Thursday, October 11, 2012

Franchising Analysis


Franchising is a business model in which many different owners share a single brand name. A parent company allows entrepreneurs to use the company's strategies and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement.
Franchising is a faster, cheaper form of expansion than adding company-owned stores, because it costs the parent company much less when new stores are owned and operated by a third party. On the flip side, potential for revenue growth is more limited because the parent company will only earn a percentage of the earnings from each new store. 70 different industries use the franchising business model, and according to the International Franchising Association the sector earns more than $1.5 trillion in revenues each year.

Franchising


Franchising is the practice of using another firm's successful business model. The word 'franchise' is of Anglo-French derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb.[1] For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.
Thirty three countries, including the United States, China, and Australia, have laws that explicitly regulate franchising, with the majority of all other countries having laws which have a direct or indirect impact on franchising.

Overview

The following U.S. listing tabulates[3] the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.[4] As can be seen from the names of the franchises, the USA is a leader in franchising, a position it has held since the 1930s when it used the approach for fast-food restaurants, food inns and, slightly later, motels at the time of the Great Depression. As of 2005, there were 909,253 established franchised businesses, generating $880.9 billion of output and accounting for 8.1 percent of all private, non-farm jobs. This amounts to 11 million jobs, and 4.4 percent of all private sector output.[5]
1. Subway (sandwiches and salads) | startup costs $84,300 – $258,300 (22,000 partners worldwide in 2004).
2. McDonald's | startup costs in 2010, $995,900 – $1,842,700 (37,300 partners in 2010)
3. 7-Eleven Inc. (convenience stores) |startup costs in 2010 $40,500- $775,300, (28,200 partners in 2004)
4. Hampton Inns & Suites (midprice hotels) |startup costs in 2010 $3,716,000 – $15,148,800
5. Great Clips (hair salons) | startup costs in 2010 $109,000 - $203,000
6. H&R Block (tax preparation and now e-filing) | startup costs $26,427 - $84,094 (11,200 partners in 2004)
7. Dunkin' Donuts | startup costs in 2010 $537,750 - $1,765,300
8. Jani-King (commercial cleaning) | startup costs $11,400 - $35,050, (11,000 partners worldwide in 2004)
9. Servpro (insurance and disaster restoration and cleaning) | startup costs in 2010 $102,250 - $161,150
10. MiniMarkets (convenience store and gas station) | startup costs in 2010 $1,835,823 - $7,615,065
Mid-sized franchises like restaurants, gasoline stations and trucking stations involve substantial investment and require all the attention of a businessperson.
There are also large franchises like hotels, spas, hospitals, etc. which are discussed further under technological alliances.
Two important payments are made to a franchisor: (a) a royalty for the trademark and (b) reimbursement for the training and advisory services given to the franchisee. These two fees may be combined in a single 'management' fee. A fee for "disclosure" is separate and is always a "front-end fee".
A franchise usually lasts for a fixed time period (broken down into shorter periods, which each require renewal), and serves a specific territory or geographical area surrounding its location. One franchisee may manage several such locations. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. A franchise is merely a temporary business investment involving renting or leasing an opportunity, not the purchase of a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license.
A franchise can be exclusive, non-exclusive or 'sole and exclusive'.


Tuesday, October 9, 2012

Turning Passion Into Profits: A Wine Wizard Bets on Old World Science


Start with the grape-growing methods of medieval French monks. Add in a spiritual science called “biodynamics,” which was formulated in the 1920s by German philosopher Rudolf Steiner and spawned the international organic movement. Mix together with artisanal techniques that promote heirloom fruits and vegetables, protect water tables and maintain nutrients in soil -- and you have the wine that has become Randall Grahm’s life’s work.
After three decades in the wine business, at age 59, Grahm has committed to producing vin de terroir, or "wine of place” (from the French terre for “earth”) in the New World. This Old World model cultivates grapes that so intensely express the alchemy of a specific place -- climate, geology, soil, water, biodiversity, biochemical composition, ecosystem -- the wines produced from them offer consummate originality and quality that can’t be reproduced anywhere else.
“The holy grail is to make a completely differentiated product,” says Grahm. “In this new weird economy, you have to either do something more efficient than anyone else, [more] cost-effective, or you must produce an utterly distinctive product. From an agronomic standpoint, that’s wine that expresses a sense of place. It’s unique, costly, tedious and risky. But, ultimately, if you achieve it, you’ll have something infinitely precious.”
Randall Grahm is on a vision quest that could seriously eat his lunch -- or make viniculture history. “Randall is one of the most interesting people in the business,” says Andrew Waterhouse, professor of enology at the world-famous viticulture school at University of California, Davis.
Shaking up the wine industry
A Los Angeles native and University of California, Santa Cruz, alumnus, Grahm wandered into the biz in 1975 via a clerk’s job at a Beverly Hills wine shop, working up to salesman and manager. “I got an intense education,” he says, noting the opportunities it provided him to taste great French wines.
Next came a plant sciences degree in 1979 from the University of California, Davis, where, he says, he became obsessed with pinot noir.
By 1981, with some family help, Grahm had purchased property near the town of Bonny Doon in the Santa Cruz Mountains, south of the Bay Area, establishing Bonny Doon Estate Vineyard (now Bonny Doon Vineyard).
Under the Bonny Doon label, Grahm pioneered a series of innovations, such as development of French Rhone and riesling grapes in California. At its height around 2006, Bonny Doon sold about 450,000 cases, more than 5 million bottles. Grahm also earned a reputation as a smart winemaker, cheeky showman, poet-philosopher and pathological punster (he’s a self-described “vitizen of the world”).
“Everyone in the industry knows of Randall Grahm being something of a renaissance man — progressive and innovative,” says Allison Jordan, executive director of the California Sustainable Winegrowing Alliance.
Where Grahm has led, the industry often follows. So when he began dramatically unwinding his business six years ago and selling off his property and moneymaking labels to focus on high-end wines, few would outright dismiss the left turn.
Rethinking the path to success
Grahm’s decision to “put my money where my mouth is” arose from life-altering events. In 2003, at age 50, he had a daughter — Amélie, now 9 —  with his partner Chinshu Huang, an alternative energy business developer. A year or so later, he suffered a near-fatal bout of osteomyelitis, a bone infection, which required months of drugs, healing and wearing a heavy neck and head brace. Both experiences made Grahm take stock.
“Life is short,” he says today. “If I were to die, I thought people would say, ‘What a great marketer he was.’ I didn’t want to be remembered for clever marketing. If producing terroir is a supremely difficult thing to achieve in the New World, it should not mean I shouldn’t try. It was years since I discovered I loved wines that express a sense of place. But I wasn’t doing it.”
Long interested in sustainable practices, Grahm had begun experimenting in 2002 with biodynamic principles, which emphasize biodiversity and a view of nature that’s holistic and interconnected. It also prescribes what seem like some truly woo-woo demands (for instance, burying a lactating cow’s horn filled with manure in the soil for its fertilizing abilities).
“The movement is steadily growing in the U.S., though it’s more popular in Europe,” says Jim Fullmer, executive director of the Demeter Association, a biodynamics certifying organization. Adherents swear that once you taste biodynamic wine or food, you’ll never go back.
In 2007, Grahm’s Ca’ del Solo wine won Demeter certification — not an easy task. So he’s moved toward making wines closer to his beliefs. But being biodynamic doesn’t necessarily lead to a wine expressing its terroir.
Love at first site
After six years of searching for the perfect property, in 2010 Grahm purchased 280 acres in San Juan Bautista, in San Benito County, to establish his boutique vineyard. “It has unique geology, incredible energetic presence, extraordinary exposures and interesting soil,” he says. The site also is sacred to the Native American Mutsun tribe. “I saw it in a dream before I visited it,” Grahm adds.
He named the estate Popelouchum, Mutsun for both “paradise” and “village,” and now has about 80 acres under cultivation. He has high hopes of growing the special grapes that will produce wines representing this absolutely original terroir in six or so years.
Meantime, he’s producing other wines with grapes he purchases, running Le Cigare Volant, the Bonny Doon restaurant and tasting room named for his signature wine, and appearing at foodie events around the country to publicize his products and book, “Been Doon So Long: A Randall Grahm Vinthology.”
Randall Grahm isn’t the type to sit around waiting for his grapes to grow. But he’s nonetheless laser-focused on the future: “My gamble is whether I can ultimately produce wine with qualities so unique that no one will be able to emulate it,” he says.

How Teen Inventor Went From Sketch to Prototype in 6 Months


Necessity may indeed be the mother of invention. Sometimes, though, an actual mother is the necessity -- for the inventor at least.
That’s the case for Carter Kostler, a 14-year-old ninth-grader from Virginia Beach, Va., whose parents invested time, research and personal funds to make his vision a reality.
Six months after dreaming up his concept for a fruit-infused water bottle -- a product designed with the goal of improving one’s health and the environment -- Kostler’s invention recently received patent-pending status. And with a little help from the Kickstarter community, he’ll soon kick his bottle-making enterprise into full gear with his first production run.
The young entrepreneur expects to have 1,000 bottles arriving in stores during the first week in December, possibly in time for the Christmas shopping season.
“This has been the greatest experience of my life and I consider myself so fortunate to have parents that believed in me,” he said.
Kostler got the inspiration for the Define Bottle -- his first entrepreneurial venture -- from watching his mom Carla Weisman cut up fresh fruit in the mornings to make “spa water” in a pitcher. When she left the house, though, she couldn’t bring the fruit-infused water with her.
That got him wondering, “How can we make spa water portable?”










Soon, he came to his parents with sketches, and the family quickly went into action. They researched and found a patent attorney, an industrial design company and a branding firm -- all, coincidentally, in California. The family never met any of the consultants in person.
The industrial design firm signed a non-disclosure agreement, and started making renderings, coming up with some 40 concepts, says Weisman. The family narrowed down their choices, and the designers developed a prototype.
“We really let him take the lead of his vision on it,” says Weisman, who filed the patent application in her name because her son is a minor. Kostler, who is interested in marketing, also worked on branding the bottle. And with a recommendation from the industrial designers, the family found a production facility in China.
Weisman said she and her husband have invested about $35,000 in the project, trying to be “as lean as possible” on the costs. Now Kostler, who has made a movie documenting his experience, hopes to raise $10,000 on Kickstarter for production of the bottles, which he expects will retail for $30. The campaign is slated to start in mid-September, says Kostler.








The Define Bottle is a contemporary-looking glass and bamboo cylinder that’s small enough to fit in standard cup-holders, with two chambers to keep ice and fruit away from the spout. A version made of BPA-free Eastman Tritan -- that is, a plastic-like copolyester is also in the works, says Kostler.
“Aside from [my interest in] improving health, it was important to me to do something good for the environment also,” says Kostler, who notes that fruit-infused water is healthier than soda and other artificially-flavored drinks.
While Kostler has received some interest from web traffic for the Define Bottle, he says it would be premature to shop the concept around to bigger companies now. Instead, he plans to focus on his startup -- and high school, which he just began this week.
“I read everything I could get my hands on about being a teen entrepreneur and came across some great resources and really helpful mentors,” Kostler says. “From reading articles, I found authors that I connected to and reached out to them for any advice they could share.” He started joining online groups and forums, including those geared toward teen entrepreneurs like theTeen Business Forum YoungEntrepreneur’s forum and OnStartups.com.
He suggests that all young entrepreneurs research the experts in their fields and contact those they admire or feel could offer helpful advice.
“By reaching out to people, I was surprised just how willing they were to offer advice and mentor me,” he says. “I’m 14 and actually have some pretty cool connections on LinkedIn. I emailed them, let them know my story and simply asked for advice.”
“I hope that one day I am successful and can pass on my experience,” adds Kostler.


Barbara Corcoran's Advice for Aspiring Entrepreneurs


Ever wondered how your business idea would fare on ABC's Shark Tank? Investor Barbara Corcoranhas funded countless companies, many of which have gone on to enormous success. She's learned to spot the startups that are most likely to succeed -- and most likely to get funded.
Corcoran looks for several common characteristics in every company she funds. She shared them at a day-long seminar on entrepreneurship at the Tribeca Rooftop in New York City last Thursday, offering insights that can help you build a stronger business. Use her criteria as a litmus test for your own small business or startup. Here's how: 
1. Use simple language. When you want to attract others to your cause, forget the insider jargon: plain language works best. Identify the essence of your company's product or mission and summarize it in one short sentence that will tell others what it's about.
Tiffany Krumins, CEO and inventor of Ava the Elephant, appeared on the first episode of Shark Tank and described her product in a simple sentence: "Ava helps children take medicine." Her message was so clear that Corcoran knew she wanted to invest. "Fancy talk doesn't work," Corcoran says. "Entrepreneurs have to talk plain to get bought." 
2. Solve a problem you know from experience. When you're looking for your next business idea, focus on problems you've grappled with firsthand. Most likely, others have faced the same issue, so you'll know you're filling a need.
For example, Ride-On Carry-On, a kid's chair that turns a rolling suitcase into a travel stroller, was invented by a flight attendant who needed a better solution for traveling with her two-year-old son. "Whenever I see an entrepreneur who invents a business out of real life experience, it is almost always a good business," Corcoran says.
3. Identify your difference. In a saturated market, Corcoran looks for products that stand out -- products with a clear difference. She remembers Villy Custom, a cruiser bike company she funded in the third season of Shark Tank. The founder was a former fashion designer whose striking cruisers were truly unique. "They were the best looking bikes I had ever seen," she says.
In other cases, the founder stands out, rather than the product. Corcoran loves to point out that the co-founder of Pork Barrel BBQ, from Shark Tank's first season, looks like "an adorable pig," a marketing advantage that none of his competitors have. "You've got to have a gimmick," she says.
4. Persist past rejection. As an aspiring entrepreneur, many people will give you 'no' for an answer. Corcoran looks for people who won't stop there. "Pushy people always deliver," Corcoran has learned from experience. "They want it, they want it, they want it." 
After Corcoran was accepted as a Shark Tank investor, she received another call saying the network had decided to go with someone else. Rather than backing down, she suggested that she and the other woman compete for the spot. As you know, Corcoran won. "All the best things that happened to me happened after I was rejected," she says. "I knew the power of getting past no."

4 Ways to Get Your Product on the Shelves at Whole Foods


To some entrepreneurs, the ultimate accomplishment is snagging a spot on the shelves of Whole Foods Market. But before you book your meeting with a store rep, you need to be sure your product fits the chain's demanding quality standards and the needs of its customers.
"The Whole Foods shopper is slightly different in that he or she is driven more by health and taste than by price," says Phil Lempert, a food analyst and trend watcher known as theSupermarket Guru. "You don't want to force-fit your product into Whole Foods if it isn't quite right."
So what's an entrepreneur to do to crack this market? First, it's important to understand that Whole Foods is decentralized. The company is organized by regions--11 in the U.S. and one in the U.K.--and each one has autonomous purchasing teams for all product categories. At the same time, decisions are also made on the local level. So, a single supermarket in the chain of 332 worldwide can opt to stock your line. "There are many paths to getting your product into our stores," says Jeremiah McElwee, executive Whole Body (supplements and personal care products) coordinator at Whole Foods in Austin, Texas.
Here are four strategies that can help you make the cut and grow your business:
Know What Makes Whole Foods--and Your Product--Distinctive.
If you think you're ready for your Whole Foods debut, first visit the company's website, which lists acceptable and unacceptable ingredients, quality standards and other important guidelines. "If your product doesn't fit, go back to the drawing board," McElwee says. If it does, make sure it meets one more requirement: distinctiveness. Whole Foods isn't looking for me-too products, McElwee says. For example, an existing Whole Foods vendor found a source for fair-trade cacao from a small tribe in Panama. "This company is going to be making chocolate bars and supplements using this super high-end antioxidant," McElwee says. "This was such a compelling story--it's a functional food, it's fair-trade, and we had nothing like it in the stores so it made sense to launch this line of products nationally."
Pitch Your Local Whole Foods Store First.But don't count on that kind of national launch. When Irene Costello, cofounder of Boston-basedEffie's Homemade decided to try to expand the company's crackers and biscuits beyond specialty food stores, she and her partner first approached the local Brighton, Mass., Whole Foods store. "We had an untried, untested product line so we had to prove ourselves," she says. "We did demos at this store and met the marketing manager. She liked us and loved our first product, the oatcakes. She got behind the brand." Once Effie's established a track record in Whole Foods' North Atlantic region and the brand won some industry awards, Costello decided to gauge interest in stocking the line at more Whole Foods stores. Today, Effie's products are available at 93 stores in five regions.
Study Store Layouts.Before you meet with a local Whole Foods buyer, study the store aisle-by-aisle so you know exactly where you think your product should be stocked. "Think of the store in real estate terms and sketch out whether your product is meant as a quick counter pickup or whether it's strictly a grocery or bakery item," says Mitchell Merrick, vice president of domestic sales at Jessie Steele, a whimsical apron and kitchen goods company based in Berkeley, Calif. "Tell your rep where you could see your product in the store. You want to lead the horse to water so to speak." Initially, Jessie Steele items were stocked only in the Whole Body department with personal care products, but the company eventually got them in the grocery aisles of some Whole Foods stores, too. The products are now stocked in about 30 stores in the Pacific Northwest and North Atlantic regions.
Build Buzz at Farmers' Markets.While you're getting your Whole Foods paperwork in order, sell your wares at your area farmers' markets. That's where many Whole Foods buyers browse regularly, looking for regional artisanal goods. That was the lucky discovery of Chris Buskirk, cofounder of Scottsdale, Ariz.-basedGina's Homemade, a line of soft Italian cheeses and biscotti. "When we started selling at farmers' markets, we didn't know there was any likelihood of the Whole Foods buyers seeing us there," he says. "We were primarily interested in developing a brand identity and getting our product in front of people who cared about food." After a few months working the farmers' markets, Buskirk started calling his local Whole Foods without getting a response. After several attempts, he finally reached a buyer, who knew about the company both because of the farmers' markets and because Whole Foods customers were coming in and asking for Gina's Homemade. "Happily, our line got approved on the spot" after a tasting, Buskirk says. Gina's Homemade is now available at the seven Whole Foods stores in Arizona, as well as the two in southern Nevada.

Entrepreneur's annual look at the brightest ideas, the hottest industries and the most insightful innovators


Brilliance expresses itself in many ways--from the esoteric tinkerings of a mad genius to the profit-heavy balance sheets that illustrate the work of astute executives. Sometimes brilliance is merely a deceptively simple, why-hasn't-anyone-thought-of-this-before solution to a nagging problem.
The products and services represented by our annual roundup of 100 Brilliant Companies are a little bit of all of these. It should come as no surprise that our list is heavy on digital technology, with apps, development platforms and gadgets related to mobile phones, social networking and health care, as well as some mind-blowing inventions that are just plain cool.
On the opposite end of the spectrum, we found much to admire in low-tech brilliance--most notably that with retro hipster appeal, as chronicled in our new-this-year category Geek Chic. Throw in a bit of fun from food, shopping, music, art and travel, and you have our list of the best ideas, the brightest innovations--and, yes, the wackiest notions dreamed up by businesses in the last year.
But brilliance is not merely subjective: In some cases, it can be quantified in dollars and cents. This is not to say that these companies are necessarily the most lucrative in their fields; few of them, if any, are that. But to get a sense of the potential value of the businesses on our list, we spoke to leading venture capitalists to find out what qualities they look for in investment targets in several of our categories. It's a fascinating window into the minds of the people who are betting big on tomorrow's brilliance, today.
Our hope is that, as you dip into our 10 categories, you'll find ideas that inspire, excite and delight you--and, more than anything, perhaps galvanize you to create a bit of brilliance yourself.