Differentiation Strategies for Franchise Companies

With the growing number of franchise offerings recently it is difficult for the smallest franchise companies to compete. They generally do not have the advertising budgets to pick and choose which markets the franchise prospects will be calling from. Many rely solely on Internet Marketing; unfortunately 80% of such leads are not so good. On top of this obstacle they must compete with sales departments of larger franchise companies, which have lots of experience.

For smaller franchisors it is imperative that they are able to differentiate between other franchisors in their price category and sub industry sectors. Below is a listing of my franchise company’s differences between other franchises. I recommend that you read this and think about your business and see if it gives you ideas of how you can differentiate your company from your next nearest competitors. Read each item and have a legal pad in hand, write down those items, which apply if any and any ideas that you think of as you read them. Remember while reading this that our business model, a mobile care wash franchise, will differ from your business so you will end up with much different items when completed. This exercise will assist you in brainstorming and thinking of ways you can distance yourself from the larger and more aggressive sales tactics of larger companies.

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We are the only Franchise which:

Requires no inventory and/or purchases from franchisor on an on-going basis

Provides you with customers when you start without charging you a percentage fee.

Has a flat rate royalty and no percentage of gross sales

Has no competition that is organized at the unit level franchise

Requires no location in the car wash industry

Franchises mobile car wash trucks

Has a founder running day to day operations who has run one of these units for twenty years

Allows you to put an unlimited number of units in your exclusive territory without paying more in up front franchise fees

Has a written policy of helping non-profit groups at the franchise level

Pays your family a $10,000 cash death benefit and helps them run your franchise until next of kin is trained. We do not terminate your franchise if you die.

In the past two years is not a copy of an existing franchise system

Has a mobile headquarters that travels from franchise area to franchise area

At a franchisor level has given twenty percent of our total earnings to charities

Has a founder who wrote his own hundred and ninety page legal disclosure documents and had it registered in three working days

Has a founder who is on the board of directors of the American Association of Franchisees and Dealers, a franchisee’s rights group

Has a founder who co-authored a book about franchising during his first year as a franchisor; “Franchising 101”

Has a founder who owns one hundred percent of his company and works seventeen hours a day.

Has a written policy about drunk driving and a termination clause for it

Is experimenting with a one hundred percent electric service vehicle in the automotive industry

Provides entire turn-key units in case of emergency for franchisees

Has a great business name that has been around for twenty years before we franchised

Maintains fully functional special event fundraiser trailers in every major metropolitan area where we franchise

Is experimenting with a air cushioned powered mobile service vehicles

Employees the Bonzai and Blitz marketing methods to new and existing franchises

Provides new franchisees with a comprehensive data base of possible customers in there exclusive territory as well as an aerial view photo and complete storyboard and marketing map

That makes you give up “Your right to fail” upon signing of the franchise agreement

Wrote a book on “Community Fundraising”

Has Founder who personally wrote the Franchise Operations Manuals from actual experience

Lists all possible competitors in a data base before you start your franchise

Gets your business license, fictitious business name statement, pays your initial liability insurance payment and your initial health care insurance payment

Will prepare a business plan for you so that you may apply for an SBA loan. We are 7-A eligible in the SBA program

Your Own Business – A Case Study on Its Risks and Rewards

Introduction

Entrepreneurial ventures are a vital part of the economy. For the individual entrepreneur the potential exists to fulfill dreams and become financially independent. Over time we have seen entrepreneurial businesses grow into powerhouses, but also apparently successful business that went down the drain. An interesting observation is that entrepreneurs within successful businesses are sometimes unhappy and even depressed. This case study highlights the various risks and rewards that some of these entrepreneurs experience (names are fictional).

When everything goes wrong

Eric was in his late forties when an entrepreneurial opportunity presented itself. He was an accountant by profession and in a senior position at a medium-sized firm. A new franchise in the automotive industry was offered to him in another town. The opportunity was too good to ignore. Eric resigned, sold his house and took the money to start the business.

The franchise did not turn out to be what was promised. The franchisor was not very honest and Eric was not an entrepreneur at heart. He was passionate about cars, but not about the more technical aspects thereof. In the end the following potential risks became reality and it had serious consequences:

  • Social risk. When Eric and his wife left town they left their supporting structure and circle of friends behind. He worked long hours to build the business. The regular and pleasant social weekend get-togethers were something of the past. Their teenage daughter also had serious problems that they found difficult to cope with.
  • Financial risk. Eventually the business collapsed and Eric was declared bankrupt. At this stage he was in his early fifties.
  • Career risk. Eric resigned from a good job with a good pension fund. When everything turned sour he tried to go back to his old firm. There were no vacancies. He accepted a lower paid job as an operational manager at a small entrepreneurial concern.
  • Psychological risk. Eventually too many things went wrong with Eric. He got divorced, is very bitter today and often comments that he needs to work till the day that he dies.

Is it worth it?

Jack was in his mid thirties when he and his partners had the opportunity to do a management buy-out of the manufacturing company that they worked for. Over the last seven years they turned the company around from making a loss to a company that is doing exceptionally well. Outsiders would say that this is the ideal situation to be in. Jack is experiencing the following reward:

  • Financial rewards. Jack became a dollar millionaire. He always lived within his means and he and his family can easily sustain a good living without him needing to work an extra day in his life.

Unfortunately Jack also sees himself as being trapped in a catch-22 situation. He feels that the price he pays for the financial rewards is too high. He often expresses the following negative impacts on his life:

  • Social risks. Jack had spent so much time out of the country that he grew apart from his friends and family. He feels he was not there for his father when he passed away on one of these trips. He also feels that his children’s is growing up and he is not there to experience it.
  • Psychological risks. Jack finds it difficult to balance the work situation and his personal life. At this stage he has a serious problem with depression. Fortunately his colleagues support him exceptionally well and they have formulated a plan for all of them to exit the business in the near future.

The fruits of success

Marc is a serial entrepreneur who started his first business in his early twenties two decades ago. He is very ambitious, made several mistakes and went bankrupt twice. Six years ago he started a business in a niche area of property development. He has an absolute passion for this line of business and in a short period became extremely successful. He thoroughly enjoys his success and believes that all the risk-taking and hard work was worthwhile. He experiences his rewards as follows:

  • Financial rewards. Marc is worth several million dollars and he used enough of this money to give him a passive income that affords him and his family a life of luxury.
  • Social rewards. Marc was always a very social person and managed to keep his social life intact. Today he is enjoying much of his social activities with friends on overseas trips and at his holiday farm and beach house.
  • Independence rewards. Marc always enjoyed being his own boss. He often said that he would rather sleep in a park than work for somebody else. In the end this attitude and determination paid off.
  • Growth rewards. On a personal level Marc used the opportunity to grow as a person. He learned to fly, did a lot of self-study to improve himself and people respect him in all walks of life.
  • Contribution rewards. The ultimate reward is the ability to give. Marc is giving a large proportion of his time and money to charity.

Summary

To have your own business can really be the best thing that you ever do (for yourselves and others). It is, however, very important to objectively look at it and to make sure that it fits your personality and risk profile. Entrepreneurship is not for everybody. The potential rewards must be balanced against the potential risks.

Copyright© 2008 – Wim Venter

Is Now the Right Time to Buy a Car Dealership?

There is never a wrong time to buy a car dealership, only a wrong way to buy one.

In 2009 there have been dealerships (both domestic and import) that have made over half a million dollars in one month, yet the majority of the pundits said that 2009 was not the time to buy a dealership.

Remember “If you wait for perfect conditions, you will never get anything done.” Ecclesiastes 11:4. It is not the “conditions” that count; it is your “analysis.” The fact is that most car dealerships that closed in 2009 were bought or established during what the pundits now describe as “the good times.” The times when owners and the experts lamented were “the right times” to buy and build.

Case in point: In 2008 Automotive News ran a front page story on a fellow that was building a Toyota dealership on the freeway, across from the Oakland Coliseum — a $35 million store, with five floors and a four-story glass showroom. The experts proclaimed about the dealer “… has a broader vision about the relationship between real estate and car dealers than you would ordinarily find.”

On February 24, 2009 The Oakland Tribune reported: “New Toyota dealership in Oakland closes”. In that article the dealership’s customer relations manager lamented: “I’m kind of in a state of shock because we thought we had such a bright and opportunistic future here, and with this, it just leaves an empty taste… “

When one analyzes that situation, the dealership was supposed to fail.

For a plethora of reasons, not the least of which was the store’s rent factor, the dealership’s success would have been contrary to the laws of nature. Analyzing that situation, however, is left for another article. For this article, the object lesson learned is: Even though the factory approves a transaction, the lenders finance it and the trade publications applaud it, those endorsements provide no guarantee a dealership is going to succeed. Having said that, there are many buyers who will still believe those endorsements mean success.

With the epidemic of lawsuits today, factories and lenders cannot give business advice because if the dealership did not succeed, it is the factories and lenders that will get sued. Consequently, one must rely on oneself and advisers that are not afraid to contradict the boss.

As an aside, be careful not to associate with habitual “deal-breakers.” Some advisers are perpetual naysayers because advisers do not get sued for telling a client not to do a deal. They only get sued when a client gets into a deal that goes sour because it is never the client’s fault. It is the bank, the factory, the accountant, the lawyer, the business advisor (anyone other than the client) that is to blame.

The bottom-line is that there are two critical factors in buying an automobile dealership that will help ensure success for the long term: (1) How it is bought; and (2) How it is managed.

Each factor has a story, but those are the two keys. How the dealership is bought and how it is run will determine its long-term success or failure. We say “long-term” because car dealerships provide enough cash-flow that some deals could take five years to fold.

Buying a Car Dealership

What is the right way to buy a car dealership in bad economic times?

In the “good times,” buyers were paying premiums for dealerships, based upon brand names, pretty buildings, nice locations, and so forth. The fact is, in good times or bad, dealerships should be valued in the same manner: by how much the buyer expects to earn after the purchase. In other words, upon expected ROI (return on investment) — not the brand, or the building, or the location.

Determining what a store can earn after its purchase encompasses more than math. Regardless of how often the “multiple of earnings theory” has been proved wrong, members and associates of the trade still perpetuate the myth that the purchase of a car dealership can be that effortless.

As a natural consequence of the ROI method, purchase prices will fluctuate because one would tend to expect to make more during “good” times, versus “bad.” Therefore, when one states that the values for blue sky or goodwill are dropping, their statement has nothing to do with the “value” of the dealership. Furthermore, there is no information in the foregoing statement to help one decide a reasonable value to pay for a dealership. Rules of thumb are only guides. Guides are good servants, but bad masters.

If a dealer is going under and throws a prospective purchaser the keys to the building and says: “It’s yours. I just want out.” That act does not make the dealership worth more or less. The questions a buyer must ask are– (a)” what is it going to cost me to open the doors?” and (b) “what do I think I will earn after I own the store?” In other words: “What is my expected return on the investment?”

At one time there was a dealer group in Colorado that presented an offer for the existing dealer to pay them (the buyer) $2,000,000 for them to take-over the stores. The offer was based upon projections of what the stores would lose while buyer tried to turn them around. The seller refused and ended-up losing several million more before the stores closed. The dealerships properties were eventually sold to a church.

A good checklist for valuing car dealerships can be found in IRS Revenue Ruling 59-60, published by the Internal Revenue Service in 1959. While the ruling (59-60) was intended to outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations for estate tax and gift tax purposes, the methods discussed are applicable to valuing an automobile dealership and valuing blue sky in an asset sale simply by backing-out the amount of the stock valuation attributable to goodwill/blue sky.

The Five Biggest Mistakes Buyers of Automobile Dealerships Make:

1. Thinking that when they verify earnings they have completed a major task. The truth is, what the seller made or lost does not matter. A plethora of details and formulas need to be applied to determine what the new owner can net. What rent factor PNUR can the store afford? Do those numbers correlate to the percentage of gross requirements?

2. Overestimating vehicle sales projections. The first question is: “What can the new owner realistically retail?” We have seen too many dealerships that went under because the buyer could not accurately predict potential sales. On more than one occasion we have seen factories and lenders approve dealerships where the prospective purchasers projected sales volumes that exceeded the volume of the area’s historical sales leaders.

3. Famous buyers thinking their names alone can turn-around dealerships or sell cars. We can name more unsuccessful, former car dealers that are famous, than successful car dealers that are famous. We have one photo that depicts a famous athlete getting a business award from the President of the United States. He went to the White House and received the award the year before the factory closed his stores. Either nobody saw it coming, or nobody cared.

4. Thinking that buying a store at a low or zero multiple of earnings means they got a bargain. The biggest misconception of a bargain is when the factory awards a new point. Most people think they got something for nothing. They really did not. The ones that do succeed, however, usually succeed because of the timing and the location — not because of the dealer.

The fact is, it takes about a year to build the service department of a new point, yet the dealer must capitalize the store as though it were already operating on 8-cylinders. In many instances, a new point suffers through months of losses until, if ever, it finally becomes a successful store. Those losses are “blue sky.” In other instances, it is the second owner that makes a go of it and in some instances, such as the Englewood store mentioned above, the point goes away.

The savvy purchaser understands there is a value to buying a dealership that has its number is in the phone book, a loyal service base and repeat customers. The main value is that the day after the store is sold there are people lined-up for service, people buying parts and customers coming back to the store. That is worth a bonus (blue sky) to the owner even if the store has been losing money.

5. Thinking there is some “magic” formula that will make a store successful. The only formula that will work most of the time is a mixture of hard work and knowledge of the retail automotive business. Each of those words is an operative word: “retail” and “automotive.” Knowledge of another business is not enough.

One last bit of advice to rookies. When making changes in the retail automotive business act swiftly. Erasers are made because people make mistakes. We have yet to meet the person who has never used one, although in today’s world one might substitute the word “eraser” with “backspace” or “delete. When a mistake is made, the trick is to analyze, decide and act quickly. Do not hesitate to correct errors and bad decisions.

That advice has been around for thousands of years, both in the proverbs one learns as a child (such as “A stitch in time, saves nine” and “He who hesitates is lost,” and so forth), and in Ecclesiastes 12:12 “But, my son, be warned — there is no end of opinions ready to be expressed. Studying them can go on forever and become very exhausting!”

In summation, do not hesitate to buy a car dealership in a bad economy, just buy it correctly. Read the articles referred to above and act upon them.

“A dealership should be bought for one reason and one reason only — to make money. It should not be bought because it is close to home, because the buyer likes the franchise, because a partner wants to provide a job for a relative or, because the building is attractive. A dealership is purchased to make money and, in order to make money, it has to be “bought right”. A Practical Guide to Buying and Selling Automobile Dealerships, National Legal Publishing Co. (1989), at page 2-4.

That was written twenty years ago. It was true then and it is true today.

During Industrial Revolution 4.0 Era, Palm Oil Plantation Have to Implement Digital Technology

At this time the world is in the era of the 4th Industrial Revolution (Industry 4.0) which is characterized by the implementation of artificial intelligence, super computer, big data, cloud computation, and digital innovation that occurs in the exponential velocity that will directly impact to the economy, industry, government, and even global politics.

The Industrial Revolution 4.0 is characterized by a smart industrialization process that refers to improved automation, machine-to-machine and human-to-machine communication, artificial intelligence (AI), and the development of sustainable digital technology.

Industrial Revolution 4.0 is also interpreted as an effort to transform the process of improvement by integrating the production line (production line) with the world of cyber, where all production processes run online through internet connection as the main support.

Road Map to Industrial 4.0 in Palm Oil Industry

In Indonesia the application of industry 4.0 is expected to increase productivity and innovation, reduce operational costs, and efficiency that led to increase the export of domestic products. In order to accelerate the implementation of Industry 4.0, Indonesia has developed a roadmap for industry 4.0 by establishing five manufacturing sectors that will be a top priority in its development, including food and beverage industry, automotive, electronics, textiles and chemicals.

The five industry sectors are favored considering that they have shown their great contribution to the national economic growth. For example, the food and beverage industry, especially the palm oil industry, has a market share with growth reaching 9.23% in 2017. In addition, the industry also became the largest foreign exchange contributor from the non-oil sector which reached up to 34.33% in year 2017.

The magnitude of the contribution of the food and beverage industry sector can also be seen from the value of exports reaching 31.7 billion US dollars in 2017, even having a trade balance surplus when compared with the import value of only US $ 9.6 billion. This figure also places the palm oil industry as the largest foreign exchange contributor to the country.

In order to increase productivity and efficiency optimally, the technology supporting the industrial revolution 4.0 is imperative to implement, including the implementation of Internet of Things (IOT), Advance Robotic (AR), Artificial Intelligence (AI) and Digitalized Infrastructure (DI).

The structural transformation from the agricultural sector to the industrial sector has also increased per capita income and driven Indonesians from agrarian to economies that rely on an industry-driven value-added process accelerated by the development of digital technology.

In the context of this industrial revolution 4.0, the palm oil industry sector needs to immediately clean up, especially in the aspect of digital technology. This is considering the mastery of digital technology will be the key that determines the competitiveness of Indonesia.

Because if not, then the Indonesian palm oil industry will be increasingly left behind from other countries. If we do not improve our capabilities and competitiveness in priority sectors, we will not only be able to reach the target but will be overridden by other countries that are better prepared in the global and domestic markets.

Digitalization Era in Palm Oil Industry

As a major player in the global palm oil industry, Indonesia needs to clean up soon. Absolute process and operational efficiency is immediately undertaken especially concerning activities involving many manpower such as field work (infield activity) such as crop maintenance, land treatment, fertilizing activity, weeding, harvesting and transporting fruit to weighing and sorting. This is because in this sector there is often time and cost inefficiency.

Digital technology has facilitated a lot of work in the palm oil industry. Now no longer need to make statistical data collected from a number of palm plantations manually. Ease and other advantages of digital technology is able to capture images or photos of fresh fruit bunches, as well as precise location of the garden using a tablet that can access the GPS.

That way, field managers can not only easily track and monitor real-time activity in the garden, but they can also see for themselves the quality of the palm fruit and know exactly which areas are experiencing the problem. And incredibly, it does not need their presence on the field.

In addition to the ease of transferring data from the field to the Excel sheet on the computer and also making reports on the quality of the palm fruit, digitization also facilitates in recording the presence of employees and field workers to then process the data for the purposes of remuneration and incentives.

How Is the Automotive Industry Handling the New Industrial Revolution?

Bill Gates is alleged to have once quipped that "If GM had kept up with technology like the computer industry has, we would all be driving $ 25 cars that got 1,000 MPG." Even though the authenticity of this quote is questionable, it has been circulated throughout the internet for years because there is something about the sentiment that rings true to us. It certainly does not seem that the automotive industry has kept up with advancing technology the way that the computer industry has.

This may be due in part to the manufacturing infrastructure that has evolved over the years. Making sweeping upgrades to equipment and / or processes seems a very expensive and risky proposition. & Nbsp; When you couple this with the fact that many automobile manufacturers today struggle to find enough demand for their current supply, it is easy to understand why keeping up with the latest technology isn't always a top priority.

The problem with this reluctance, though, is that automobiles are not inexpensive consumables that people buy casually. Customers expect vehicles to come with the highest standards of safety and efficiency. Customers expect the latest technology possible. How can manufacturers keep up with this demand for innovation without changing their processes?

It seems that some manufacturers are beginning to embrace the ways of the modern industrial world, and are finding ways to align their business models with the current wave of interconnectivity and streamlined automation.

Honda Manufacturing of Alabama

Honda's largest light truck production facility in the world – a 3.7 million square foot plant – was faced with a problem all too common to large manufacturing facilities. Over the years, a number of different automation systems were introduced to help streamline production. With operations including blanking, stamping, welding, painting, injection molding, and many other processes involved in producing up to 360,000 vehicles and engines per year, it is not surprising that they found themselves struggling to integrate PLCs from multiple manufacturers, multiple MES systems, analytic systems, and database software from different vendors.

Of course, on top of these legacy systems, Honda continued to layer an array of smart devices on the plant floor and embed IT devices in plant equipment. The complexity introduced by this array of automation systems turned out to be slowing down the operations they were intended to streamline.

After reorganizing their business structure to merge IT and plant floor operations into a single department, Honda proceeded to deploy a new automation software platform that enabled them to bring together PLC data with the data coming from MES and ERP systems into a common interface that allowed the entire enterprise to be managed through a single system. This also allowed Honda to manage and analyze much larger data sets that revealed new opportunities for further optimization. While this reorganization required a significant investment of resources, they were able to realize benefits immediately, and ultimately positioned themselves to maintain a competitive edge through the next decade or more.

Ford Motor Co.

Ford Motor Company operates a global network of manufacturing operations, and have had difficulty when trying to promote collaboration and share best practices between their various plants. They found a solution using technology based on the Google Earth infrastructure.

Ford was able to develop a cloud-based application that stores 2D and 3D representations of Ford's global manufacturing facilities, and allows users to navigate through these virtual environments, place pins, and upload video, images and documents to these pins that are shared throughout Ford's global operations. Engineers and operators can share information about current plant conditions and procedures, which can be accessed in real time from anywhere in the world. The accumulated data can be used for training or to update standard procedures. By creating a global collaborative tool, Ford has created a means of ensuring that each and every one of their employees has the latest, most accurate information on how to best perform a particular task or how to avoid a problem that was encountered elsewhere.

We will have to see in coming years whether or not these innovations will lead to improved market performance for either of these manufacturers, but in the meantime it is probably safe to expect other companies to follow suit. With the advances in manufacturing technologies and machine-to-machine communication, it is becoming very difficult to remain competitive without playing by the same rules as everyone else. Industrial technology has advanced to the point that we are experiencing what people refer to as a new industrial era – or Industry 4.0. Reluctance is no longer a viable option.