Car Wash Franchises

Franchise businesses are so common as to be ubiquitous in America today. According to the International Franchise Association, a new franchise business opens somewhere in the U.S. every eight minutes. In fact, about one out of every 12 retail stores is a franchise. Because of the unique way they are run, they present an excellent business opportunity for budding entrepreneurs.
The concept of a franchise is simple: an independent business buys the right to use a large company's name and get access to its expertise. The big company gets a new outlet that will promote its brand and provide ongoing revenue, while the franchisee gets a big leg up thanks to a proven business plan, an established brand, and many different types of assistance and training.
It is important to distinguish between regular chain stores and franchises. In a chain store, the corporate parent owns and runs every location. With a franchise operation, each franchised branch is owned and run independently of the corporate headquarters. Franchisors, as the parent companies are known, can own some outlets directly while franchising others; franchisees can own one local store or dozens of branches across a city, but the basic relationship remains the same.
The nature of a franchise business comes down to a significant tradeoff: franchisees get access to a proven business model while giving up significant control in how they do business. This BuyerZone Buyer's Guide will help you decide if buying a franchise is the right choice for you, teach you how to evaluate potential franchisors, and point out some common mistakes you should avoid.

Benefits and drawbacks of franchising
The primary benefit of franchising is that it leverages the brand and experience of a successful business concept, while the main drawback is the tight control franchisors exert over their franchisees.
Pros
The franchise system provides the benefits of a big company to an individual businessperson. These include:

• Brand awareness and advertising
• Proven business processes and training
• Products familiar to customers

Consider a burger franchise. While opening a small, independent burger stand is fairly easy, succeeding against national chains that benefit from widespread advertising, lower costs through bulk purchasing, and time-tested recipes and procedures presents a very serious challenge. Buying a franchise of the national chain gives you all of those advantages while still letting you run your own business.
Since you represent its carefully-cultivated brand name and image to the public, the franchisor has a vested interest in your success above and beyond the fees you pay them. Because of this, they provide many types of consulting and guidance:

• Considerable expertise to bear on problems such as choosing a site, which can be essential to a retail business.
• An operating manual that can spells out how to effectively run the business.
• Sales and marketing help - from ideas, to sample collateral, to assistance in execution.
• Occasional seminars and workshops or send consultants to help train your staff.

All of these factors combine to greatly increase the success rate of franchises compared to independent businesses.
Cons
To protect their hard-won image, franchisors have very strict procedures and rules. One inherent problem with franchise businesses is that the people most likely to be interested in starting their own business - independent, entrepreneurial, and creative - are also the most likely to feel stifled by the tight control franchisors exert over each local branch. This control can extend to many different aspects of the business:

• Franchisor-imposed restrictions. A franchisor can place restrictions on the goods and services you can sell, the hours you are open, employee uniforms, and the type of signs outside your business.
• Restrictions on business procedures. That same operating manual that helps you run your business can also spell out specific accounting practices, operating procedures, hiring requirements, and other rules.
• Purchasing restrictions. While there are anti-trust restrictions that prevent franchisors from forcing you to overpay for goods, they can specify the suppliers you must use to outfit your business.

Is a franchise business right for you?
While opening a franchise business may be easier than starting your own business, it still requires a broad skillset and a commitment to hard work. The most important characteristic of successful franchise operators is dedication: a willingness to work hard and the ability to stay motivated. Also critical is business aptitude. Previous management experience is not required, but you will have to be able to learn business skills, from hiring to bookkeeping to inventory management. As with any startup business, expect long hours and minimal pay at first.
This is one reason that you should choose an industry that interests you personally - success is really driven by the amount of work you put in, so it helps if you enjoy the work.
As a general rule you should expect not to make any money personally during the first year of business. Any profits the franchise creates should be put back into the business to drive further success, so you should make sure you have other funds to live on. If possible, starting a franchise as a part-time venture can be a good way to launch the business and still pay your rent.
In some ways, what the company actually does has little to do with your duties as franchise owner. Mundane planning details, employee managements, and ongoing administration are critical functions that will fall on your shoulders. Studying the market before you purchase, staying on top of industry trends once you do, and keeping on top of bookkeeping, inventory, and staffing plans can all make or break your venture.
Many people who are successful in traditional businesses may not be suited for operating a franchise, so it is worth taking the time to consider these questions.

Franchise buying tips

• A great question to ask franchisors: "What traits do your most successful franchisees share?"
• Any franchisor who guarantees specific returns or asks for cash up front is breaking the law. Move on to your next prospect.
• The FTC can be a big help to franchise buyers. Call them at 1-877-FTC-HELP or visit them online at http://www.ftc.gov.
• If possible, try to work at a business in the same industry as the franchise you are considering. Familiarity with the industry and experience with the day-to-day realities of running a similar business will help your franchise get off to a good start.

Franchise brokers and consultants
While most franchises are sold directly by the parent franchisors, there is a growing set of middlemen called franchise brokers or franchise consultants. Much like real estate agents, they work to help match buyers and sellers. Their services are free to the buyers - they are paid a commission by the franchisor.
Working with a franchise agent involves a couple of steps. First, they will consult with you to determine your needs, skills, and available capital.
Once they have a good understanding of your situation, they will recommend a few companies that they think will be a good fit based on your interests, financial qualifications, and the current market. Then they will put you in touch with the franchisor directly.
There are a couple of advantages to using a franchise consultant:

• They pre-screen franchisors, making sure the companies they represent are responsible and financially fit.
• They can introduce you to franchisors you may never have found on your own.
• They will help you make your case to the franchisor.
• It's free!

The only real disadvantage is that each franchise broker has only a limited amount of companies that they work with, so you may miss out on opportunities that would be great for you. Some brokers are focused on particular industries, which can be an advantage if you are certain you want to operate in that industry, but is too limiting if you are trying to explore all your options.

Costs of buying a franchise
Buying a franchise is a major investment. You should expect to draw on almost all of your financial resources and/or take on additional lines of credit. Before start talking to franchisors, have these questions answered:

• What is your net worth? How much of that is liquid (accessible cash)?
• How much can you afford to lose? (Remember - nothing is guaranteed.)
• Is your credit rating favorable?
• Do you have sources of additional financing if they become necessary?

There are two main costs associated with buying a franchise. The first, which is most likely to cause sticker shock, is the franchise fee. This is a one-time startup fee that can range be as low as $1,000 or as high as $100,000. Most are between $20,000 and $30,000, and some are non-refundable, even if you decide to pull out of the deal before opening your franchise.
The second major cost is the monthly royalty payment. This fee ranges from 3% to 6% of your gross monthly sales. Some franchises have monthly minimums that can really hurt during slow periods for your business.
Other costs vary almost limitlessly, depending on the industry and the specific franchise. Some typical expenses include:

• Location. Most franchises need a place to do business - some contracts mandate corporate-controlled leases, others allow you to set up your own lease.
• Equipment. Could be anything from food preparation equipment to vehicles to display cases to cash registers.
• Signs. Many franchisors will specific exactly what type of signs you have to buy.
• Opening inventory. You may need weeks' worth of inventory to open.
• Working capital. For expenses that accrue before you start generating revenue - pre-opening payroll, for example.
• Advertising fees. Larger franchisors typically require that you pay into a national advertising fund that goes to support the company as a whole.