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Is franchising a good idea?

Veteran

Bradley Benton Elizabethtown, KY

Hello, I am exploring options on start a frozen yogurt business and was considering franchising or trying to obtain my own equipment. Which would be the best route to go? Also, if possible could shed some light on how the whole franchising works.

15 January 2018 10 replies Small Business

Answers

Veteran

Michael Del Vecchio Killingworth, CT

GM sarg -

Franchising may or may not be a good idea. The good news is that it is a business in a box - the startup work is done. The caution is that the economics may or may not be to your advantage.

I do have experience here - some ideas:
Start by contacting SCORE - many free resources available.
Check out the SBA website - there is a list of approved franchises and some possible deals - as an example, seven-eleven was giving away a franchise to a veteran.
Vetfran is a good start. Also check out frannet.

Contact me if you want to talk. Best of luck.

6 February 2018 Helpful answer

Advisor

Richard Ashe Houston, TX

Hi Bradley,

My first question for you is why frozen yogurt? But let's come back to that later....

You have 3 options for getting into business:
1. Start your own
2. Franchise
3. Buy existing

Here's a quick pro/con of 1 & 2. As each model has its own set of advantages and disadvantages.

As an entrepreneur, the advantages and disadvantages are the same; you will be required to develop every aspect of your business, your brand, i.e. website, signage, etc., develop training and operating process for your employees, select location, etc. If you enjoy or want to make every decision about your business then start your own.

The primary disadvantage is funding the business. To qualify for loans you will have to establish that you can meet business expenses and loan payments from the earnings of the business based on historical performance of at least 24 months to be eligible for an SBA loan.

The advantages of franchising are an Increased chance of success with a proven business model, established product with brand recognition, training, and SOP with ongoing support in operating the business. You are also qualifying for an SBA loan is easier based on the historical performance of the franchise.

The disadvantages are you're required to operate the business according to procedures of the franchise. In addition to the franchise fee, franchisees may pay ongoing royalties, other fees. Also, terms of the agreement are limited and the franchisee has little or no say regarding terms of a termination.

If you would like some help exploring the franchise option there are franchise consultants that will help you better understand franchising and assist in guiding you through the selection process with no cost or obligation.

http://www.veteranfranchiseadvisers.com

But going back to the other question; Why frozen yogurt?

Here are some articles that may help in your exploration: http://www.veteranfranchiseadvisers.com/blog/

At your service
Rich

3 February 2018 Helpful answer

Advisor

Karen Shockley Marietta, GA

I couldn't have said it any better than Rich. I own a juice bar and the only thing I would add is LOCATION, LOCATION, LOCATION is key. If you are going the yogurt route, stay near a college or the biggest fitness facility you can find. I'm actually inside an LA Fitness... saves on storefront costs, but rent can be a bear!

I'm considering franchising and would love to swap information. Let's stay in touch!

Advisor

Phillip Nelson Tyrone, GA

I would encourage you to keep an open mind when exploring franchise opportunities. Consider contacting a Franchise Consultant who can work with you to learn about YOUR criteria and goals. Investing in a franchise is not for everyone, however the stats are overwhelming:
- 90% of franchises are still in business after year 7 compared to 20% of independent businesses.
- 1 in 12 business in the U.S. is a franchise.
- Critical startup and on-going support, defined marketing, business plans, etc are all provided by a franchise.

A good franchise does not require industry experience - in fact, in most cases they prefer that you do not. They look for someone with business savvy who can follow a plan and execute it. The best franchises award a franchise - they don't "sell" one.

With over 4,000+ franchises in the U.S. today, it can be frustrating for someone with little experience to find an opportunity that aligns best with their ownership and investment goals. A Franchise Consultant will work for you and at no cost to you to find opportunities that fit best. They can also put you in touch with the right people at the franchise who are responsible for awarding the franchise. They will be a great resource for you during your due diligence and evaluation.

Since you are a few years away from starting your search, my recommendation is:
- Save as much as possible.
- Contribute to your TIPS plan.
- Build and maintain credit (aim for a credit score over 680)
- Research industries that interest you.
- Identify your strengths and business activities that you enjoy doing.

Some people are great at sales, some prefer networking, others are more service oriented. When the time is right to really look into franchise opportunities, you may be very surprised to learn that you have more options than you realize.

Advisor

James Mingey Oregon City, OR

Hi Bradley,

Excellent comments and suggestions above - all.
I might suggest you read a short book called E-Myth (short read and less than $10) It will help you frame your role in a new business/franchise. Knowing your role inside your own business will help frame your decision about franchises. First you accept the idea/business model. Then you build it out. Whether you use the franchise model or not, select and build the business according to a system you apply to your own strengths

Veteran

Bradley Benton Elizabethtown, KY

Thank you all for the help. This is one of my goals in the next five to six years. I guess one of my questions would it look better for me to have a degree in business or experience. I have a lot of management experience from being in the military. Also found this website https://www.vetfran.com/ has anyone had experience with them?

Advisor

Cary Grossman Houston, TX

Bradley:
Franchising can be a good way to start a business if you choose a franchise that really has something to offer for a permanent 5-7% of your revenue stream. In a business like yogurt, success is probably more about location and execution than anything else. Good franchisor's usually know what kind of locations work best for their systems and that is one benefit you receive. There any many folks that have become wealthy by building multi-location franchise businesses (especially in higher volume concepts like McDonalds, Whataburger, etc.). On advantage of a concept like yogurt is low cost of entry. You probably cannot make a living off of one yogurt store even if you work in the store full-time. However, if you have retirement pay and/or income from a working spouse that may help. In my view, if you go this direction you should be thinking about how you can eventually own 3-5 stores. Happy to have a call to discuss.

Advisor

Andrea Hannah Nashville, TN

Bradley,

I agree with Brian. A start-up will have stringent financial requirements that may not only include up front costs but also net worth criteria, which my recommendation does require and may prompt you to seek local partners. I won’t talk numbers, as you can explore them using the link below to my recommendation of a yogurt franchise. This brand is well-known in Tennessee and has gluten, dairy, and sugar free product offerings. The opportunity lies in that while it big in TN, our Kentucky neighbor has yet to harbor this yogurt chain within its boundaries. Best wishes to you!

http://yogurtmountain.com/franchise/criteria-and-fees/

Regards,

Andrea

Advisor

Brian Burress Cincinnati, OH

Bradley,

Mikhail's link is a great one. I'm not well versed in this area. I don't think franchising is a low-cost method to starting a business. If anything, it may even require more cash up front. Franchising lets you work under an existing brand name and will frequently give you access (or more likely require) you to use equipment and ingredients of the brand. A sort of quality control concept, if you will, as the brand name needs to be protected. As such, you'll have built in guidance on how things need to be done. In addition to buying the franchise rights, you'll need to acquire equipment, location, etc as part of the business.

The suggestion that you work at a franchise before buying is a great one. Any business knowledge you acquire will be great whether you open your own or go the franchise route. You should be able to get a feel for what does and doesn't work. You may feel that there are things you could do better and at that point you'd be able to start forming your brand and business model.

There is a lot of info on the web. Some into here may be helpful in addition to the ACP link.

https://www.entrepreneur.com/encyclopedia/franchising

Advisor

Mikhail Relushchin Brooklyn, NY

Hi Bradley,

Best of luck exploring starting your own business and franchising as options! In addition to any advice other Advisors will give you, consider taking at look at this article:

https://acp-advisornet.org/articles/479/10-things-veteran-should-consider-committing-buy-franchise-2

Hope that helps!

- Mikhail

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