TEXT 3.2. BUYING INTO THE DOMINO'S EFFECT

Date: 2015-10-07; view: 355.

Encumbrances

Supports

§ Does your family like the idea of your starting a business?

§ Will they support you, encourage you and answer the phone when you are out?

§ Are they willing to accept with you the financial risks involved: no regular income and the possibility of failure?

§ Do you really believe in what you are about to do? Are you determined to see it through to success?

§ Is your physical strength and state of health good enough to allow you to sustain the effort through difficult periods?

§ Have you any large debts outstanding?

§ Do you think you have enough ready money to put into the business, bearing in mind it might all go wrong and you may lose it?

§ If you do not have any assets, that is to say some ready cash or some money tied up in a house, valuables, or a usable insurance policy for instance, you will have enormous problems in raising money to launch your business.

Well, having answered the questions, are you still thinking that you are the person to run a successful business?

v Read the text “Buying into the domino's effect”. Would you like to try franchising?

If you like the idea of running your own business but fear failure or are lacking in skills and resources, then buying your own franchise might be the answer. It certainly was for Lisa Tobias, one of eight female Domino's Pizza franchisees in the UK, who, at just 25, already owns two outlets in Scotland.

Tobias started working part time at the pizza delivery company when she was 17. She then went to university but, six months later, decided that it wasn't for her, so she returned to Domino's and worked her way up to be manager. Two years ago, she decided that she wanted to run a business for herself, so she raised the necessary cash - "I'd rather not say how, but the banks are very helpful!" - and now has stores in Kilmarnock and Ayr.

She says that Domino's looks for people who are hands-on, and if you follow the training and marketing guidelines, you'll do well. Franchising, says Tobias, is a safer option for people who want to have their own business but are afraid of taking the plunge alone.

Tobias's positive experience is backed up by the British Franchise Association (BFA), which says that franchises appear less likely to fail than other types of small business organisations. Ninety-six per cent of franchised units still operate profitable businesses five years down the line, whereas only 66 per cent of small firms survive their first three years. But franchising still means a lot of hard work and money, particularly in the early stages.

In simple terms, franchising means that a company grants a licence that enables someone else to sell its product or service. The advantages include the fact that you are selling an idea that has already been tried and tested, and well-established franchise operations have national advertising campaigns and a solid trading name, as well as offering training in sales and business skills.

The BFA advises people to choose a franchisor that is a BFA member, and to consider carefully how much time and financial commitment they can give.

This is exactly what Juliet Liebenburg, 38, did eight years ago. She was then working as an accountant, while her husband was working for Domino's. "We wanted our own business but didn't know whether to start from scratch or go the franchise route. We chose the latter because, with a young family, we had to bring a certain amount of money in."

The couple underwent interviews and an examination of their financial background, and then paid around ₤150,000 for a store in Sandhurst and a ₤10,000 franchising fee to Domino's, raising the money from savings and borrowing from family. Liebenburg says that she broke even in the first year (on average, it takes three years), and they now have four stores, including a former fish-and-chip shop and a former charity shop in Brighton, with three more in the pipeline.

Today, the initial start-up cost for a Domino's store is ₤230,000, of which a third must be cash. For this you get a fully equipped site, as well as media coverage, and a 10-year franchise agreement, renewable subject to lease and conditions. You then pay a percentage of your net sales to Domino's.

The company looks for candidates who can manage both people and finances, but you don't need any catering experience. New franchisees go on a three-week training course, and the company's Milton Keynes training centre runs courses on everything from business development, to dough management and road safety. Franchisees also spend time working in an outlet to learn management.

Domino's, which opened its first UK outlet in 1985, now has 150 franchisees running 400 outlets. The average age of a franchisee is 42, and the average starting age is 35. Once you have your store, Domino's assesses how you deliver product, service and image and whether you meet safety standards. A franchise consultant helps with recruiting and training new staff, marketing, product control and pricing, while a development consultant gives on-site support for four weeks during the launch. Normally, you can't open a second store until six months after the first.

Liebenburg admits to a few sleepless nights initially, and for the first year she continued working as an accountant to guarantee mortgage payments. Today, while she won't give details of her salary, she says that they have just bought a boat worth ₤250,000, and her three children all go to private schools.

v Read information about entrepreneurship courses. Would you like to enroll at such courses?