Why Women Make Great Franchisees

By Carrie Brenner

Some women plan on becoming business owners practically as soon as they can talk and others fall into it by happenstance, but the motivation is often the same -- they want to escape the drudgery of working for someone else and make their own business decisions. Mary Ellen Sheets became an entrepreneur once her sons went off to college, leaving their after-school moving business behind. Before that, she was a systems analyst. “It’s a wonderful feeling,” Sheets says of running her business and watching it grow. “It’s so fun it was like not even working.” Sheets says one of the most rewarding things for her is being able to provide others with good jobs. She started franchising Two Men and A Truck in 1989, and the company now has about 190 locations.

Because so many women have already spent years in the work force by the time they’re ready to take the leap, becoming a franchisee is a great way for them to jump into business ownership without having to spend several more years doing research. Choosing a franchise still requires lots of due diligence, of course, but the biggest bonus of franchising is that it’s a proven system.

For a lot of women, especially those supporting a family, knowing they won’t have to make the same mistakes the franchise’s founders did is key, says Sheets.

Franchising also plays to several traits women tend to have. Women are natural networkers, a skill that’s fundamental to becoming a successful franchisee. Being the new business owner in town, explains Sheets, means going out into the community to introduce yourself and attending events. Women tend to be good at networking within the business community and sustaining support systems with both men and women. Women with a nurturing side tend to excel at customer service -- something on which a franchise’s success often depends. At Two Men and A

Truck, Sheets has also noticed that women are very good at managing other people, an ability that’s vital to training and retaining employees.

Nikki Sells spent 14 years as a franchisee herself, and is currently vice president of franchise development at Tasti D-Lite, a soft serve frozen dessert franchisor. She’s seen firsthand some of the strengths and weaknesses women and men bring to the table as franchisees. “When [women] find the right brand for themselves, that passion transfers [to the business],” says Sells, who believes that women have the ability to be passionate about whatever business they own, be it a frozen yogurt shop or a janitorial service. “They’re great ambassadors for their brands. They talk about it, they live it, they breathe it.”

Another advantage of franchising is that it gives women a way to leave the corporate world behind and take charge. “Franchising offers [women] that opportunity to really create their own destiny and call their own shots,” says Sells, who believes that in the corporate world, women still face real obstacles in some industries. As franchisees, women have the opportunity to own their own progress 100 percent -- be it success or failure.

One reason both women and men are drawn to franchising is the flexibility it provides, as franchise systems of all kinds allow franchisees to work from home, part time, or flexible hours. Even though the numbers have changed drastically over the last few decades, more women than men are still primary caregivers in households. Being in charge of their own work schedules gives women the chance to have more balanced personal and professional lives. And being the primary caregivers all these years has also given women an advantage in business, says Sells: They’re really good organizers.

An area some women need to work on, Sells cautions, is finances. She’s seen a lot of women who aren’t financially prepared to open a business. In the past, it was easier for women to get loans, since they’re considered a minority in business. But with the recession in full swing, even the Small Business Administration has cut back drastically on its lending. Women who are thinking of becoming franchisees need to take a close look at their personal finances -- the sooner the better. Advises Sells, “Know how much money you have to invest, make sure your credit is really good, and make sure that you’ve got enough cash upfront to invest in the startup fees you need.”

Carrie Brenner is a writer and editor based in Southern California.

For further information visit: http://www.allbusiness.com/

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What to consider when starting a new business

New companies must consider numerous issues, such as whether to buy a freehold or lease property, planning permission and their businesses structure, says David L P Salamons, consultant at Cubism Law

Starting a business is more topical than ever, given the economic downturn and Gordon Brown's plans for a new state-backed bank to address the funding gap for new start-up companies. But there are many hurdles to overcome before pursuing your dream and sound legal advice is essential.

One of the first considerations is are you buying an existing business or opening a new one? If you're buying a new business you need to make sure that you are actually paying value for money. You will need to check their accounts, look at their turnover and then decide if it really represents your best opportunity of running a profitable business. Buying an existing business means that many of the existing systems necessary to running it will already be in place.

Starting your own business means no premium at entry and you can build it from the ground upwards although you must make sure that your passion does not blind you to sensible and professional advice on all matters outside your own specific areas of knowledge.

Leasehold or Freehold

You may well need premises from which to run your business, unless of course it is a home run business. You will need to decide whether to invest a large capital sum and buy a Freehold property or whether, like most start up businesses, you plan to take a leasehold property. The majority of commercial leases are within the terms of the Landlord and Tenant Act 1954. This means that at the end of the lease (bar a few exceptions) you will have the opportunity to renew your lease on acceptable terms. My advice is with start-up businesses, a relatively short lease within the terms of the act is quite beneficial, because if things don't work out and you can't sell the lease your liability will at the worst be limited to the term of the lease.

Planning

With your new premises, you will need to consider what kind of planning is required and check whether the premises that you are taking already has this use. These uses are prescribed by the Town & Country planning orders. It is vital not to take a lease of premises that has the wrong use as you will simply be unable to trade without planning permission and your lease may prohibit you from making a planning application.

Staff

If you are acquiring an existing business, you may be required to take over the existing staff. Be aware that you will also be taking over liability for all their rights of redundancy and unfair dismissal. You will need to look at how long they had been with the previous business and calculate what the cost to you might be. In general, when staffing a new business you will have a number of considerations but be wary of taking on too many employees until it is warranted by your new business as the cost both financially and emotionally of terminating people's employment is very high.

Business structure

You need to decide on the best and most suitable business structure. Examples are:

Ordinary partnership

This is a comparatively simple arrangement between two or more parties trading for profit. There are certainly some tax and financial advantages and it is quite flexible. There are also huge disadvantages insofar as the parties are personally liable, not only for each other but also for the business if it makes a loss. However, if you are in a simple business providing services with really no real exposure to any debts there are still advantages to using this business format

Limited Company

This is perhaps the most common business structure. The disadvantages are that it is perhaps not as flexible as a partnership or a sole trader and for customers of the business there are no partners or individuals who have personal liability towards them as in the case of a partnership. However it is a much safer proposition for the owners of the business as they do not have personal liability, except where they have taken on some form of guarantee, such as a lease or a personal guarantee to the bank

Limited Liability Partnership

This is a comparatively recent business structure that in effect has many of the flexible advantages of a partnership but also has many of the elements of protection for the proprietors contained in a limited company.

For further information visit www.cubismlaw.com

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Choosing a business medium for your start-up

When it comes to setting up a company, there are no hard and fast rules about which type of business fits with which trading entity, but it is important that you understand each structure in order to make the right choice for your business.

Sole trader
Acting as a Sole Trader involves one person who must register with HMRC in order to pay income tax and Nation Insurance Contributions.

Sole Traders avoid the paperwork and cost associated with registering with Companies House and are not answerable to partners or shareholders, which some argue makes it easier to make quick decisions and stay competitive. However, they are personally liable for any business debts incurred as well as any legal action taken as a result of their actions in the course of their business.

While National Insurance Contributions are typically lower than they would be on a PAYE scheme, Sole Traders are liable to pay income tax on any salary paid and fixed Class 2 National Insurance plus Class 4 National Insurance on all profits, which can be more costly than paying corporation tax on profits within a Limited company. Further, as the business does not exist as a separate entity, it is difficult to sell on, and difficult to win investors.

Partnership
A Partnership is made up of between two and twenty people, where all partners are 'jointly and severally' liable, meaning that the liability is shared equally between partners. Again, each partner is liable to pay income tax Class 2 and Class 4 National Insurance on their share of the profits.

Partnerships don't have to register with Companies House, so there is less paperwork and accountancy costs than a Limited company. They are considered suitable for individuals who need to retain a degree of independence in the professional capacity, such as accountants and solicitors.

There is no legal requirement for partners to draw up a formal agreement as Partnerships are automatically governed by the Partnership Act 1890. However, it is advisable to draw up a Partnership deed to avoid default requirements such as the obligation to wind up a Partnership if a partner leaves the business.

Aside from risks associated with debt and legal action and the non-preferential treatment by suppliers and banks, as with Sole Traders, another weakness of the Partnership structure is the problems that can arise if a partner wishes to leave and take their assets. Again, however, a formal agreement can help protect against this.

Limited Liability Partnership
The Limited Liability Partnership (LLP) is seen by some as offering the ‘best of both worlds' as it gives the flexibility, in organisational terms, of a Partnership, but removes liability from the individual by creating a company which acts as a legal entities that is separate the partners within it. As such, the company can own property, enter into contracts and indeed accept liability for debts and legal action, with the individual partners' liability reduced to personal investments, plus any finance raised using personal guarantees

Creating an LLP involves registration with Companies House and a commitment to publicly file annual returns, which means more paperwork and higher accountancy fees than the above structures. However, this also allows the business to ‘claim' its name, which can protect the brand to an extent.

LLPs are treated as Partnerships for tax purposes and are governed by LLP Act 2000 and LLP Regulations 2001 which makes it more flexible in terms of legal requirements than a Limited company, however it is advisable to have a written agreement in place between partners to avoid costly misunderstandings.

Limited
Limited companies require directors to operate within defined roles, with ownership defined by shareholdings. In this way, there is less danger of confusion or disputes than with an LLP or Partnership. As with LLPs, Limited companies are required to register with Companies House and exist as separate entities from shareholders, making the reduction in liability one of the most attractive features of this trading entity, despite the added paperwork and accountancy costs.

The Limited structure is the only structure option which allows owners to raise capital by selling shares. In addition, Limited companies are generally the most likely of the four structures to secure investment from banks as the level of regulation imposed on the entity means it is considered a safer investment.

Creating a Limited company can also facilitate tax savings. For example, a Director could draw a salary below the threshold for 40% income tax, pay just 21% corporation tax on the profits (providing the profits do not exceed £300,000) and then draw the profits as a dividend.

It is clear then, that each structure presents its own set of pros and cons, so your decision should be made after careful consideration of each element of your business, including the number of people involved, the level of profit you are likely to make, and who you intend to trade with. Of course, if you are in any doubt, it is wise to seek third-party advice before making a decision.

Anita Brook is director of chartered accountancy firm Accounts Assist. For more information visit http://www.accountsassist.co.uk/

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Follow Up

Follow Up

In the closing remarks, the chairperson, or participants may want to discuss the date and time for the next meeting, when the minutes will be available, or when a decision should be made by. This is also the time to give contact information, such as how to send a question by e-mail or who to call regarding a certain issue.

We'll meet again on the first of next month.

Next time we meet I'll be sure to have those contacts for you.

If anyone has any questions about anything we discussed today, feel free to send me an e-mail.

The minutes from today's meeting will be posted as of tomorrow afternoon.

I'll send out a group e-mail with the voting results.

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