How Franchising Works

Franchising is a popular way of doing business in which an individual or company can purchase and operate a proven business model, this avoiding the risk of starting something that is completely new and uncertain.

One of the main reasons why people buy franchises is the reduced risk. Most small businesses fail, and the main reason for that failure is ‘’weak management’’ (1). A franchised business addresses that issue by ‘’leasing that managerial know-how’’ (1) to those who purchase the franchise.

Another reason why I would buy a franchise is because it allows small businesses to enjoy some of the benefits that only big companies would have otherwise. Some of these are: reduced price for supplies since they are bought for the whole chain in bulk, instant recognition from customers because of standardized products and service in all locations, and chain-wide marketing campaigns.

The downside of purchasing a franchise is the lack of freedom to direct the business, ongoing royalty payments that depend on sales rather than profit, and non-competition rules outlined in the franchise contract.

One thing to point out here is that there are some kinds of businesses that are so similar one to another that can one could think that they offer some of the benefits of a franchise, without the rules and limitations of a franchise. An example of this are Chinese restaurants. When I go to a Chinese buffet I know what to expect from the beginning, their food is almost the same and they even look very similar one to each other. The key here worth considering is that they don’t have a proven successful managerial method, so a new business owner would have to create one from scratch, which implies more risk.

Would I ever consider owning a franchise? Yes; I would do it despite all the limitations that owning a franchise might entail.

1.      Lee Ann Obringer. “How Franchising Works’’. Taken from http://money.howstuffworks.com/franchising2.htm

Journal Entry Lesson 10

This week I had the opportunity to interview an entrepreneur. I interviewed Victor Uribe from Tumbiko. Some of the things I learned were the importance of having a strong commitments for my goals and objectives, but also adapting to change and modifying my strategies according to the new situations I find. He also gave me some advice like observing the world around me looking for problems I can solve, talking about my ideas and sharing them with others, and surrounding myself with more experienced people who can become mentors.

For my $100 project I had to try new strategies because of slow sales. At night, when I drive to the subway station to pick up my wife, I started taking some crepes with me to sell them at the subway entrance. I also planned to take some with me when visiting other town during the weekend and selling them there but I haven’t had a chance of trying that yet.

Acton Hero: Catherine Rohr

Acton Hero: Catherine Rohr

Catherine Rohr was a successful Wall Street executive until she was invited to a prison-tour that changed her life. She realized how people in prison have a great untapped potential and decided to help them change their lives through the Prison Entrepreneurship Program.

I was amazed by her ability to see the best of people and recognizing them for who they are capable of becoming. She has been successful because she has a great desire to help others. She uses her talents to do good for society, instead of just benefiting herself.

The key for her success was that she had a mission she believed in, and she wasn’t afraid to ask others for help and resources. She has a very strong commitment to her purpose and doesn’t give up when obstacles arise. She has encountered many difficulties along the way, from thieves stealing her belongings, to colleagues not believing in her, and prison officials shutting down her program; however, she has been strong enough to work through those obstacles and find success.

Journal Entry Lesson 9

This week I finished reading the E-Myth revisited and it blew my mind. It taught me about the kind of vision I need to have when starting and running a business. I need to think about the kind of company I want to have, and create the systems that will allow it to work without me. In other words, I need to build a business, not a job.

I also learned about how I need to find the best people for my business, which at first seemed contrary to what I learned in the E-Myth, but after reflecting on it for a while I realized that both approaches are compatible and complementary. Even when I hire the best people, I still need to provide guidance, limits, and systems for them to work in.

As I reflected on these principles I learned, I realized how different my last business venture (my car in Uber) could have been, and what I will do in the future. It has also given me some correction for my $100 project that I have been trying to implement. This week it has been more difficult to find time to work on my project, so I have been focusing on the less time-consuming and more effective strategies. I have also been finding a lot of ideas of other things to sell that won’t take me a lot of time and resources.

Acton Hero: Matt Stewart

From: http://www.actonhero.org/celebrating-heroes/stories-of-heroes/index.php?hero=matt-stewart

Matt Stewart started in the world of business after losing his job right when he was about to attend graduate school and become a lawyer. He started his first company and it was there where he learned what his values were; he learned about integrity and how to live life in a better way. Since then he has had experience with many different companies and industries.

One of the most important things I learned from him is that success comes when we focus on the mission of what we do. He says that those of his companies that failed were the ones from where he tried to make money off. He has realized that a successful entrepreneur needs to focus on his core business and not lose track of it.

Matt teaches that success needs to be measured on how well we teach our values to others around us. In business we need to get our employees to share our values and mission in order for the company to be successful. 

Journal Entry Lesson 8

This week I learned about leadership. Some of the things that I would like to remember are the qualities of a true leader. A leader is there with the people he leads to inspire them, show the way, and help them grow. I read the article ‘’Leaders toManagers: The Fatal Shift’’ by Hugh Nibley that I had read a few years ago during my mission. I have read many of Hugh Nibley’s articles and I find them very interesting, however I noticed how Nibley doesn’t seem to be very fond of business majors and thinks that business owners live off other people’s work. I don’t agree with that; I believe that entrepreneurship is an essential factor of production in economics along with labor, land, and capital. Somebody needs to be capable of taking risks, having a vision, and organizing the other factors of production, and it must not be the state in my opinion. I do agree with Nibley’s vision of how a leader should be and I wish to emulate it.

I have encountered more difficulties with my $100 challenge. Some of the extra ingredients don’t cost exactly what I thought and I’m having trouble finding enough clients to match my estimates. I am trying to focus only on what works, or at least what has less issues and more margin! Talking to the people is also a challenge for me that I’m trying to overcome.

Acton Hero: Ken Zolot

From: http://www.actonhero.org/celebrating-heroes/stories-of-heroes/index.php?hero=ken-zolot

Ken Zolot tells how when he was young he felt like he didn’t really fit into the world of school and the traditional way of doing things. He was very curious, restless and refused to play by the rules. He has taken that curiosity to the world of business. Some of the things that I have learned from him is that I need to be brave enough to do things and try something new even if I feel unprepared and inexperienced. Some of the key character traits that Ken mentions that he learned from his family’s example are: accountability, responsibility, and punctuality. He says that many people can fix a technical problem, but few have the character to be responsible and accountable.

Whenever we work at a new venture it is very easy to fall in love with it, even if it’s not going anywhere. I need to ask ourselves ‘’who cares?’’ about what we do, who could be interested, and how what we do can fix people’s problems.

Journal Entry Lesson 7

 This week I learned about customer service. I learned why Zappos pays new employees to quitin an effort to keep only the right people. Those people who stay are more willing to adopt the company’s culture and provide an exceptionally good customer service. Zappos is more profitable in the long run because of having the right people on board.

I also learned the concept of lifetime value of a customer. A customer’s profitability for a company increases over time as increased revenue offsets acquisition, marketing, and administrative costs of serving the same customer. Satisfied customers are more likely to return and even recommend the company to their friends and family creating positive referrals. A satisfied customer invites, on average, 5 people. A dissatisfied customer tells 11 people about his experience, on average.

I am making some progress with my $100 dollar challenge. More importantly, I am making mistakes. I had some problems with the recipe of the crepes and the ingredients. Fortunately, I started small so I can easily correct it now.

Today, my wife and I visited some of my wife’s relatives. As we visited her uncle Guillermo I met Jose, who is married to my wife’s cousin. Jose comes from Costa Rica but he moved to Mexico because of his wife. As we were talking about our jobs and education Jose mentioned how he is starting a construction business and he wants to make it grow into a successful construction company. He said that in Mexico there is a lot of money to be made and that he is very excited and optimistic to have so many opportunities available for him now that he became a permanent resident. He made me feel optimistic with his comments; he is definitely a person that I want to stay in contact with.

Acton Hero: Bud Brigham

From this video: http://www.actonhero.org/celebrating-heroes/stories-of-heroes/index.php?hero=ben-brigham 

Bud Brigham came from humble origins in a broken home growing up in Odessa Texas, but he knew from the very beginning that he wanted to be an entrepreneur. I learned from him that I need to start young and be the best I can be. A great lesson from him, that I want to apply to my life, is that he surrounded himself with bright people who shared his value system; I know that by doing that I can be positively influenced by those people and learn from them without even noticing it. I have heard before that we become the average of the five people we spend more time with so we’d better spend time with people who will help us be better. Bud Brigham mentions that he has received a lot of support from his wife and that his family has given purpose to his life.

An interesting detail about him is that he follows the objectivist philosophy.