Saturday, December 13, 2008

Startup Tips Series: Fundamentals of Franchising by Armando Bartolome (Part 3)

Subtitle: Let’s talk about ROI (return of investment)

Note: This is PART 3 in a series of posts on Start Up Tips: Fundamentals of Franchising by Armando “Butz” Bartolome. The full series is PART 1, PART 2, PART 3, PART 4, PART 5 and PART 6.

PART 3, Mr. Bartolome talked about ROIs or return of investments. Here’s PART 3 of Bam’s interview with Mr. Armando Bartolome:

(START OF INTERVIEW – PART 3)

BAM: There’s always an ROI in these franchise packages, like a suggested ROI of your money, return of investment of your money. How accurate are these ROIs? When they say your money will be back in 2 years, will it really be 2 years?

BUTZ: First, a, Bam, I always tell people, make your own market study, ok. Don’t believe on what the franchisor says.

Make you own market study instead of believing in what the franchisors say. (Source: Start Up)

Don’t believe in what they do, hard sell, it’s a hard sell. You have to, let’s say, you want to get into allocation, ok, make a financial study, make a market study and then compare notes with the franchisor.

Now, talking about the payback, the payback is usually about a year and a half to two years, out of 5 years.

The usual ROI (return of investment) for franchises is 1.5 – 2 years. (Source: Start Up)

So imagine if you put your money in a bank, as compared to a franchise, it’s much better (at large?)

(END OF INTERVIEW – PART 3)

Let’s first define ROI (return of investment)…

According to the most-lovable encyclopedia in the whole wide Web, Wikipedia, ROI is: "the ratio of money gained or lost (realized or unrealized) on an investment relative to the amount of money invested."

According to forecloserlistings.com, ROI is: A regain of money invested from a sale or depreciation.

Some points to remember…

• Don’t always believe in what franchisors say about their ROIs. Make your own market study. I guess, by this, Mr. Bartolome wants us to do some research first. Research, research, research. But how? I’m not at all an expert but I believe it would help if you’ll ask other franchisees about their ROIs (it won’t hurt). :-)

• The usual return of investment (ROI) is usually 1.5 or 2 years. That’s a lot of hard work if you ask me. That’s why Mr. Bartolome said that if you’re into franchising only for the investment, you’re not likely to succeed.

Remember also, that one of the things to consider before getting a franchise is to “look at a company’s product and the service to see if your interests fit into the business.” (Source: Start Up) (found in PART 1)

Again, if you’re into franchising solely for the investment, and not really for the reason that you like or believe in the product, you’re not likely to become “truly” successful.

Keywords here to succeed are interest, passion, desire, drive, motivation, etc. (note: etcetera is not one of the keywords :-)) and not just the money.

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