- What’s a PowerSeller?
- What’s a Trading Assistant?
- What’s a Trading Post?
- To Franchise or Not?
This chapter is from the book
This chapter is from the book
This chapter is from the book
To Franchise or Not?
Many successful entrepreneurs have put together wonderful, successful Trading Posts on their own. Hundreds of others have turned to franchise firms to help them along. Some of the best-known franchise firms, (listed alphabetically) include the following:
AuctionDrop (UPS stores)
iSold It
NuMarkets
QuickDrop
SnappyAuctions
The advantages of hooking up with a franchise organization are many. First, you get to learn from other peoples’ mistakes. Hopefully by the time you join, the franchisor and its franchisees have made many of the obvious and not-so-obvious mistakes and have learned from them. Good franchisors will help train you and point out the landmines (or at least where the landmines were during their last trip through the field.)
You will have a built-in community of peers—similar franchisees who have invested a sizable chunk of their nest egg in a dream just like yours.
A good franchisor has made arrangements with vendors for such things as fixtures—counters, shelving, and so on. A few even provide "turnkey packages" where your entire store rolls up in a truck, with an installation crew. This can be a huge timesaver, and can free you up to do pre-opening marketing and the myriad other things you need to accomplish before opening day.
As franchise networks build out hundreds of stores they gain clout with shipping carriers, supply vendors, insurance companies, and others. This can often result in discounts, or at least in better customer service.
Joining a franchise can give you instant credibility, as well. If the franchisor has done a good job of establishing its brand and policing the quality of its stores, and if the firm’s franchisees have a lot of well-branded auction items on eBay, your reputation will precede you. People will walk into your store and say, "Oh, I know you guys. I see your stuff on eBay all the time," or "Don’t you folks have another store on the west side?" In effect you are buying the power of national and regional marketing that you could not otherwise afford.
Speaking of marketing, it’s an important part of increasing any PowerSeller’s business. Effective franchisors spend a lot of money on professional printed pieces, ad campaigns, public relations efforts, and much more. You’ll learn about marketing and promotion in the chapters found in Part IV, "Marketing, Public Relations, and Advertising," but for now, consider this: One thing a franchise can bring to the table is a marketing and public relations team you could almost certainly not afford to assemble or maintain yourself.
Yeah, but.... Okay. You’re right. There is a downside. The franchisor will want a percentage of your income—perhaps even a percentage of each auction’s final ending value, even though you keep only a portion of each auction. Say, for example, that an item sells for $90 and you agree to pay its owner two-thirds of the auction’s ending price, or $60, leaving you with $30. Your franchisor might want 5% of the final ending price, which is to say 5% of $90, not 5% of $30, or $4.50 rather than $1.50. This will add up and can really change a balance sheet. In return, of course, you get help from the franchisor—training, marketing, technology, and more. Just be sure you know up front what this will cost you and how it’s calculated.
Read the contract before you sign it. Do a spreadsheet. Have an accountant and a lawyer help you understand the implications of your agreement. Run the numbers using realistic rent, labor, advertising, average selling prices, and other assumptions. See if it makes sense. Talk to some established store owners. Do a reality check.
Other parts of franchising that annoy some folks delight others. For example, you will probably be told quite a bit about what you can and cannot do in your store. Franchisors have an image to uphold and expect you to help them make the store conform. Some store owners love the uniformity this brings to the system. They like not having to worry about what color to paint the walls or how big a sign can be. Others bristle at being told what to do, where to locate their store, what things they can and cannot list on eBay, and so on. If you are fiercely independent, you are probably not going to be a good franchisee in any industry, be it donuts or drop stores. Think long and hard about this.