You are an unhappy office staff, toiling more than ten hours a day, and noticing playing by the rules does not give you what you really wanted and it only made you old and busy.

Going entrepreneur came into your mind. But, with all those news about traditional businesses closing left and right, the terror stop you from taking action.

However, you find in the newspapers, in the TV and in the internet, firms offering franchising. Maybe this is the type of business for you. And you are intrigued. You ask yourself, what is franchising, anyway?

This blog post will tackle the definition of franchising.

Franchising is a practice where an already established allows another entity to use the company’s already successful business solution. The franchisor (the company that provides the business solution) and the franchisee (the entity that uses the business model) enter into a contract to use and capitalize on the companys successful business model and/or its existing brand awareness (most often called Goodwill) for a faster return of investment.

In return, franchisees expend two payments in general. First is a one time investment, called the franchise fee, and the second is royalty fee, which is a recurring expense, for the continuous usage of the business model, advertising and training costs. Royalty is usually 3-10% of gross profit.

Franchising is a interconnected network of mutual business relationships that permits a number of people to share:

– A brand recognition

– A successful method of doing business

– A proven marketing and distribution system

Thats pretty what much franchising is.

One common misconception about franchising is the phrase, “I am buying a franchise”. You are not buying; you are investing onto the business. What you will own are the physical assets that are needed to act upon the franchise, like the building and equipment.

For a business to work as a franchisor, it must have a good track record of being profitable and the business model it employs is easily duplicable. Otherwise, that business is not suitable for franchising.

What’s so great about franchising?

For the franchisor, the company can grow and gain more chains while lessening the traditional risk and liability of doing so. It is also a great way to gain more brand recognition and reputation.

For the franchisee, they are capitalizing in an already proven business model and recognized brand. In fact, a franchising business is 90% proven to be successful. With a success rate like that, who can go wrong?

There are many ways by which entrepreneurs get on the road to success. Some entrepreneurs choose to take advantage of franchise opportunities and from there, move on to greater glory.

There are a lot of things that can be said about franchising. For one thing, franchise opportunities let you penetrate the market with an already-established brand name. People already know the product or service so you won’t have to go through the trouble of making a name.

Of course, you have the responsibility to make a name for your business and not just the product. This means you’ll have to sell yourself. After all, people can get the product or service from other franchises, so what makes you any different? You’ll have to show them that you are different from other businesses even if your products are the same. You’ll have to do your best to convince people that getting the product from you is the best decision that they can make.

If you don’t think that taking advantage of a franchise opportunity is the thing for you, maybe you should consider starting a small, home based business.

A lot of budding entrepreneurs put up small home based businesses for different reasons. Here are some of them:

1) Lack of funding – most entrepreneurs have small home based businesses because of the simple fact that, as a beginner, most do not have the funding to rent office space.

When you think about it, a small home based business is perfect for a budding entrepreneur. He or she actually gets to save money on the rent of commercial space. We all know how hard it can be to manage finances when you are starting a business, so saving all the money you can is a very good idea.

2) Convenience – for entrepreneurs, small home based businesses can be very convenient. When you think about it, they can stay at home all day and still make a living.

Entrepreneurs find small home based businesses convenient in other ways as well. Much legality is eliminated when you base your venture at home. Getting a lease on a commercial space may sometimes prove too complicated, as compared to having your business at home.

3) Customer base – some entrepreneurs start small home based businesses because of the fact that they may already have an established client base there. Some restaurants, for example, get started because of a person noticing that his or her cooking is very popular around the community. Now, by starting a restaurant in the home, he or she would already have a customer base, willing to pay her for her cooking.

Many people know just how hard it can be to start your business as an unknown. By basing your business at home, you know that you will already have established connections and you know that people will find it more convenient to go to you for their needs.

Remember that you need to plan properly. Most entrepreneurs’ small home based businesses fail because of poor planning. You need to learn how to separate your business finances from your home finances, and learn how to record each correctly.

Business franchising, in various forms, has been around for decades, and it proves an eternally popular business vehicle for start-ups and for those looking to break out of the 9-to-5 rut. It hosts its own range of advantages and disadvantages, of which it is important to take notice before committing to purchase. Likewise for the franchisor, the business model has notable advantages that many businesses might at some time like to consider, as a more effective way of growing the business over a short period of time.

Business franchising is a less risky way to start a business. If youre considering giving up your job to work for yourself, you might like to consider business franchising options that may be available. Business franchising allows you to run a branch of someone elses business, providing you with a blueprint business plan thats been tried, tested and is successful in other areas. It also gives you an opportunity to benefit from the experience and industry knowledge of the franchisor, which you would otherwise have to gain from your own experiences in business or in the employment arena.

An additional advantage to business franchising is that a number of high street banks support most major franchising opportunities, and are more willing to lend money to cover the franchise fee and start-up costs than they would be with other businesses and enterprises. That means you will be more likely to obtain funding for all your initial costs if you elect to run a business franchise rather than opting to go it alone straight from the off.

For the franchisor, business franchising can be a profitable and useful model to adopt. Firstly, it can raise substantial capital in the form of franchise fees, which can often run into the tens of thousands. This can be used to finance the development of the franchise opportunity, and can also make the promoter of the franchise particularly wealthy. Additionally, many business franchising opportunities also require a proportion of revenues to be paid from each franchisee in royalties, providing an on-going income to the business.

On the business side of things, business franchising allows a business to achieve rapid but controlled growth, which would be simply impossible were it to be effected organically. While it does mean giving up some control of the way the business is run, particularly at an individual franchise level, it nevertheless allows the business to grow geographically and in terms of revenues over a very short period of time. With the right franchisees, business franchising can prove lucrative as well as being an excellent way to prompt and maintain growth.

Considering the advantages of business franchising, it would appear to be a particularly useful model for all parties concerned. While that is the case, its also important to bear in mind the disadvantages, such as the lack of absolute freedom on both sides of the fence and the risk that either side to the deal might turnout to be wrong for the relationship. Nevertheless business franchising will continue to prove a popular way of doing business.

On first hearing the idea of using Other Peoples Resources (OPR), it may seem a little exploitative or unethical to some people but when you examine it closely its really not. It is simply a great example of the principle of fair exchange at work. You are trading something you have (e.g. money) for something another person has (e.g. time/skill etc) and both parties agree to it up front, seeing it as mutually beneficial or win-win as they say. However, using OPR goes way beyond simply trading time for money. Other Peoples Resources can also include any combination of any of the following: skills, contacts, minds, talents, technology, systems, environments etc.

Using OPR to Build a Business

Strategic use of Other Peoples Resources (OPR) is one of the quickest and easiest ways to fast-track the development of a business; create wealth and hit the “big time.” Huge multinationals such as McDonalds and Dominos Pizza grew through a shared ownership, franchisor-franchisee business model. Dell Computers etc. have grown their entire direct sales global businesses through the use of OPR, this time you the buyer make up the OPR element; you essentially use your own resources (internet, time etc) to buy a Dell computer. However, OPR isnt exclusive the domain of big business.

Other Peoples Resources (OPR) is particularly useful in the start-up phase of a new business venture. Chances are that either you dont have the capital yourself or havent raised the capital this early in the business but yet you still need the business to develop. Since entrepreneurs are often victims of their can-do attitude, their biggest failing is learning to let other people do the can-do bit. The solution is creative use of Other Peoples Resources. Whilst big business normally wants to own and control its own resources; small business only needs to use and control other peoples resources. Ownership is not necessary. The less you own, the more you can control.

Leverage is a Skill, OPR is an Asset

Leverage is essentially achieving more with less of your own resources. Leverage can be using other people’s talents, skills, contacts, credibility and resources etc. Other Peoples Resources can also include the use of someones office space, trading one service you can provide now for a service you need, bartering your future services or revenues for current use of OPR etc.

It actually takes time to develop the skill of using leverage. It requires a departure from conventional thinking about how to get things done. Other People’s Resources are often available when conventional routes of Other Peoples Money are not. You could say OPR is an indirect form of Other Peoples Money. Instead of using your money to grow your business, with OPR, you build your business by using resources paid for by other people.

With OPR, you can build a business by using/leveraging resources directly paid for by other people. You are essentially indirectly using OPM that went to develop or acquire that resource. A great example of OPR at work is when your outsource functions of your business to another company to provide. I like to look at OPR as an asset that you dont own, but one you can still control. Operated correctly, and under certain circumstances, it can be a better use of money to control an asset than own it.

Thankfully, with the advent of the Internet, the world is literally at your fingertips. In no other time in the history of the world has there been such opportunity to use OPR. You can take advantage of online technology, products and tools that companies have invested huge amounts of money to develop; and you benefit from their use for a tiny price in relation to how much it costs that company to develop and continually service.

Getting Out of Your Own Way

One limiting factor were all faced with in life is that of time. Even if you have excellent time management skills yourself and are highly productive in your output, you are only you. You are a bottleneck in your own production line so getting out of your own way will fast-track development and achievement of your goals. The good news is you can buy time from other people and oftentimes you dont have to use your own cash, or any cash for that matter. This gives you more bandwidth to focus on what you are really good at.

The way I see it is – being busy is a form of laziness, if youre busy doing things that other people are better at doing than thats a form of laziness. You havent taken the time to leverage of other peoples skills, talents and time. One of the greatest skills you can learn is not just that of managing how you spend your time but leveraging your time by accessing and managing how other people spend their time. If youre to-do list is longer than that of the people you manage than you havent developed this skill yet.

Some Ways of Accessing Other Peoples Resources

1.Outsourcing – turning specific functions over to a third party provider to implement and support, for a fee.

2.Joint Ventures a strategic alliance where two or more parties form a partnership to share markets, assets, knowledge, and, of course, profits.

3.Affiliates a type of re-seller arrangement where the affiliate refers customers and is rewarded financially for doing so. Very popular on the Internet.

4.Technology using other peoples technology to cut overheads, streamline operations, access new markets, support remote workers etc.

5.Systems systemising your business functions so that they operate with the least amount of human intervention
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6.Exchanging Services i.e. contra deals bartering your services with those of another person or company for mutual benefit.

7.Franchising using another successful firms business model thats taken them years to develop.

8.Mastermind Groups regularly connecting with and exploiting the talents, contacts, ideas, experience, intelligence etc. of like-minded peers.

In Summary

Building wealth and achieving success shouldnt be about extracting every last ounce of your own energy and resources to get there, for that carries a huge personal cost and can sometimes prevent you from sustaining this success. The tank literally runs out of gas! Therefore, it is beholden upon you to explore the use of Other Peoples Resources in a mutually-beneficial manner.

The options for leveraging OPR are truly limited only by your imagination, your ability to negotiate and utilize the principle of fair exchange. Utilizing OPR cuts to the very heart and essence of being an entrepreneur. If you can master this skill, your entrepreneurial endeavors will reach great heights and you can create wealth not just for yourself but for everyone else connected to you. Hows that for wealth creation!

Not only do you want to have a solid plan when you want to finance a franchise in Canada – it sure helps when that plan makes sense for the business financing loan / loans that you need!

We think that most Canadian entrepreneurs who are either first time franchisees or perhaps are adding another location to their business would agree that its not as important as to where the franchise lending and business funding comes from, but that you get the full funding at terms that make sense for you personally .

Let’s examine some of those key decision points and requirements that you need to fulfill a proper franchise financing solution in Canada.

We think that a lot of franchisees are sometimes overly focused on ‘ the interest rate ‘ when they are seeking a franchise loan. That’s human nature we guess, but the reality is that the loan is simply commensurate with your overall credit quality and in line with the types of financing that are out their in the Canadian business financing market – unfortunately that market for new franchisees is somewhat more limited that in the U.S.

In Canada franchises are financed really in only 3 or 4 different manners — actually 5 we could say if you considered financing the whole franchise yourself through personal savings.

While that might seem a good idea we think in many cases it is not for a variety of reasons – i.e. collapsing personal investments and savings and assets when you don’t have to cant be an overall great strategy. We spoke awhile back to a franchisee who had pledged and used all his personal assets to acquire a franchise – business was slow, and he was unable to secure additional outside financing to re- boot the business because all his personal assets were pledged/gone. Bottom line, not recommended!

So the question then becomes as to how you decide to finance a franchise once you have made that acquisition decision. We’d like to share a couple key points. First of all, whether it’s a franchise or any business whatsoever, it’s financed by two guys, debt, and equity; i.e. what you borrow and what you put in yourself. Spend some time determining the optimal mix and you will best be able to gravitate to the right financing strategy.

In Canada these days we see franchisees putting in anywhere from 10 -50% as their personal investment into the business. Whats the perfect number? The reality is there isn’t one, because each business requires a different amount of financing and has a different mix of assets and financing needs. The key assets and financing needs in franchising are all your initial soft costs, such as the franchise fee, and then comes your costs to open the door, often called the ‘ turnkey ‘. That turnkey component consists of equipment, leaseholds and opening working capital.

We spoke of 4 methods of franchise financing in Canada .Those are as follows : Specialized commercial finance firms that have dedicated franchise finance divisions , Equipment financing, Working Capital term loans as a supplement to your overall financing, and finally the BIL/CSBF loan . The latter is the government SBL loan that is used by hundreds, probably thousands of franchisees to acquire their franchise. It only has one or two limitations, one of which is that it caps out at 350k, but that certainly covers a lot of franchises in Canada in different industry segments – examples restaurants, service businesses, etc.

So, today’s bottom line? Simply that spending some quality time early on in the process in understand which of the 4 options makes sense for you is a valuable investment. That time, coupled with your business plan and financial projections will help you ensure that you have the right mix of financing solution, as well as a properly chosen business loan strategy for your franchise.

Speak to a trusted, credible and experienced Canadian business financing advisor on how to best decide which financing mechanism works for you.