Sep 18, 2009

Before You Buy that Franchise

An email to a friend of mine who's considering buying a franchise.


Based upon some brief research, the company's niche seems to have a sweet spot, and may be worth pursuing.

A few things though -

I would check out the location and setup a time to meet with, or at least call a few owners.

I've found that talking with an actual franchise owner gives me real insights into whether or not the opportunity is something they would want to repeat. Many times, they have regrets (Quiznos and Subway franchisees usually hate the company and want out).

If you fill out the application they sent, they should provide you with the UFOC and franchise agreements if you qualify. Those are the legal documents that spell out all the rules, and in some cases show actual sales revenue of various locations, and what the failure/dropout rate is - all critical pieces of info.

However, beware because the franchisors don't have to disclose a store that's been closed if they're able to resell it to another franchisee - they have loopholes that make the UFOC's look better than they actually are sometimes. That's why I strongly recommend going directly to the franchisees. In fact, you don't even need their permission to do this - I would call 5-6 or so, ask to talk to the owner, and then have a list of questions prepared, such as:

1) Would you do it again?

2) What do you wish you'd known before that you know now?

3) If you don't mind me asking, how much does the store produce for you gross vs. cashflow?

4) How did you finance it (savings or an SBA loan or other?)

5) What do enjoy most / least about running the company/

6) How many hours per week do you work on or in the company?

Email me if you have any questions.

Hope this helps!

Sep 13, 2009

Some Ideas on Capitalism and the Free Market

I recently watched a video about Milton Friedman (July 31, 1912 – November 16, 2006), an American economist and free-market advocate.

Some ideas gathered from the series that I believe are worth remembering, sharing and passing along.

1. Capitalism Fosters Peace. It took as many as 10 different countries to produce a single pencil, all coming from different nationalities, religious beliefs and cultural traditions. It's very likely some of these groups would refuse to work together if they faced each other personally or directly -- in fact, many might opt to kill each other. But the power of the free market allows them to work together, indirectly, in an impersonal way. The free market therefore encourages peace, unity, harmony - not war.

2. People Value Freedom Over Security. In Hong Kong the living conditions are awful compared to the life styles we live in the U.S. People come by the millions from Communist China to Hong Kong, a place with no natural resources, to obtain freedom. Imagine that - people fleeing the "security" and "safety" of communism to be subject to the ups and downs of a free market system. Freedom is probably something the average American takes for granted. Only those who've been without freedom can truly appreciate what a free market society offers.

3. Scarcity Mentality Thinking Creates War. Since 1750, our world population has increased 6 times. But our output as a world has increased over 1,700 times. The idea that there's only so much of a limited resource to go around has caused more wars, destroyed more nations, homes, and individuals than any other false idea. The limited-resource idea breeds selfishness, greed, and fear. If these ideas take root in nations, they lead to the growth of governments, the destruction of personal freedoms, communism, and eventually dictatorships.

4. Combating Terror and Corruption Through War or Legislative Force remains the Least Effective Method.
The history of war, economics, and government shows clearly that in almost every case, whenever government intervenes in the lives of others, it almost always hurts the very people it's hoping to help. Weather it's government's setting of minimum wages, handing out welfare checks, taxing the rich to feed the poor, imposing trade tariffs on other countries, or going to war against another nation for it's natural resources, all of these methods of force to compel another group to more fully comply with our wishes, actually hurts us in the end. The best medicine even if, for example, another country isn't playing by the rules of free trade, is to be the type of people and the type of nation that others will still seek to trade with, to not impose any dues or tariffs - to foster and value freedom over fear. And to trust the hand of providence and the invisible hand of the markets.

5. Letting our Dollars Do the Voting is the Best Form of Govnerment. In such a system, each person gets what they really want. But when we vote for a person to represent us in governement, even though we voted them in, we have to vote for the whole package. We don't get what we want usually through the voting system. But the free market always gives us exactly what we really want - freedom.