Understanding The Ins And Outs Of A Coffee Franchise

Owning a coffee franchise can be a very rewarding experience, but before you sign on the dotted line and start serving hot cups of ‘joe’, there’s certain things you need to know so you can make the right decision. If you go into buying a coffee franchise blindly, you could end up making a very costly mistake.

First things first, get a reality check. You should know going in what kind of money you have to put towards a coffee franchise, you should understand your strengths and weaknesses in running a business and be very honest with yourself about how much time you’re willing to spend in your business. If you do this, you’ll be way ahead of the curve. Don’t jump into any decision. Take your time, consult with franchise experts and do your due diligence.

The attractive thing about owning a coffee franchise is the cash flow and profit margin. People are drinking coffee today like it’s going out of style and they are happily paying upwards of $3 per cup. The real cost of the coffee is under $.25. The profit margins with coffee are HUGE! On the contrary, only making a few bucks per cup isn’t going to get you a mansion in Beverly Hills. A Coffee franchise is 100% a volume business. You have to crank out thousands of cups per month to see any real income. Some of the most successful coffee franchises have drive-thrus which can make up to 70% of the revenues.

The real secret of a coffee franchise is NOT the coffee, but the atmosphere. People can get coffee anywhere, but they come to these shops because of the social element. They come to hang out, conduct business, surf the web, relax, read a book, whatever. That’s why so many coffee franchises have the relaxing and mellow look and feel to them.

However, there are things about a coffee franchise that aren’t so fun from the very start. First, the high start-up costs can be huge. Not only will you have to pay a hefty franchise fee, but then you have to get a location, you’ll have to get equipment, you’ll have inventory to get, fixed costs, variable costs, employee wages and on and on. The costs can be high. Don’t forget about the royalty fees that are based on gross revenues, not net profits.

Now even if you are financially capable of buying the coffee franchise, that won’t matter because there are more pre-qualifiers you must meet. You’re going to need a considerable net worth, a good credit history but the real challenge is that you have to get approval to buy the franchise. If they don’t like you, they won’t sell you a franchise.

Differences Between Starting From Scratch And A Franchise

Are you contemplating starting a new business? There are some things that youre definitely going to need to think about before heading down that road. Lets talk about a few very important options youll need to consider.

The most difficult part of any new business is getting it started. Youll have a lot of administrative stuff to figure out, and youll need to start getting clients right away. Youve undoubtedly heard that 80% or so of new businesses fail in the first 2 years or so. This number will fluctuate depending on the industry and where you get your numbers from, but in the end its been shown the most new businesses fail.

So why do most new businesses fail? Well, there are a couple of common reasons. One is that a new business fails to advertise like it should. So they fade into nonexistence. This ties into the second common problem which is just running out of money. There are a number of causes for this, but if you run out of money you are pretty much out of business.

Im not trying to demotivate you. But you need to be aware that there are things you can do to improve your chances. Lets look at one.

One way to give yourself a better chance of surviving as a new business is to start as a franchise instead of a brand new business. There are a couple of reasons why this is a good option. First of all, the franchise will teach you how to run their system. They already have a proven track record that will get you started right.

Another great benefit of starting a franchise is you get brand recognition. No one has heard of Bills Best Burgers, but they have heard of McDonalds, Burger King, and a number of other franchises. With all the advertising the franchise does nationally you get immediate recognition when you open your store.

You dont have to just open a franchise in the food industry. You can also open them in just about any other industry you can think of. There are franchises in electronics, batteries, ink cartridges, clothing, and tons of other industries.

So there you have it. Do you start everything from scratch or do you start a franchise? One is definitely a more expensive option, but you will have a much better chance of long term success.

Subway Franchise Review – One Footlong At A Time

The first Subway franchise was born in 1974 even though founder Fred DeLuca opened his first store 9 years earlier. Today there are currently over 29,000 Subway franchises spanning the globe in over 85 countries. Entrepreneur magazine has ranked Subway the number one franchise 13 out of the last 17 years, so its a rock-solid franchise.

Even with its amazing popularity and tremendous track record, the real question is deciding whether or not owning a Subway franchise is the right choice for you and your family. There’s a ton of things you should consider when making this big of a choice, so let’s identify what the positives and negatives are.

First of all, the total cost of entry and the total investment to get started ranges anywhere from $101,000 to $285,000. The reason for the big discrepancy depends on whether you’re buying an existing franchise or you’re having to build one or start one from the ground up. Other costs may include remodeling, leasing equipment, inventory, etc. Typically, the down payment that’s required must come from your personal liquid assets and can NOT be borrowed or come from a loan. That fact right there might eliminate some potential franchise owners.

Every Subway franchise pays a royalty fee to the company, specifically 8% of their overall gross sales. This is very important to understand because losing 8% right off the top before you pay for any rent, equipment, inventory, marketing, employees, etc can make a difference in whether or not you’re profitable. On the other hand, in exchange for the royalties the franchisee’s are rewarded with a strong brand recognition and national advertising campaigns.

As far as sales are concerned, 2800 sandwiches and salads are sold every 60 seconds. This provides a pretty constant flow of customers and expected sales. Potential franchise owners feel comfortable with this knowing that their stores most likely will not be empty. Besides, people have to eat somewhere, right?

On the flip side, you are at the mercy of your store location when owning a Subway franchise. No matter if you are open 24 hours, a location can only serve so many customers and can only make so much money. Obviously the product can not be sold online or in other areas, so actually getting traffic to the store is the only way to make sales. In this regard, the Subway franchise is NOT scalable. An entrepreneur would probably have to own multiple locations to really generate the kind of income they would be looking for in owning a franchise.

Furthermore, to buy a franchise, you must have good credit, have considerable net worth and you have to be approved by the company. Once again, this could potentially eliminate more prospective franchise buyers. In the end, owning a Subway franchise is a solid way to have a great chance of success but keep in mind that to really make it big, you’ll probably have to own about 10 or more.

KFC Franchise – What You Need To Know

A KFC franchise is just part of the umbrella of the Yum Brands empire. Yum Brands is the largest restaurant franchise system in the world. KFC franchises are located in over 80 countries worldwide and have sister franchises like Pizza Hut, Taco Bell, Long John Silvers and A&W.

There are quite a few advantages of being part of the Yum Brands family however, owning a KFC franchise may not be right for you.

First and foremost, any potential franchisee must be prepared to own more than one franchise. Therefore, if you want to open a KFC, you’re also most likely going to need to open another franchise in the same location. That’s why you see so many groups of fast food stores in the same location. A good idea would be to consider owning multiple franchises on multiple sites.

Yum Brands has quite a reputation for having ambitious business owners as their franchise owners. To be considered on their “good list”, you’re going to have to own at least three KFC franchises. In fact, ambitious franchise owners will get help from Yum Brands on building up their franchises.

The upfront cost to get into a KFC franchise is why so many people do not qualify for this particular franchise. Go ahead and plan on spending 1,000,000 to 2,000,000 to start up your KFC franchise and partner brand franchise. Furthermore, your net worth has to be above 1 million and you have to have liquid assets of at least $360,000. On top of that, you must have experience in the food service industry or least your partner must have that experience.

Plan on spending at least a year going through the whole process from start to finish. If you qualify based on their requirements, you will meet with the Yum Brands leadership to see if the relationship would be a good one for both parties involved. Then there would be the work finding a site and all that other fun stuff.

Bottom line is owning a KFC franchise can be very profitable and a very solid investment even if you can qualify for the high demands of buying a KFC franchise.

The Key Differences in Buying a Business vs. Buying a Franchise

Source: FranchiseDirect.com

The Support Network

When you’re buying an established business, you’re surrounded by your own support network. Your family supports you on your new endeavor. You might be a part of a mastermind that supports you as you plan new goals and a new direction. You will probably also have a transition team that stands alongside you to support you while the reins get handed over to you.

With a franchise, you have all of this and more.

The roots of the support network with a franchise run deep. In addition to the above, you also have the support and encouragement of those who have had success within the franchise. The key difference between these types of owners and the owner you’d buy a startup from is that they continue to be invested in the success of their franchise. Long after you buy and open a franchise you’ll have access to their brain power to help you strategize and grow.

Ongoing Partnership

Throughout your franchise ownership, you’ll have an ongoing partnership with the corporate office of the franchise you’re buying. That means, you’ll never be left alone to figure out how to do something or create new marketing collateral for your business. Long after you’ve bought the franchise, you’ll still have help, guidance, and proven direction from the people who know your business inside and out.

This ongoing partnership is a fundamental difference in buying a business vs. buying a franchise.

Having a headquarter office guide you keeps your franchise fresh. They’re constantly introducing new ideas and new concepts for your market, giving you creativity in what you offer to your customers. It enables you to expand your business over the coming years in a way that’s smart and healthy, taking the guesswork out of the marketing game.

Disclosure Documents

Before you buy any business – franchise or startup – you need to have a solid understanding of what’s happening in the business, what has happened, and what the future looks like.

The Federal Trade Commision (FTC) requires that franchises provide this information in the Franchise Disclosure Document (FDD). This includes the fees you can expect to incur, any litigation history, any restrictions, financial performance, and any other proprietary information.

Recently, the FTC also put a regulation in place requiring other sellers of business opportunities to provide the Business Opportunity Rule. This is a disclosure document that allows you to review your potential investment before you sign.

Although the Business Opportunity Rule is a step in the right direction, it still lacks the depth of the FDD. Business Opportunity Rule documents can be as short as one page, whereas most FDDs are over 100 pages.

What’s Right for You?

Buying a franchise is a far less risky endeavor. Although you’re still responsible for the growth of your franchise and able to be creative in how you market your new business, you can be certain that you’re entering a world of ownership that’s backed by a strong support network. This type of security is attractive to many people with an entrepreneurial and ownership mindset because it’s stable yet empowering.

Interview

Want To Work For Yourself? Learn How To Finance Your Own Business

Who isn’t sick of the incessant slog of working for a big corporation under the looming shadow of global economic pressure that sends American jobs and whole companies overseas. When you add in an unappreciative boss and workplace malaise, it’s only natural to start dreaming about starting your own business.

Related: Ready For A Career Switch? Consider A Franchise

The questions add up fast — How do I even start? Don’t I need a lot of money? — and you go back to your desk and spin on that hamster wheel a little longer.

Wonder no more. Starting your own business is easier than you think. A whole growing sector of our economy proves the point, as people continue to start franchises at a rising rate. Folks at mid-career represent the largest cohort of entrepreneurs in the U.S. economy, which isn’t really surprising since they have the experience and skills to be successful.

The best thing about choosing a franchise to jumpstart your career is you can find out everything you need to know to succeed before signing any contracts. With the assistance of a franchise coach — whose services are free — you can learn how to investigate the market to make the right match for your skills, experience and interests.

So the big question remaining is how to finance your new business. Not all franchise businesses require the type of large outlays typical of fast food restaurants like McDonald’s or Five Guys.

Lots of franchises in the area of personal and business services require less than $150,000 and can offer a six-figure income. Many excellent earnings opportunities are available for a total investment of under $100,000!

Among the most popular ways to finance your new business is to tap into your retirement funds. Think of it as investing in yourself. Just as you would invest a 401K in other people’s company, i.e. the stock market, you would instead invest in your own business, and the profits would roll right back into the fund.

Basically the way it works is the Employee Retirement Income Security Act of 1974 allows people to roll over a portion or all of their 401K or IRA into a new 401K profit-sharing plan sponsored by your new business entity, which buys stock in the new corporation without penalty or paying additional tax.

While you do put your retirement savings is at risk, you’re betting on your business acumen. The question is do you think you’re a good risk? If you believe you have the skills and experience to succeed then the risk is low when you buy a franchise with a good track record. If you’re not sure you should invest your own money in yourself, you might want to reconsider starting a business altogether.

Of course, you might be able to finance the start-up cost with a combination of savings, and a home equity loan. A big advantage of tapping into your own savings is you don’t need to put other collateral at risk.

The goal is to take every step possible to minimize your risk. This includes conducting a thorough due diligence of the franchise company, including checking out its record of success and how well it trains and supports its new franchisees.

If you believe you have what it takes to run a business and you connect with a great operation, your risk may actually fall lower than remaining with a company whose loyalty is to shareholders, not you.

Move Over McDonald’s, 20 Healthy Food Franchises to Challenge the Burger Chains

When you think about franchise restaurants, you might not picture menus that are especially healthy. But there’s more to the franchise restaurant game than McDonald’s.

If you’re interested in opening a franchise restaurant, but you want to keep it healthier than traditional fast food, here are 20 franchise restaurants with healthy options.

Healthy Food Franchises to Consider

Panera Bread

With strong nationwide brand recognition and a reputation for using only fresh, natural ingredients, Panera Bread is one of the top franchise options for healthy food. To get started, you need experience as a multi-unit restaurant operator and a net worth of at least $7.5 million.

FRESH Healthy Cafe

FRESH Healthy Cafe is a global brand that fits into the fast casual sector. The company is open to everything from multi-unit developments to co-branded franchises. So costs can vary based on your preferences.

UFood Grill

Another fast casual restaurant franchise, UFood Grill specializes in fresh, grilled, low-calorie options. The initial franchise fee is $35,000. And the company provides assistance with site selection, training and more.

Noodles and Company

With a menu that includes a large variety of noodle-based dishes, Noodles and Company also includes fresh veggies and other healthy ingredients in many of its menu items. The company is mainly looking for franchisees interested in opening multi-unit developments. And you need a net worth of at least $3 million to get started.

Extreme Pita

Extreme Pita pairs traditional pita bread with a number of fresh, healthy ingredients. The initial cost can vary based on a number of factors. But you’ll need a net worth of at least $200,000 and a clear credit history to get started.

Saladworks

Specializing in customizable salads made with fresh ingredients, Saladworks is part of the growing fast casual restaurant market. You need a net worth of at least $1.5 million to get started.

Maui Wowi

Smoothies offer a unique opportunity to offer menu items with lots of fresh fruits and other healthy ingredients. And Maui Wowi specializes in smoothies and coffee. A mobile franchise style, Maui Wowi is fairly affordable compared to other opportunities, with a liquid capital requirement of $75,000.

Smoothie King

Smoothie King is another smoothie and juice bar franchise that offers a variety of healthy ingredients for customers. The initial franchise fee ranges from $20,000 to $30,000. And other costs can vary depending on location, size and other factors.

Del Taco

A Mexican restaurant franchise that specializes in using only fresh ingredients, Del Taco has been building up its nationwide brand recognition for over 50 years. The initial franchise fee is $35,000. And you’ll need a net worth of at least $1 million to get started.

Au Bon Pain

Operating cafes mainly in the Northeast part of the U.S. Au Bon Pain is open to new franchises in select locations like office buildings, shopping malls and more. Costs can vary based on a number of factors. But you’ll need a minimum net worth of at least $5 million to get started.

Corner Bakery Cafe

Corner Bakery Cafe is a neighborhood cafe restaurant chain that has a menu featuring items like soups, salads and sandwiches made with fresh ingredients. There are several territories currently available. And you’ll need a net worth of at least $3 million to get started.

Qdoba

Qdoba is a well-known Mexican food chain. But many of the menu items feature fresh and low-fat ingredients. Plus, customers can customize their own dishes to their specific tastes. The company is currently looking for franchisees that have the financial capacity to develop multiple units.

Firehouse Subs

With more than 1,000 locations, Firehouse Subs is a sandwich shop that uses healthy ingredients and is also dedicated to helping the communities they serve. You need a minimum of $80,000 to invest.

Teriyaki Grill

Teriyaki Grill is a restaurant chain that specializes in Asian inspired dishes made with fresh, healthy ingredients. The initial franchise fee is $25,000, which includes training.

Smoothie Factory

A smoothie and juice bar, Smoothie Factory offers a variety of healthy beverage options. You need to have a net worth of at least $200,000 to get started.

Taco Del Mar

Specializing in tacos and similar items made with fresh ingredients, Taco Del Mar offers another franchise option for health minded entrepreneurs. The company provides training, field support, product development assistance and more to franchisees. And the initial franchise fee is $15,000.

Pita Pit

Pita Pit’s menu items are made with fresh baked pita bread, lean grilled meats and fresh toppings. The company currently has many openings in markets around the U.S. Costs can vary based on location and other factors.

Atlanta Bread

Atlanta Bread is a chain of bakery cafes that offer quality, healthy food items. The company provides assistance with real estate, design, marketing, ongoing support and more.

Rush Bowls

Rush Bowls is a Colorado-based franchise concept that specializes in acai bowls and other menu items made with fresh fruit, granola and other healthy ingredients. Launched in 2004, the company has already developed a strong brand recognition in select markets. You can request more information on the company’s website.

NrGize Lifestyle Cafe

Specializing in healthy smoothies and meal replacement shakes, NrGize Lifestyle Cafe offers a variety of different franchise opportunities ranging in cost from $7,500 to $30,000 for the initial franchise fee.

Healthy Food Photo via Shutterstock

This article, “Move Over McDonald’s, 20 Healthy Food Franchises to Challenge the Burger Chains” was first published on Small Business Trends

How To Evaluate A Franchise

The best thing about starting your own business with a franchise is that it comes with everything you need to succeed. So long as you choose a good company with a system that suits your strengths.

This is why your selection process becomes the most critical aspect of your work. When people fail with a franchise, the problems can invariably be traced back to before the beginning. Either they chose a franchise that required skills they didn’t possess or they chose a franchise system that was not ideal, for whatever reason.

After years of experience reviewing franchise companies and working with franchisees, I have developed a process that has led to a near perfect success rate among my clients. All you need is to set aside some time over a period of several months and start researching.

What To Learn From The Franchise Disclosure Document

Every franchise is required by federal law to disclose the details about their business in the Franchise Disclosure Document. You should read all 23 items, with particular focus on the following:

The backgrounds of their executives, litigation and bankruptcy

You want to find out about the executives’ business experience. Have they or the company been involved in any litigation or bankruptcies. All are red flags. Items 1-4

Upfront costs

Clearly, you want to avoid getting in over your head. You need to know all your costs, exactly what is included with the franchise fees and what you may have to kick in yourself. Sufficient capitalization is one of they key prerequisites to success. Items 5-7

Franchisee’s obligations and restrictions

You should know right at the start exactly what will be expected of you. If you don’t like what you read, steer clear. Likewise, if the restrictions on operations strike you as particularly onerous, this franchise is not for you. You have to be prepared to follow their system for it to work. Items 8-9, 15.

Renewal and Termination terms

You need to know how easy it is for the franchisor to terminate its agreement with you. Likewise, if for some reason you want to get out of the business, know what rules apply. Legal advice might be helpful here.

List of franchise outlets

This is where you get the contact information for the franchisees, as well as franchisees who have left the system is the past three years. Contact and interview as many as possible. (see below) Item 20.

What To Ask Franchisees

Why did you choose this franchise?

Does they have anything in common with you? Can you see yourself in their shoes? Listen for clues about what skills are necessary for this business.

Have you been satisfied with the level of support and training from the franchisor?

Was it all that the franchisor promised? Do you like the support staff and executives of the franchisor? Are they easy to work with?

What do you like best and least about the business?

Get a good feel for what running this business is all about. Maybe the best thing is the social interaction with customers. Only problem is you don’t want to deal with the public. Choosing a business can be a lot like choosing a spouse. The match has to be particular to you.

Would you purchase this franchise again?

If the answer is no, find out why. These reasons may not hold for you.

How long did it take to reach break-even?

You need to know how much capital it would take to get this business to profitability.

Are you able to earn six figures with this business?

While you may not be able to get specifics on earnings, press for as much as you can to see how it aligns with the franchisor’s sales pitch.

9 Critical Questions To Ask Franchisees

Franchisees are by far your best resource about a franchise. I would go so far as to say you should not consider buying a franchise without talking to at least a few of the franchisees first. I know I wouldn’t.

You need to get a real sense of how the franchise’s promises pan out in the field. And franchisees are uniquely placed to give you the best answer to that question.

Over the years as a franchise coach I have encountered various levels of commitment to the research I recommend. You need to cast as wide a net as possible to get a true representation of the folks operating this business.

Franchisees are a diverse bunch, and you may find you don’t have a lot in common with the most successful of the franchisees in a system. This in and of itself is an important discovery. Maybe this franchise is not the right match for you. And if you can’t get many franchisees to talk to you, that’s another red flag.

As they have once been in your shoes, franchisees generally are willing to share their experiences with you. Of course, they tend to be a busy group, so you may have to try a few times to get an appointment for a conversation that best suits their schedule.

Here is what you want to learn from a franchisee:

1. Are you satisfied with the support you have received from the franchisor?

Franchisors offer various levels of ongoing support, which is particularly important for new owners to get the hang of the franchisor’s system. Has this been sufficient?

2. What type of training did you receive prior to opening?

Find out what the franchisor did to prepare the new franchisee for his or her new business. This would include training on equipment, technology, hiring, employee relations, and so on.

3. What was your background?

Was this a business in which the new owner had any experience? Get a feel for what it takes to run this business.

4. Why did you choose this franchise?

Did the franchisee go through an elaborate search process first? Or did they know someone who recommended it? You will learn how much research the franchisee did ahead of time so you can correlate this with how it’s worked out.

5. What do you like best about the franchise? Least?

Answers to these questions will give you a feel for some of what an owner does day to day. And how it’s working out.

6. How long have you been in business?

The longer the person has been in business, the more accurate read you can get on the learning curve of the franchisee. As a new business gets up and running, new owners generally take awhile before they get the hang of everything.

7. Have your earnings been what you expected?

Some franchisees may be reluctant to get into specifics on this point, but you should use sensitivity and try. Is there six figure potential with this business?

8. How long did it take you to reach break-even?

This is one of the most important pieces of information because you need to know how much money you need to set aside to pay your bills until your business starts to generate profits.

9. Knowing what you now know, would you buy this franchise again?

If the answer is no, it doesn’t mean you want to walk away. It depends what a representative sampling of other franchisees say. Not all franchisees are created equal. Some may not have been up to the task.