Imagine being able to start your own business over the next 7 days that was fully branded and already a leader in it’s market. All you needed to do was grab the steering wheel and keep guiding it down a proven path…
Online franchising has to be one of the most popular ways of starting a business that really makes money online. There are many out there, but one thing to consider is your level of experience, so we’ve created this article to guide you through the process.
The article is quite long, but by the end you’ll understand better how it works. If you have questions you can also Click on the word “business” anywhere on the page to see a video from myself, and have the opportunity to schedule a free 1-on-1 Skype call with me or a team member to get more information on the road ahead.
For any entrepreneur considering adopting the franchise business model as a way of starting up their own business, the easy decision has already been made. The power of franchising is a clear and proven one, and having a completely “Done For You” business is a smart business move. At least in the branding and conceptual sense. Creating your own brand, your own products, and your own marketing plans is extremely expense not to mention time-consuming, so spring-boarding off the back of some-one’s else hard work provides a Win-Win situation.
In this article we will discuss:
- Overview of a Typical Franchise
- Comparisons Between Brick and Mortar and Online Franchise Opportunities
- How to Choose an Online Franchise
- What Should You Expect from a High Quality Franchise License Provider?
- Distinguishing Between License Types
- Where to Find Products with Secure Long Term Markets (The Hidden Gems*)
*By “Hidden Gems” I’m referring to the ones most people overlook when searching for a typical franchise.
1. Overview of a Typical Franchise
Let’s start with a “Typical” franchise idea to make sure we’re all reading from the same page. Then we’ll start picking apart the finer details.
Automatically, when the word Franchise drops, the global brands spring to mind. McDonalds, Subway, et al. are top of the list. That’s not surprising when it’s difficult to turn a corner without finding that a new one has sprung up during the night. The strength of these brands is huge, and whilst taste may be a matter of choice, knowing exactly what you are getting is not.
Let’s think about what the customer is exposed to during their journey through a franchise store…but let’s think about it in a business sense. From the outside the appearance already starts to get the juices flowing. The customer knows what they are about to experience, and their anticipation is rising. Inside they are guided from the entrance, through a range of familiar products. And then on to the cash desk in a way that they are completely comfortable with. After the first experience (which they will either love or hate), there are no surprises, not shocks, and no disappointments. They get exactly what it says on the tin. It doesn’t matter if they are down the street from their home, or on the other side of the world.
For you as a Franchise Opportunity seeker, it’s a complete system. It’s packaged and ready to go whenever you are ready to invest in it.
And that, in summary, is what you are investing in.
You are harnessing the power of the Franchise. You’re buying rights to the System and implementing it as leverage to shortcut and guarantee your own success.
So with the easy decision made, let us look at the next big one….
Which franchise to invest in
For most people the thing on their mind is the investment that the franchise requires to get running. You can Google this search yourself, but I’ll save you the time if you have not already done so.
Keeping the well trodden path as our theme (McDonalds), depending on the results that spring up you’ll have one of two immediate reactions.
- Fantastic! – “A Franchise Fee of $45,000! I’m ready to go.”, or
- Ouch! “A Non-Borrowed liquid capital minimum of $500K and a total investment of between $1 Million and $2 Million. Out of my league…back to the day job.”
Yes, the initial research can be an eye-opener. But probably not a complete surprise given the size of the franchises brand and their reach.
Well, right now I have some good news for you. Things have changed massively in the last 5 years.
2. Comparisons Between Brick and Mortar and Online Franchise Opportunities
The substantial, even colossal, investments of Bricks and Mortar Franchises are no longer the norm when it comes to franchise investment. With the rapid acceleration of powerful internet resources, an equally rapid growth in Online Franchising has been fuelled. What used to be called simply “Licensing” for online products and services is now being better understood by the general public as “Online Franchising”. During the rest of this article I’ll often refer to a License rather than Franchise when talking about Online investments, but it’s the same thing. I’m referring to the contract put in place between you and your company of choice, that grants you the rights to sell. I’ll throw them in randomly, as I feel.
So, let’s compare the two business models – Offline and Online.
Bricks and Mortar Franchise
Whilst Bricks and Mortar offer good returns, for the entrepreneur looking for a rapid return on investment it’s not always a reality. The downsides can outweigh the upsides and swing the balance towards the online franchise market.
But the upsides are well documented, and highly regarded in the public eye.
- High profile high-street brands
- Globally accepted by the man in the street
- Known business models, that can be calculated over the longer term
Some of the downs are not even considered once you’ve climbed aboard the roller-coaster of wanting your own business. I’ll outline what I see as the main ones, because once you are tied to a bricks and mortar franchise there is no turning back. So investment, stress and lifestyle are all things that you have to balance in the equation as a future business owner and the freedom you belief that should offer.
- Heavy up-front investment
- Obligation to buy stock from the franchise supplier (they call the shots on prices)
- All the management tasks that go with running infrastructure and personnel
- Geographically constrained (it’s fixed distribution)
So how does the Online Franchise measure up?
Consider online franchising more as flexible distribution. I’ll explain by using a well-known “Physical” example so you grasp the picture easily.
Coca-Cola, whilst not exactly a franchise, owes its success to the strength of its distribution chain. As long as you have a fridge and a stockist to supply you with Coke, you can sell it anywhere in the world. Coca-Cola works because it is a mobile product. In theory it can be produced anywhere in the world and it can be sold anywhere in the world. As long as the Brand controls the quality and manufacture of the product, anyone with a fridge (or without) can sell it. The Brand in itself is so strong that people buy it in the same way they would buy a McDonalds, but you can sell it in an office, on the beach, or wherever you happen to be that day.
Online franchises work the same way…but now the fridge is in the Buyers home. The buyer sits in the comfort of his or her lounge/office/coffee shop and clicks a mouse to receive their fix.
The “Product” they have delivered, can be in several formats.
- A Physical Product – Beauty or health products are good examples
- A Service – Home help, or tax preparation
- An Electronic Product – Software or Cloud Services
And now even large Brands are circumventing online behemoths like Amazon in favour of more focused teams of online Affiliates and License Holders (Franchisees) that receive varying percentages of the total sales price based on their levels of investment.
Why is this good for the Company?
Selling on major online platforms is a battlefield. Take it from me, I’ve had two of my own personal brands out there and whilst the whole creative thing is an incredible buzz for the entrepreneurial spirit, the sales experiences can be brutal; even for big brands with big budgets.
So why not short-cut all that by having a team of extremely focused franchisees all over the world that actively promote your product for you? It allows the company to keep and small core team to actively control and expand the business, whilst giving worthwhile returns to the franchisees who have had the confidence in you to invest reasonable sums and grow their own online home business.
Why are License holders more focused?
Well they invest money to get a higher cut of the sales pie. They’re objective thinkers who understand that to invest something of themselves up front gives longer-term benefits, and it gives them an opportunity to grow and expand their own business. There’s not only a contract between you, there’s an understanding that you can both win from this arrangement.
Why is good for the Franchisee? (or License Holder)
Straight off the bat, your Initial investment is lower. Whilst your investment surely impacts on your revenue coming back, you normally get to choose how much you would like to invest. That means you are not obliged to stump up heavy sums cash immediately, unless receiving immediate higher return appeals to you. You can try it out (the trade-off is receiving a lower percentage of the sales price), and then if it works out you can invest in a license that will give you more lucrative returns i.e. a higher percentage of the sales price.
So in general, here are the…
- Lower up-front investment
- You can run several online franchises from different companies at once (let’s face it, running a McDonald and a Subway at the same time would present some issues)
- The Company takes total control of distribution – normally you don’t hold stock and you don’t do customer service if you choose well
- No Personal geographical restrictions – you can distribute from anywhere
- No Customer geographical restriction – you can distribute to anywhere
- You choose you own workload and your own working hours “in the business”
- Out of the business, it runs 24/7 when you aren’t there!
- With many to choose from you could lose focus. If you buy a McDonald franchise that’s all you will do. If you choose several Online Franchises, you may be pulled in several directions.
- The Brands are less well-known (but then so were Microsoft and Apple once)
- There are so many sectors to choose from you may get a headache before you’ve even started
Even if you already understood how online franchise opportunities work, I hope I’ve drawn a line in the sand as regards the benefits and flexibility of the online franchising model. I’m sure you can come up with other pros and cons, but the above list are the immediate one and general across franchises.
So now it’s time to research your online franchising opportunities.
3. How To Choose an Online Franchise
Once you’ve decided you would like to go into online franchising, then whether you choose one or several opportunities should be down to your level of previous online experience.
Existing Online Affiliate?
If you’ve been doing Affiliate marketing for some time, then you’re already in the game. You have an understanding of how an internet business works, and you’re probably looking to increase your income streams.
Number One take-away:
Stop wasting your time accepting 4-6% affiliate pay outs from programmes like Amazon Affiliates. Unless you’re really good at it (and I do know people who are), you’ll be wallowing along on the “free traffic” band wagon for years, and you won’t be building a business. Invest in a license that will grant you 50% to 90% commissions and you’ll be able to work a paid traffic strategy and see good returns.
This should be a simple math.
- Review the percentage returns from various license providers
- In your existing niches if possible to reduce extra work
- Find products that fit
- Decide if it make sense to throw everything into one pot, jump from Affiliate to High Level Franchisee and get the maximum return from one company, or
- Spin plates across several existing niches and cream from them all to bring in a higher overall income across the board
I’ll discuss niches you should consider in a moment.
New to Online Business
If you’re starting from zero, then you could be in a better position. That may sound unusual, bu you’re more likely looking from a Business Perspective, and not a Web Junky Perspective. Seek advice from someone in the business (as it appears you are doing here), but most of all stay focused on one area of activity and learn it inside-out.
You may not understand what I’m referring to when using terms like Niche, Traffic or Affiliate, but nor do you need to. You need to understand the business model, and I’ll explain exactly how to overcome the rest later.
Number One Take-Away:
One Franchise, One Focus!
Investment (Time and Money)
For both existing affiliates and online business start-ups a couple of things remain the same.
- One is Money
- The other is Time
You have a certain amount of hard cash that you are willing to invest, and you have a certain amount of time that you are prepared to put into the business.
How much am I really prepared to put into it…
I’ve seen many people get excited, only to throw in the towel three months later. If you’ve read this far, I’m assuming that’s not you.
Be prepared to commit to your new business, as the risk in online franchise opportunities is minimal compared to bricks and mortar opportunities.
- You don’t have the infrastructure worries that you have with a bricks and mortar business
- You don’t have the human resources and man management issues
- You don’t have the customer service issues if you choose the right license
- You’re not tied to one geographical location
- You’re shop never closes – the internet runs when you are asleep. You can place an advertisement once; it will stay there 24/7 as long as you decide and the franchisers picks up the calls and deliveries
If you choose a high quality Licensor the hard work is done for you, and you have the rights to the franchise for life. That means you have a high potential income source for life.
4. What Should You Expect from a High Quality Franchise License Provider?
What makes a good franchise offer and what makes a bad one.
First of all, you have to understand that Licenses on the internet fall into a number of categories.
Indeed, this is probably the reason that the word franchising isn’t used as often on the Internet as it is in high street. There’s substantial gap between buying the rights to resell somebody else’s Products and buying the rights to promote and sell somebody else’s Brand.
This is quite an in depth subject on its own. First I’ll tell you what to expect from a high quality franchise business. Second I’ll cover the other product licenses in a brief summary.
Expect the Following from a High Quality Franchise License Provider
A Full Suite of Products
Products ranges must begin with high quality entry level pricing that gives high value to the customer. In consequence the higher priced products or services should rate at the top of their industry.
Support and Customer Service
When you invest in a franchise you “leverage” the Brand. They should do ALL of this for you. Most importantly support desks and phone lines, whilst good ones will even provide you with your own website linked to theirs.
Sales Systems and Product Delivery
Again, all of this should be in place for you. You don’t invest money with them to do it yourself. If they supply a bunch of emails with a link to their sales page, this is not sufficient.
You need to have complete sales systems with multiple sales pages, ad codes, tracking, and lead storage. Not to mention technical support. As a franchise investor you are also their partner and you should expect to be well supported.
There is no obligation to hold stock. Remember, you are buying rights to sell, not buy and stock. This isn’t hamburgers! For sure, you should have complete access to digital products for you own use and validation, but your High Potential is the Rights, not the Products; the products are there to provide high value to your customers. Even if you never use the product yourself, you still have a high business potential because you own the Rights.
You sell their products on the strength of their Brand and they are responsible for full delivery and support.
- You Leverage their Brand
- You Leverage their Competence, and
- You Leverage their Services
If they don’t provide these services, look elsewhere.
Choice Of Investment Levels
Not everybody has the same amount of money to invest in a business. You should have the choice of investing to a level you are comfortable at, knowing that the more you invest the higher the percentage of return on sales price you will receive.
This should be flexible, meaning that if you wish to upgrade at any time you will be allowed to do so.
High Percentage of Return On The Sales Price
You don’t invest to make a small piece of the pie. There should be a comprehensive Benefits Plan (sometimes called a Compensation Plan)
- Expect to get 80% to 90% on entry level products
- Expect 30% to 50% on the higher price products
Percentages will vary across different types of products. The fixed costs associated producing the products and running the business will be related to the area of expertise of the Licensor.
There should be some form of bonus system over and above the normal compensation plan. This is still a sales environment and the effort you put in should be directly associated to the number of sales you make.
Outstanding effort = Outstanding Benefits
There are a number of way of doing this. One is extra benefits over a sustained period, the other is one-off prizes for outstanding short term performance, for example during the launch of a new product.
A Company or Brand is only as good as the team supporting it. When you invest in an online franchise you effectively become an extension of the sales team. Continually educating and training should form part of the make-up of the whole community. Nobody wants to invest and then feel left out in the cold by the Licensor.
I believe that’s a fair overview of what to expect from an online Franchise, so now I will briefly cover other licenses types. For the sake of drawing another line in the sand I’ll call them Non-Branded Licenses.
5. Distinguishing Between License Types
Other styles of license that exist online are ones that allow you to use other peoples creative products to sell in your own business. This allows you to build your own range of online resources without the need to spend time creating your own products from scratch. It requires you to put in a lot more work, and build your own brand, but drastically reduces the time it takes to create and launch your own unique products.
These Non-Branded online licenses are still good businesses, but by License definition you are selling the Product not the Brand. You can still earn a living at this, with a much lower investment, but the ball is in your court as a business. This can work really well for digital download products such as ebooks, videos, and some types of software.
In descending order of purchase price.
Private Label Resell Rights:
You get the source files to a product, so you can create a new product from it and call it your own.
Hey, what do you know! You just created you own little brand…
Master Resell Rights:
When you have these rights to a product, you could give it away, resell it, bundle it, create new information packages or include them in your own membership site.
You can even pass on the resell rights to others, meaning that when you sell that product to someone, they can turn around and sell it to someone else.
Generally, you are free to sell these products at suggested resale price, plus these are royalty free, so you keep all the money yourself.
You are free to pass on the ebook or software at no cost to anyone. You sometimes are not even allowed to sell it. You can find these rights usually stated at the beginning of ebooks or somewhere in the software file.
6. Where to Find Products with Secure Long Term Markets
In any market, there are always products that can be considered “Evergreen”. One of the finest examples is “love and relationships”. As long as the Earth is turning people will be looking for a partner, or at least some kind of relationship. That is what we call evergreen.
Why is this important?
It ensures the long term existence of the market, and an abundance of people that need your services.
Where do I see the current hidden gems?
From time to time I’ve been asked by friends and colleagues to be a guest speaker at Business Schools. I’ve done varying lectures, on Internet-based and entrepreneurial subjects. Personally, I like to get some interaction with the crowd, so I would always include some form of physical tasks that the room would have to be involved in. For me it was all part of the fun, and apart from keeping the room awake, it served a purpose.
If you do a task once, then generally you can repeat the operation again. It got people to take action on the education I was offering, at the same time removing the fear of actually having to do the task without support. And I had a free reign to make it up as I went along. It wasn’t part of the fixed program that people were there to learn.
I could play with the system, and adapt the course or lecture to the way the students in the lecture hall reacted. I had 100 people to tell me what they found interesting, and what avenues they would like to explore more.
Education is one of the central pillars of our society, and right now there’s a major shift in the grand axis of how education is being served up. The recipes are changing, and it’s the pupils who are beginning to make many of the rules.
For me Educational Franchises are the way to go, and I’ll elaborate some more.
There’s the things that students should really know; the things that form the basis of a given subject. Then there’s the areas of exploration that don’t fit into pigeon holes, and that’s pretty much endless. There are always more questions than answers.
I don’t need to ask you where they go looking for answers, because right now you are doing exactly that. You were looking for information on a subject that you wanted to be better informed on, and here you are. I’m giving you some guidance here, but the subject will be continually updating as time marches on, and really you need a more in depth education. If you know that you want a long-term business, then you’ll be educating yourself along the way to make sure you stay ahead of the curve.
For me personally, my own education is my highest operational cost. Why? Everything else is internet based. I have no building, and my workforce is contracted as and when I need it. For the educational courses that I have the rights to distribute, either the Franchiser (Licensor) hosts it or I pay a hosting company to deal with it. The costs are fixed, and in relation to the physical world the cost are minor.
Business schools, universities and other educational establishments realise this, and they realise that the costs of conventional educational systems are starting to put them out of reach. Not only that, they lack flexibility. Because they have to respect long standing regimes for the purposes of the diplomas, it makes them less flexible and slower to react.
Does that mean they’ll go out of business? No, we still have respect for the system, but another ecosystem is growing alongside.
Internet companies that are quick to adapt and have a network to grab expert resources will have an upper hand in the day to day market. Would-be students that don’t have the time or the money to follow college-based courses can grab video courses in segments. They educate themselves during lunch time at work, using mobile devices that they didn’t have a couple of years ago.
That increase in mobile traffic is not just creating businesses, it’s extend the “opening hours” that people are now accessing online applications. I’ve witnessed my own websites, across the board, go from 20% mobile to 80% mobile as Google forged ahead and started ranking my mobile responsive websites above classic desktop based websites. Hats-off to me, as an early adopter of responsive design.
This has meant that the best online education franchise providers have grown exponentially with the increase of mobile users grabbing courses as and when. A few years ago they had to wait to get home to continue the course, now they can view and review to make sure they fully absorb the content during coffee breaks.
If you can invest in an educational franchise right now you’re at the sharp end of an exploding market that is following the mobile market.
So that’s my “Gem” of the day, and that’s my advice to you.
If you have already decided that an Online Franchise is for you, then now should be the time to take action. But remember, owning a business is not for everyone. Some people just can’t make decisions, and don’t have what it takes to be serious about running an offline or online business.
If you’re still wondering about the mysteries of building a business online, don’t worry. You can always break into the online world by learning simple affiliate marketing skills without having to invest in a franchise.
You can find out more over at OnlineBusinessLeverage.com