Franchise Business - The Fresh Healthy Machine Company - Case Study Example

Name : xxxxxx Tutor : xxxxxxx Title : Franchising Institution : xxxxxxx @2015 FRANCHISE BUSINESS A franchise is basically an authorization granted by a company to carry out similar business activities as they do using their names and their policies. It is more of becoming the company’s agent by opening a branch for their products. The franchising business can be traced back in the 1850s then Isaac Singer invented the sewing machine. He wanted to distribute the sewing machines to a bigger geographical region so he gave entrepreneurs licenses as a go ahead to sell them on his behalf. Since when franchises have been in operation until now. A franchisee is a person who has been given the right to sell products or services belonging to a company in a particular area. As a business, a franchise is a good idea for any entrepreneur who wants to get in an established business. There are many advantages of being a franchiser which includes; There are lower risks. Most franchise business management styles are tested and proven methods of running a business. This places them at an advantage over individually owned businesses where the owner decides how to run the business without proven results. The franchises are more likely to succeed since they know the how exactly the market runs. A startup has a higher risk of failing since the entrepreneur might not be aware of some facts as he goes to that line of business. Name recognition. Some franchises have already created a brand for themselves. This comes as an advantage because most consumers prefer to buy goods that they are familiar with. The franchisee will get an advantage since he will sell his goods to familiar people and hence a good market for them. Cost sharing. Franchisor can organize with the franchisees to be sharing the cost of goods. This could be supplies, advertisements, government licenses and marketing resources. This will increase the profit margin of the business. They have established products and services. It might be easy to determine if franchise will be successful in the market. A franchisee can tell this by the number of outlets the business have and how well they are faring. This way, the franchisee doesn’t jump into untried fields thus reducing the chances of failing. Franchisors can provide operational systems and procedures to the franchisee. Mostly, since the franchisee is opening a branch of a business that has already been established, the franchisor can offer operating systems and procedures to the franchisee. This may include in fields like accounting, managing, security, sales & marketing, customer service and advertising. If the franchisee is not experienced in that field of business he or she doesn’t need to worry since the franchisor’s experience in the market will be of help. The franchisor can provide a business plan. Owing to the experience a franchisor has in the market, he can provide a viable business plan to the franchisee. The franchisee will use this plan to get financing from maybe a bank or a Sacco. There will be a higher probability of him getting the finance since he has written of achievable goals. Some franchisors can offer financing. Although majority of franchises do not offer financing for their franchisee, some franchisors offer their franchisees financing in terms of inventory and equipment’s. This is a great advantage since the franchisor will get the equipment’s at a lower price and he will get better quality items as compared to a fresh start up business. Some have favorable growth strategies. Some franchises give the franchisee an option of expanding the business so that he too can enjoy the profits of having multiple franchises. This means if profits are realized in the initial franchisee, there is a go ahead to open a similar business. Exit strategy. Since the line of business is already established, there is a high chance of getting someone to buy the business if the franchisee wants to leave the market because of some issues. The only exception will be if the business is failing. If the franchisee sells the business when it is not doing good chances are that he will sell it at a loss. Given the above advantages of a having a franchise it is easy to think that having one is way better than operating your own business. However there are some disadvantages every franchisee should consider as listed below. The business will be dependent on the success of the franchisor. This can be a limiting factor to the franchisee. He or she may have put a lot of resources towards the success of the business just to be frustrated by the franchisor who does not work hard enough to enhance the success of the business. Moreover if the franchisor is at the crossroads with the legal authorities, he may directly affect the franchisee. A good example is in an operation of a fast food restaurant where one outlet belonging to the franchisor experience a recurrent food poisoning probably from the use of expired goods. If the government requires a legal action, there is a big likelihood that it will be against the whole brand. The franchisee will suffer losses because of an offense they did not commit. Payment of fees to the franchisor. The aim of most franchisors are to get more capital from their businesses and some is even to make additional profit from selling licenses to franchisees. This means that no franchisee can be given a business without paying a certain fee to the franchisor. The fee varies from as low as $20000 to about a $1000000 dollars. At times, if you make a good calculation of that amount and compare it with the risks of running a business on your own, you might find that in your business where you are seeking to establish yourself you can do much better. Lack of ultimate freedom over the business. When you purchase a franchised business, you cannot have as many rights as a person running their own business. This is because there is an already set code of how operations should be run in your business and you cannot go against the company’s way of business. This means you cannot bring changes to the business without consulting the franchisor. This can deter positive change to your business hence limiting your profits. For instance, you might have a franchised fast food restaurant; you then realize in your location many people prefer to spend more time having lunch or dinner. As an entrepreneur you have found an expansion plan. In the agreement with the franchisor, you had agreed that it is only a fast food hence the limitation. Unscrupulous franchisors. Keeping in mind that not everyone we meet has good intentions towards us, we should be very cautious when dealing with people especially in business. Some franchisors are just out to make profit and at times they go to extreme expense of selling a business at a value which does not match its worth. Others sell business that does not exist. For example a franchisee might have heard about a fast food restaurant named “pizza inn”. The “pizza inn” might be a franchised business which is out for sale. A franchisor, better described as a con, might sell another business with the name “pizza inn” he then goes as far as altering the documents of the previous business the name of the second. A franchisee might assume that the franchisor just made a spelling error and end up losing lots of money. Hidden charges and inexperienced franchisors. Some franchised business might be new in the market and the franchisors might not have sufficient knowledge of the market and his can lead to heavy losses. In addition, the franchisor might ignore some charges in the payment fee just to include the latter. Such charges include insurance, sales & marketing, maintenance of equipment’s among others. This might lead to the dissatisfaction of the franchisee since the profits will not be as they anticipated. Having observed both the advantages and the risks of running a franchised business, an entrepreneur can determine whether he is ready to purchase it. However the franchisee give a careful consideration to the issues below. The cost of the franchise. Cheap is expensive as a saying is justifiable in this case. You might spot a business that is being sold at cheap price. While there are chances that the business might till do good, it is wise to ask yourself why. Some franchisors do not have an established position in the market and they are using the franchisee to make a name for the brand. This might not be settling for a franchisee who has high hopes of springing into business immediately. Others are too expensive that if you compare the cost of running a sole p-proprietorship you might be at an advantage. The freedom of running a business. Your freedom as the owner of the business will be seriously minimized since you have to work with the already established methods of running the business. This might be in terms of management, equipment’s, supplies and legal publications. In cases where one needs to establish his/her rules, they should reconsider getting a franchised business. Legal requirements and agreement. It is the most important part of the process. The franchisee should carefully read and understand the concept of their agreement as written on the paper. For example in U.S.A, the Uniform Franchise Offering Circular (UNFOC) is a document that explains all about franchise business. If there is something that you have agreed upon with the franchisor and is not in the document, you should not sign. The document can be used against you or in your defense in a court of law should some disagreement arise. Exit option. Most franchised businesses run for about ten to fifteen years. As an entrepreneur you should carefully consider what should happen should you end the contract before the agreed time to avoid losses? Having that in mind, it is now safer to explore on the available franchised business. The food industry consists of one of the fastest growing industries all over the world. People cannot do without food, if an entrepreneur can have this knowledge and use it well, he can find for a gap in the market and come up with a viable business idea. However one should be vigilant since a mistake in the sector is not easily forgotten. For example a customer suffers from food poisoning in restaurant word will go round and the people will have problems with it causing a big damage to b the business image. However after a thorough research I have seen a business that will not only bring profits but also promote healthy living amongst us. I would recommend that you consider it as a possible business idea. The name of the business is Fresh vendor’s machine. Below are the details of the company located in San Diego California U.S.A FRESH HEALTHY MACHINE COMPANY This is a fresh beverage and snack company determined to give the most healthy snacks and drinks to the societies. Given the rising number of obesity cases and the much nutritional awareness, it seems an ideal business for the today’s world. The company has fresh vending machines and they normally operate in secure institutions like schools, hospitals, military bases etc. With an aspiration of being a franchise, this could be a good business idea. The role of the franchisee will be to provide healthy and fresh snacks and beverages to the community .This calls for a big interest in a healthy lifestyle. The fresh machine vision is to have an obesity free society. As a franchisee you will have to keep this in mind. I would strongly recommend that you purchase this franchise as I have carefully researched on then following factors; which I will expound on the details. 1. Ready market 2. Government policy 3. Business location. 4. Funding 5. Brand name 6. Competition 7. Outlets 8. Training 9. Profits READY MARKET The Fresh Healthy Machine Company have invested in places where nutrition is greatly observed. Their main focus has been to schools and other public institutions have even gone to an extra step in providing for healthy options for the communities by setting up vendor machines in estates which are secure and in malls. As a franchisee this means there is a ready market since the product is usable by everyone. GOVERNMENT POLICY The government is also alarmed by the number of rising obesity cases. It has therefore encouraged companies to provide healthier diets in replacement of healthier foods. With more than one thousand collection of organic foods, the company is promoting the government’s vision of a healthier nation. Also quoting Megan Wilson, Product Development Manager: “In addition to complying with the guidelines set forth by the USDA for implementing healthier nutritional requirements, fresh healthy vending also abides by more robust guidelines from local government, public and private schools and can also create menus for special requirements.” This means that the government will be supportive should you need to expand the business to other locations especially in institutions. BUSINESS LOCATION This Fresh healthy vending company is quite easy to handle. They have location teams that locate ideal places to run the vendor machine. As an entrepreneur this saves you a lot in terms of time and resources since you do not have to hop from place to place looking for a good place. FUNDING The company provides the machine and all the franchisee requires is to run them. In addition they have a website which is exclusive for the franchisees. They offer over two thousand products that are well tested and tried by their vending machines. It thus reduces the effort of finding a reliable supplier. BRAND NAME With over two thousand vending machines countrywide, the franchise has really made great influence in the society. This is a very huge advantage to the franchisee since you do not have to start small. Since you are delivering the same goods as the franchise it will easily appear as a branch of the Franchise. This will attract customers since they are used to the name Fresh vendors and as long as you give quality services to them you can be assured that they will be checking anytime they need something to drink or a snack. COMPETITION. In any business competition is inevitable. However with an already established brand, this company has equipped itself well to fight off near rivals by providing fresh and healthy organic drinks to its customer. Its charges on the goods are relatively low ranging from $0.75 to $3 dollars. It has also put in place attractive and up to date machines and not only are they attractive to customers but they hardly jam. This awesome experience will make customers come for more and hence the profits. OUTLETS. Given that the business is already established all over the USA, as an entrepreneur, if you see a business opportunity of the same kind, you should not hesitate just communicate with the team of directors who are set aside specifically for you and they will guide you on the way forward. You can have as many vending machines as you want. TRAINING The franchisee will receive extensive training in the corporate offices located in Sad Diego. The training will cover everything to do with the business. This includes, the operation and maintenance of the machine, inventory management, nutritional value and also the fitness and wellness of a workplace, an institution or an organization. In addition the company have field agent who will offer you help with the machine should any problem occur. PROFIT. The company have pocket friendly prices ranging from $0.75 to $3 dollars and $ to $2.50 for the snacks and beverages respectively and having a markup of 60% to 100% and 300% to 500%respectively. The location is paid 15% of the net profit by the franchisee. The rest goes to the franchisee. That is a perfect deal I highly recommend it. Check their website www.freshvending.com or email info@freshvending.com for further details. REFERENCES BOOKS RICK, B. (2011) (The Educated franchisee. Minneapolis: Hillcrest publishers group) Andrew, J. (2011) (Franchising and licensing. New York: AMACOM) Don, L. (Evaluating franchise opportunities. Toronto ONT: Productive publications) WEBSITES America SBDC (2015) (http://americassbdc.org/?s=franchise++business&x=10&y=2) About money http://franchises.about.com/od/franchisebasics/a/what-franchises.ht Fresh healthy vending www.freshvending.com JOURNALS Amazon, B. (2013) (Journal of business and economic research. IE University) MAGAZINE M.C. Davit. (August 2015) (Secrets to successful franchising. Franchising USA) Read More