than a new car dealership. On the other hand if you are a terrific sales person, a car sales company either new or used would be a logical choice if you have the money to buy one or get a new one off the ground. There are brokers and brand name auto companies that could help you find the answers you need for this niche area of the auto business. One other factor that must be looked into is there are many types of used car businesses. There are companies that only carry certain brands and there are businesses that restore certain cars. The variations which are found within the auto related entities is so profuse, that a person would be wise to see a list of all of the businesses in the area they wish to work. There are just so many possibilities that a person may consider when looking for a business to own.

If you have the money, the old owner will have the time

If you have the money, the old owner will have the time to listen to your offer to buy their business. This does not mean that you have all of the cash yourself, it just means that you can make a cash deal happen. I f you can get pre-approved for a credit line or loan, you can get a better price typically with a cash price offer. Most sellers will lower the price if they can be totally cashed out at the time of sale. If they do have to carry back paper, the price will be higher than an all cash deal. Using the sources that are easily found on the Net can help arrange this loan. By using a good search engine to find companies that make loans to buy a business, you will be surprised at how many sources make these business loans.

Other money sources are partners, friends or relatives. Each of these will have different pros and cons associated with them. Relatives may be willing to make a loan, but they will probably want it to be very short in time. A partner can bring all other sorts of difficulties, as someone has to be the boss. Friends may be okay if they can truly afford the loan. In any event a disinterested third party is the best of all sources if for no other reason than peace of mind.

A substantial down payment may ease the reluctance of the seller to carry back paper. At this point in the sale, it is all about negotiating the deal. Terms can be fair to both parties and that is the way it should be or the deal may ultimately fail. If the seller will not cooperate and the other money sources are not willing to help you, it is time to walk away. Sometimes not doing anything is the best course of action by all concerned. It may be that a year would make all the difference in the world.

This business purchase cries for a broker’s help

Because there are so many aspects to the auto business, this area is one where a knowledgeable broker with solid lists of businesses for sale would be of real help in finding a situation that is perfect for the buyer. They could give a quick over view of what is available in the categories that make up the auto businesses. This could save time and maybe even generate a new idea for a business. This is just one of the many services that a good broker can provide in the search for a business property.

Conclusions

The auto related business is an interesting area of possibilities for the person that wishes to own a business connected to cars. There is an area for just about every interest or personality that wants to earn his or her living in these areas. If you like working on cars or selling cars or caring for cars there is a business for you. It truly is about what you like to do with your time and finding an area that will allow you to enjoy yourself and make money at the same time. Finding a property that fits your interest or your skills is easily accomplished by using an experienced business broker. They will know the businesses in a geographical area that are for sale. They can give you a run down on the prices and the profitability of the businesses on their lists. This is a great time saver and speeds up the gathering of information that you will need to make informed decisions on the business you would consider owning. You may find two or three possibilities and this would be better for you as you could see which would be the best to buy based on many factors. Profit versus price would be a first consideration. You could find whom you could make the best deal with and have the best terms of purchase. And of course that is very important in buying an existing business.

Millions of people dream about owning their own business. Having the independence that being your own boss brings, the security that no one can fire you, enjoying a good income – and for the most successful – the accumulation of wealth and prosperity. Unfortunately, the cards are stacked against a new small business making it big – or making it at all. An endless stream of problems makes competition from large, sophisticated chains too intense. Many new start-ups end as failures.

Buying a franchise represents a different approach to starting a business.  For an upfront franchise fee plus ongoing royalty payments, the parent company teaches its business model and methods to the franchised-operator who shoulders all operating and financial responsibilities of the outlet. Some statistics are impressive: it is said over 40% of all U.S. retail sales are through franchised establishments. While franchise giants like McDonalds, KFC, H&R Block and Radio Shack are familiar, household names, franchises are available in a wide range of industries. The list of 3,000-plus companies selling franchises span over 100 different industry categories.

American Dream … Or Nightmare?
But just as franchising represents a chance to get rich, it’s also a chance to get stung. An alarming number of franchised operators make less than the minimum wage, working seven days, sixty to eighty hours a week, pursuing an expensive and elusive American Dream that turns into a nightmare. Since the ongoing franchise royalty payment comes right off the top, as a percentage of gross sales or a fixed minimum amount, the franchise company gets an assured revenue stream, even if its franchised units are operating unprofitably and are sold over and over again to new, unsuspecting buyers. The internet is filled with comments of the many people who lost 0,000 and more on concepts like eBay Drop off stores (iSold It), 30 Minute Fitness concepts (Curves), The UPS Store, etc. Yet many of these companies continue to sell and resell franchises over and over again. How do they accomplish that? Because there are enough people who think they can “believe” their way to success, even with a concept or business that’s not working in the marketplace. As discussed below, in many cases franchise investment decisions are incredibly based on emotionalism, not on business logic or even common sense.

Ownership And Being Your Own Boss?
Pride of ownership and being your own boss are highly touted phrases in franchise recruitment ads. But these are more fantasy than reality. Although you get all the financial exposure, headaches and stress of business ownership, what do you really own? A franchise owner is merely licensing a trademark (or service mark) from a company that dictates every detail of business operations. So the real boss isn’t you, but the company that sells you their franchise rights . . . and sea of franchise obligations.

Equity Build up?
But at least you’re building up equity, the ownership value of the business as a going concern beyond your investment of money, to compensate for all those years of hard work and long hours – right? Wrong – at least in the world of franchising. The franchise company reserves rights to acquire your entire business at below wholesale prices if their contract is not followed precisely. The acquisition rights provide for predetermined asset-based valuations, like book or liquidation value. These valuation methods provide bare minimum compensation (the used value of some file cabinets, office furniture, equipment, etc.) and are not generally used to determine the selling price of any business.

Absolutely no compensation is paid for established goodwill, the value of a business that is generating $X in profit or cash flow every month after years of effort, investment and expense – thus eliminating the most valuable ownership asset. Of course, you may be able to sell your franchise to a third party for a sales price that includes an earnings-based valuation. But that’s possible only if:
(a) you can find a buyer who is willing to live within the complexities of a franchise relationship, and
(b) you happen to own a franchise that’s showing healthy profits.

What follows is a bottom-line franchise checklist and tips compiled by franchise attorney and franchise expert, Mr. Franchise, based on reviewing over 500 franchise offering circulars and twenty-eight plus years of experience in the franchise industry – including ownership of a very successful franchise. These factors to consider in making a franchise investment will help you eliminate 95% of the companies you are considering. Then, you can concentrate your efforts on the 5% “cream” of the crop” companies that may deserve consideration. This franchise checklist assumes you’re suitable for and willing to live within the confines of a franchise relationship. It also assumes the franchise company:

(1) has itself successfully operated the concept being franchised for at least five years at multiple locations;
(2) is not plagued by franchise litigation and franchise lawsuits from disgruntled franchise owners;
(3) does not have unusually high franchise attrition rates (owners who have “left the system”); and
(4) has a balanced, fair franchise contract.

SOLD It – An American Dream That Turned Into A Nightmare
An example of a franchise company in trouble that failed to meet basic threshold standards is iSOLD It, an eBay drop-off store franchise. The company started its one and only company-owned store in November of 2003. Just weeks later, on December 10, 2003 they filed an application to sell franchises. The California Department of Corporations didn’t say “What are you thinking? You’ve only been in business a couple weeks, how can you even consider selling franchises?” Nor did they require this be disclosed as a risk factor on the cover page of the Franchise Offering Circular, as it should have. Disclosure responsibilities ultimately rest with the company (and its attorneys), and this will become one of many issues in future franchise litigation.

Instead, the Department simply collected its 5 filing fee and issued an order declaring the franchise registration effective the next day – on December 11, 2003. Then the magic of franchise marketing  took over. By 2006 the company had nearly 200 franchised drop off stores in operation and was touted by Entrepreneur Magazine as #1 in their list of “Top New Franchises for 2007” and #17 on their “Hotter Than Hot” franchise list. Entrepreneur Magazine, which requires franchise companies to submit their FOC’s (Franchise Offering Circulars) for supposed review each year before they’re listed, didn’t consider the high attrition rate (franchise owners leaving the system) or the fact that the audited financials in their FOC showed the company hadn’t operated profitably since 2004 as serious negatives and awarded iSold It the #1 listing for Top New Franchises of 2007. How did all of this happen? It’s yet another bizarre reality in the world of franchising.

The franchise company’s audited financial statements for the year ended 12-31-05 showed an operating loss of .1 million. Nine months later, in September of 2006, the net operating loss mushroomed to over million.

In its November 3, 2006 Franchise Offering Circular, the table in Item 20 disclosed a total of 10 franchise owners leaving the system, yet a hand count of Exhibit D-3’s “Former Franchisees” revealed a significantly different number – 44. A similar “discrepancy” exists about franchise transfers. Item 20 says 12 transfers whereas Exhibit D-3 discloses 27.

In a long overdue letter distributed to franchise owners on April 5, 2007, CEO Ken Sully painted a dire picture of an American Dream that had turned into a nightmare. Mr. Sully’s letter admitted the company has not been profitable since 2004 (according to the audited financials, the company showed its one and only operating profit of 6,286 in 2004 before the precipitous downward spiral of 2005 and 2006). Over 60 franchised stores have closed and many more are struggling for survival. Mr. Sully observed “Tragically, many individuals who believed passionately in the potential for the category have lost sizable investments, including homes and retirement savings.”

Lost homes and retirement savings? How could such a travesty happen? I counseled a number of persons considering an iSold It franchise and warned all of them against the investment. Fortunately, they followed my advice. The concept was never proven in the marketplace before franchise efforts began, violating the most basic Franchise 101 precept. I also felt the management team lacked strong franchise credentials and the five-day training program was woefully inadequate. Finally, the franchise company was operating increasingly in the red and had a high attrition rate (owners leaving the system). It didn’t take a lot of brain power to see this was an accident waiting to happen. I predicted the bubble would burst and, sadly, it did.

Common sense could and should have prevented so many people from losing so much. Unfortunately franchise sales persons appeal to emotions (passions and potential, to use Mr. Sully’s terms) and strive to keep common sense and business logic out of the buying equation. If a franchise company is able to obtain a ranking on a media list, the sale is even easier. Reprints of high rankings on lists, like Entrepreneur Magazine, are included in the package given to franchise buyers, who are lulled into a false sense of security and begin to stumble over each other in a rush to sign up before someone else takes their desired territory (another favorite closing technique used to sell franchises).

iSold It! amended its FOC at the end of May, 2007 to add some long overdue risk factor language to the cover page of its Franchise Offering Circular. Hmmmm… maybe they read my comments above and did a little research. The new FOC cover page risk factor language says their “franchise system is still new and unproven.” That’s very interesting. How can they say a franchise system, that’s approaching its fourth anniversary, is “still new?” Maybe they’re looking at things from a ‘how old is our universe’ perspective? The word “unproven” is another play on words. The system is most certainly proven in the sense that many people, to quote Mr. Sully, “have lost sizable investments, including homes and retirement savings.” So why not use this quote directly in their Franchise Offering Circular? Answer: can’t sell any franchises that way.

In an August 31, 2007 Business Week article, CEO Sully claimed it wasn’t necessary to disclose these risk factors in the FOC. His reasoning: “We told everybody that this is sort of like the wild, wild West” he says. “It’s a brand-new concept and nobody knew for sure where it was going.” Disclosure was added to the UFOC recently, he says, “because of the number of stores that weren’t understanding the complexity of the business.” Hello? You don’t tell your franchise investors after the fact what you were required to disclose in the FOC before they bought so they could make an informed investment decision. That’s the purpose of franchise disclosure laws. And claiming written disclosure of risk factors in the FOC is not necessary if a prospective buyer hears a salesman’s verbal wild, wild West story ignores franchise disclosure responsibilities and is really an admission the company failed in this regard. With its amended FOC, the company incredibly continues marching forward with franchise marketing efforts.

Now, let’s consider the franchise checklist and factors to consider before any leap into franchising.

INDUSTRY TREND
Is the franchise in a cutting-edge industry that is doing well currently and is projected to do well in the future despite any economic slowdown? Education and home-improvement services are stable categories. Food is over-saturated generally and, except in exceptional circumstances, is not worth the high investment, long hours, headaches and marginal income.

TOTAL INITIAL FRANCHISE INVESTMENT
In general, don’t expect a franchise that requires a five-figure initial franchise investment to produce a six-figure income. As with most things in life, you get what you pay for. On the other hand, don’t assume a six-figure investment will lead to a six-figure income level. Be realistic and conservative. Is the total initial franchise investment range (including working capital) 5,00 or less; and the maximum investment less than 0,000? You can find solid companies in this investment range if you’re willing to look around.

Don’t forget to consider long-term financial commitments, particularly the real property lease (see discussion below under “LEASING AND LOCATION”). Also, the working capital estimate (called “additional funds” in Item 7 of the company’s franchise offering circular) does NOT cover operations up to the break-even point. It only covers a short initial phase (usually only three-months) of operating costs As the break-even point (where revenues cover all operating costs) may not happen for one, two or more years, knowing only what it’s going to take to get you through the first 90 days is not helpful – in fact it may set you up for financial suicide. In many cases, reaching the break-even point can require more reserve funds than the total initial capital investment. Don’t ever forget the name of Item 7 in the Franchise Offering Circular: “Initial Investment.” If you don’t have enough reserve capital to reach the critical break-even point, your entire investment will go down the drain and franchise failure occurs.

One franchise owner in a relatively low investment and low operating cost window cleaning franchise said his biggest surprise was how long it actually took his franchise to be profitable. Going in, he thought it would take 12 to 15 months. It ended up taking twice that time. Fortunately, he had enough reserve capital to make it there, but declined to say what his actual franchise profits or income level were once he reached “franchise profitability.” If you’re operating just above the break even point and making less than minimum wage, is that anyone’s definition of success?

REAL BUSINESS
Is this a legitimate retail business, as opposed to a “work out of your home” operation? The vast majority of work out of your home concepts produce marginal income at best.

FRANCHISE MANAGEMENT EXPERTISE
Does the management team of the franchisor (the company selling you the franchise) have executives with demonstrated past achievement and experience in operating a franchise company (not just persons who have sold franchises)? If not, this is a big RED FLAG. Many companies enter franchising and fail to realize they are in a brand new business – one requiring entirely different management skills and abilities to navigate franchise relationships. A seasoned franchise management infrastructure must be in place. If the franchise management team lacks strong franchise credentials, or does not receive ongoing advice from qualified individuals, you might as well take a trip to Las Vegas with the money you’re intending to invest. Your chances of making vs. loosing money are roughly equal.

NORMAL WORKING HOURS AND DAYS; SUFFICIENT FRANCHISE INCOME LEVEL
Will the nature of the business allow you to work a normal five-day, forty-hour workweek? Life is too short for the seven-day, sixty to eighty hours a week, workaholic lifestyle that destroys health, family and pocketbook. Financially, we’ve calculated the true hourly rate for franchise owners who work these workaholic hours and discovered many are making far less than the minimum wage. One couple who operated a 0,000 fancy pizza franchise in an upscale mall were shocked to discover they were making fifty cents an hour each. Hardly an income level to recoup or justify the franchise investment. Many more fast-food franchise operators make even less, or operate at a loss until their funds, retirement savings, homes, etc. are exhausted. Buying a franchise in a non-food industry doesn’t necessarily improve the franchise profit picture. In a 2006 article “Mail Boxes Etc. Owners Fighting UPS Conversion,” a Mail Boxes, Etc. franchise owner who operated his franchise since 1993 reported profits for a typical MBE store like his were ,000 per year after paying royalty and advertising fees to the franchise company. That calculates out to about .33 per hour for a forty-hour work week, approximately the wage of an entry fast-food worker.

Another major shortcoming of disclosures in the Franchise Offering Circular is not telling you how much money the franchises in the network are making. Instead of answering what is the most important question in a franchise investment decision, the franchise disclosure laws make this “optional” for the franchise company to answer or not. If they do answer this critical question, it will be found in Item 19. But don’t hold your breath – more than 90% of franchise companies “decide” not to answer this question. It’s another bizarre reality in the world of franchising. Although they collect complete monthly (and in many cases, weekly) financial profit and loss statements from their franchise owners, and know exactly how much their franchises are making (or losing), more than 90% decide not to share this information before you buy one of their franchises. A number of franchise salespersons have told persons asking this question: “the franchise laws don’t allow us to answer that question.” Nothing could be further from the truth.

And just because you’re a business executive making a 6-figure income now, don’t assume this income level will be duplicated in a franchise investment just because the company “approves” your application. One such executive, despite a plethora of negative feedback from current and past franchise owners who’d lost everything, marched forward with her franchise investment in a 30-minute fitness concept. Despite her 6-figure income, she didn’t invest a dime in professional franchise evaluation advice and stated she was taking a leap of faith, hoping to build her wings on the way down. Build her wings on the way down? Sound’s (and is) crazy, but this happens all the time. Due to the ploys of the franchise salesperson, too many franchise investment decisions are based on emotionalism. Prior business skills, business sense (and even common sense) are short-circuited. Needless to say, if this business executive made a similar investment decision for her corporate employer paying the 6-figure salary, she would be promptly fired.

MINIMUM NUMBER OF EMPLOYEES
Can you operate the franchise business with 6 or fewer employees? Managing dozens (or in the case of some fast-food operations – hundreds) of minimum-wage teenagers who are constantly quitting or simply not showing up for work is a royal pain in the ….. Well, you know what we mean.

LEASING AND LOCATION
For most retail franchises, the triple net lease of the location is the biggest financial commitment, larger than the total franchise investment. Yet, the typical real estate lease and its ramifications are not required disclosure in any Franchise Offering Circular (FOC). For example, an estimate that you’ll need 2,000 sq. feet of space with expected rental of to a foot per month is normally disclosed in the Franchise Offering Circular’s initial investment table as Leased Real Estate ,000 to ,000. A footnote to the investment table may say “assumes 2,000 sq. ft. at to a foot.”

But, that’s only the beginning of a much longer story. The lease is normally a 5 to 10 year triple-net lease. So, the financial commitment made when the lease is signed is at least 0,000 (at /foot for 5 years) to ,400,000 (at /foot for 10 years). And this doesn’t include substantial, additional obligations to pay all of the landlord’s yearly property taxes, insurance, common area operating expenses, etc. With hundreds of thousands (or even millions) of dollars in financial obligations at stake, personal guarantees and other risks, more than just a warm, fuzzy feeling that everything will work out is necessary.

Key questions to ask here:

(a) is the franchise you’re considering one that can be operated in a low rent commercial business zone? Avoid franchises requiring the costly expenses and triple-net leases of a visible retail storefront and the extravagant rent associated with areas of high foot traffic, like shopping malls. You’ll sleep much better at night.

(b) What’s your total financial commitment under the lease?

(c) Do you have sufficient liquid assets (or a willing, sufficiently liquid third party guarantor) to meet the landlord’s lease qualification standards?

If you don’t, you might as well forget about investing in the franchise. Or even worse, getting involved in a questionable franchise and business model, then realizing you’ve made a big mistake – and discovering you’re on the hook personally for a 0,000+ lease obligation.

A related real estate variant is securing a lease with a sufficient term (with renewal options) to recoup your investment and make a profit. In July, 2005, an attorney in her mid-forties purchased an existing ice cream store franchise for 5,000 believing it to be a “once-in-a-lifetime opportunity.” Trading her briefcase for an ice cream scoop, she attended the company’s 11-day Ice Cream University and assumed operations of the ice cream store. Turned out it was an opportunity – but only to inherit a store with numerous problems. These problems included (but were not limited to) a lease that would expire the following summer and a landlord who’d previously announced the lease would not be renewed. Rather than pay the 0,000-plus in relocation costs, the attorney returned to the practice of law, but is still paying off 0,000 remaining on the loan taken out to buy the once-in-a-lifetime franchise opportunity. Although there’s a franchise lawsuit pending, it’s yet another case of “franchise fever” – this time attacking a professional no less. Who would ever commit to paying 5,000 for an existing retail franchise without checking out the l-e-a-s-e? Sound’s like another bad attorney joke, but I can guarantee she’s not laughing. Business fundamentals were ignored or forgotten in the rush to acquire the opportunity of a lifetime. And I’m willing to bet not a dollar was spent on competent, pre-investment franchise advice.

IMAGE AND LIFESTYLE
How does flipping burgers, scooping ice cream and cleaning restrooms fit the image of what you want to do for a living? Investing in a franchise will be the most important financial and psychological decision you ever make. Many prospective franchise owners fail to realize they’ll be wearing virtually every hat at some point, from salesperson to bad-debt collector, from firing employees to bathroom janitor. The franchise owner is usually the first one to arrive in the morning – and the last one to turn out the lights late at night. And you’ll need to forget about corporate perks like paid vacations, paid holidays and sick pay. In their place, substitute financial pressures, unexpected events and money draining out of your savings and retirement accounts. Does the typical working day and responsibilities of the franchise you are considering fit your personal image and desired lifestyle? You can experience some of this BEFORE you invest by working for a couple weeks in an outlet owned by one of the existing franchise owners.

TRUE FRANCHISE VALUE
Buying a franchise from a “blue chip” franchise company that has spent decades and hundreds of millions on advertising to develop their brand can make a lot of sense. These companies have “true franchise value” that compensates for the long-term disadvantages of ongoing royalty and advertising fund payments. Often these additional payments literally mean the difference between earning a profit and operating at a loss. In unknown franchise chains with little or no brand recognition, you the franchise buyer are building their brand from scratch, and are saddled with severe, long-term competitive disadvantages.

In these unknown franchise chains, you have to ask yourself a simple, common sense question. What value is the company giving you that you couldn’t learn on your own by working at one of their locations as an employee for a couple months? Franchise truth be told, what most unknown franchise companies are selling is just a business opportunity – teaching you how to get into a new business venture. But unlike a business opportunity seller that charges a one-time fee to help get you into business, they call it a “franchise” and charge ongoing royalty and advertising fees like they’re a McDonalds or other blue chip franchise company.

The reality is they’re not a McDonalds type franchise – not even close to one. In the majority of these lesser-known franchise chains, you’d be much better off starting an independent business on your own. You can learn most or all of their so-called “secrets” in the franchise interviewing process and by talking to (and possibly working a short time for) existing franchise owners.

FRANCHISE PROFITABILITY & “SUCCESS”
Dr. Timothy Bates’ study released in 1993 by the Entrepreneurial Growth and Investment Institute in Washington, DC (and another study published in 1996) was the first to compare start-up costs, franchise profitability and franchise failure rates for franchised vs. nonfranchised firms. In his analysis of some 7,270 firms over the test period, Dr. Bates found that startup capital for a franchised business averaged ,293 compared with average startup capital for nonfranchised firms of ,156. In 1987 nonfranchised firms reported average pre-tax net income of ,744 as compared to a loss of (-,548) for franchised firms. Dr. Bates concluded “Despite their larger revenues, much better capitalization, and their supposed advantages of affiliation with a franchisor parent firm, the franchisees lag behind cohort young firms in profitability and rates of survival.”

The franchise companies ignore both studies by Dr. Bates, pretending they never happened. Instead, other techniques are employed. For example, some franchise companies use misleading success statistics to sell their franchises. Their promotional materials say franchises generally enjoy a 90% success rate, compared to less than 20% for independent firms. These figures are based on unverified information supplied thirty years ago by a select, non-representative group of franchise companies. A full third of the companies receiving “questionnaires “ elected not to participate. There was no verification of any of the information supplied by the franchise companies, not even random, spot checking. Nor was any effort made to identify franchise companies who, along with the franchise owners in their chain, had gone out of business.

Even more recent “studies” saying nine out of ten franchise owners (90%) consider their franchise to be somewhat or very successful also suffer from serious methodological flaws. These were simply telephone surveys of franchise owners who were still in business and asked to say (with absolutely no definition of the term “successful”) whether they felt their business was “very unsuccessful,” “somewhat unsuccessful,” somewhat successful” or “very successful.” Franchise owners who had gone out of business or bankrupt were not included in the survey.

Even if terms are defined and a representative sample obtained, franchise owners can be a quirky group. Hence the need, as in Dr. Bates’ studies, for review of financial data. I remember evaluating an existing franchise for a client. I asked the current owner of the franchise if his business was successful. He said it was very successful. But his financial statements revealed a different picture. He’d never taken a dollar out of the business for himself, never made a profit in two years of operation, and was on the verge of bankruptcy. Another owner of a bakery franchise, interviewed by Business Week, says being successful in franchising means “adjusting your definition of success.” He says he makes a profit, but declined to say what it is, or if he’s ever recouped his 0,000-plus initial franchise investment. Incredibly, he insists he’s in business “for lifestyle reasons, not profit reasons.” Huh? Probably a quote from the company’s franchise recruitment materials. In the world of franchising “success” and “profitability” are very subjective terms.

FRANCHISE BROKERS WHO FIND YOUR PERFECT MATCH?
Does the franchise you are considering have its own in-house marketing department, or does it utilize outside franchise brokers? The use of franchise brokers is a definite red flag. First, it indicates the franchise company is not very serious about who it lets into the franchise network, or even worse, they’re desperate to sell franchises. Second, franchise brokers receive a substantial commission up to 50% or more of the franchise fee you’re paying the franchise company. Franchise Broker Realities: (1) Their service is definitely not “free” despite these and other similar misrepresentations. It’s really common sense – how could anyone offer a “free” service and survive in business? Unfortunately, the common sense part of the brain tends to short circuit when the franchise brainwashing process begins. The simple truth is if you buy one of the franchises they’re hawking, your money goes to the franchise company, then into the broker’s pocket. If anyone ever calculated how much time they spend to collect their ,000 or ,000 commission, it’s probably a lot more than a brain surgeon earns. (2) Franchise brokers definitely do NOT have your best interests in mind. They will do or say whatever they have to in order to close a deal and earn their commission.

Many franchise brokers claim they will help you find a franchise company that is the perfect match for you. In the beginning it sounds good. There’s some personality testing and review of your personal finances. At the end of the day, it turns out they only represent (and steer you towards) a handful of small franchise companies you’ve never heard of before. A detailed analysis often reveals these highly touted franchises produce mediocre or even below minimum wage financial performance. Yet franchise brokers don’t mention this, and individuals continue to rely on their recommendations, believing the broker represents them. Nothing could be further from the truth.

Also, many franchise brokers call themselves franchise consultants. A franchise consultant is usually an independent adviser who offers advice to others (usually franchise companies or firms that want to franchise their business) for a fee. This makes their advice more impartial in theory as long as they are not compensated by third parties. Because they are not legally required to disclose actual or potential conflicts of interest, it’s important ask questions. For example, if you’re using a franchise consultant who is recommending the “best franchises,” are they paid anything by the companies on their list? This could be a commission, kick-back or consulting fee. As mentioned, many franchise brokers call themselves “franchise consultants” to hide their true identity. So, make sure if you’re dealing with a franchise consultant, he or she is not really just a franchise broker in disguise.

FRANCHISE DISCLOSURE LAWS
The franchise disclosure laws, while requiring franchise companies to give you certain, limited information, don’t come close to protecting your interests. For example, as discussed above, Item 7 of the Franchise Offering Circular only requires an estimate of additional funds for 90 days as part of the investment information. But economic reality is you need to know the additional funds you’ll need to reach the break-even point, which can be years away, or your entire “initial” investment will go down the drain. You’d think this type of information would be required by franchise disclosure laws, but it’s not.

FRANCHISE REGISTRATION LAWS
Don’t ever assume that because a company has registered its Franchise Offering Circular in your state, someone at the state has approved or reviewed the document in your favor. Franchise registration is obtained by simply forwarding documents and paying a filing fee – period. In most cases, franchise offering circulars are given an extremely limited review to ensure state-specific disclaimers are present.

I remember filing a registration application for a new franchise company in a state with a reputation for being one of the “toughest” franchise registration law states in the country. After the three-week review period set forth in the statute had gone by, and not hearing anything, I called the examiner assigned to the application. After looking through his files, he finally found my client’s offering circular and application. He apologized for entirely misplacing the file and promised to immediately review the application and call me back. Ten minutes later, he called to say he’d finished and was making the registration effective that day. Ten minutes of review and the franchise company was given the state’s green light. This is not an isolated case – it happens all the time.

WHAT STANDARDS MUST A FRANCHISE COMPANY MEET TO SELL FRANCHISES; ARE THERE ANY REQUIREMENTS TO FRANCHISE A BUSINESS?
Incredibly, the answer is – none. There are no minimum standards or requirements to franchise a business except preparing a Franchise Offering Circular. It’s yet another bizarre reality in the world of franchising.

You and I could have no background in any business, form a new corporation or LLC, capitalize it with only , put together a Franchise Disclosure Document and file it with any franchise registration state. While the offering may be subject to an impound or escrow requirement because of the low capitalization (), we’d still get “registered” and be able to sell as many franchisees as we want.

In these 14 franchise registration states, we may not be able to receive any money until each franchise actually opened, but simply posting a bond would alleviate this difficulty in the franchise registration states. And in the vast majority of states there are no franchise registration laws, so we’d be able to sell franchises and collect fees with impunity once we compiled our Franchise Offering Circular. The federal FTC Franchise Rule doesn’t protect against this risk either – it only requires disclosure (i.e. provide a Franchise Disclosure Document) and has no registration component or minimum standards for franchise companies.

Basic investor protections and requirements found in both federal and state securities laws for over 50 years were never carried over to franchise investments. While most non-blue chip franchise companies could never even qualify to sell you a single share of stock in their company, they are entirely free to collect unlimited franchise fees, ongoing royalties, equipment and other purchases, as well as cause you to incur financial obligations totaling hundreds of thousands of dollars, or even millions in some cases. This isn’t information you’re likely to find in the glowing articles about franchising and franchise companies prevalent in the media.

CLOSING REMARKS
Remember, you are the only guardian when it comes to your franchise investment. It’s definitely an environment where the phrase “Buyer Beware” applies. So, before you sign on the line and make what will undoubtedly be the most serious financial and emotional commitment of your life, get all the facts and figures.

One couple I counseled after-the-fact, invested million in a new franchise company. The contract they signed gave them no right to terminate, no matter what the franchise company did or didn’t do. Of course, the contract gave the franchise company unlimited termination ability, a right it had exercised. The franchise company’s management team had no one with experience in running a franchise company. Incredibly, the couple had not spent a dime on legal or business advice before investing million. The once friendly franchise company had transformed into a formidable foe and was poised to take over their franchise. Sadly, this happens too frequently in franchise investments. Decisions are made on fuzzy feelings and emotionalism. In an effort to save a couple thousand dollars, franchise investors risk homes, retirement savings, everything they have. Then they scratch their heads in amazement later on after inevitable and often horrific problems develop, wondering how they could have been so nearsighted.

Another indispensable level of inquiry is whether you’re getting true franchise value and whether you’d be better off doing the business on your own. In the overwhelming majority of franchises touted by unknown companies, franchise value isn’t there and doing the same thing independently makes better economic sense and actually decreases the risk of failure.

Finally, and this applies to franchise investments as well as investing in any business venture, develop a plan to succeed but also plan a franchise exit strategy that minimizes financial risk in case things don’t work out. Both plans need to be thought through before the investment is made. Don’t wait until problems develop to start thinking about a franchise exit strategy – by then it’s usually too little, too late.

For more information, visit the Franchise Foundations Website.

© 1990-2008, Kevin B. Murphy, B.S., M.B.A., J.D. – all rights reserved