Biz Op or Franchise
Hey Uncle Jim,
A few years ago I wrote to you about firing my accountant. Now I have a different question for you.
I've been in business for over 5 years, and it's still a struggle, but it feels like some major things are about to break for me (and I've still be able to pay all of my bills on time and keep my savings account with at least 6 months' of bill paying in it).
I'm looking at a company that's related to one facet of my company. I am a baker (cookie trays, special occasion/wedding cakes) and I also conduct culinary classes for adults (community ed, Ladies' Night Out) and kids (candy making birthday parties, Girl Scout workshops, cooking camps, and community ed programs). So, (pardon the pun but) I've got my fingers in a lot of pies. Recently, I pitched my candy making party idea to a company that offers a variety of kids' themed parties, but NO food-related parties! I'd love to sell them my ideas for kids' candy making birthday parties. However, I have no idea how to pitch it to them AND protect my creative ideas. What's to prevent them from stealing my ideas and then telling me, thanks but no thanks!
Also, they have a "business opportunity" they're selling for $2-3K for their party ideas. There are none in the eastern part of the US (they're from Utah), and it would meld well with my current kids' party/Girl Scout customer base. This might be a way to build the business up a bit more - by offering OTHER types of parties to people who've used my services before. However, they're changing to franchises soon. I would also like to know what the difference is between a Business Opportunity and a Franchise, whether it's wiser to wait and pay a higher amount for a franchise, what are the up-sides and down-sides to each.
I do have liability insurance and I'm incorporated (an S-corp). I know that, in order to grow, I'd have to hire people to do these parties, too. I've got a few people in mind, so that shouldn't be a problem. I'd probably have the folks who go out and do the various parties act as independent contractors.
Thanks in advance for any help/advice you can give me!
Kathy
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Kathy,
I am happy to hear that your business is up and running. That 6 month reserve is excellent.
It is virtually impossible to protect an “IDEA.” Don’t count on that happening.
EX: IDEA – a car that gets 300 miles per gallon. It’s a great idea but how could you protect it? McDonalds can’t get royalties on burgers nor the IDEA of fast food.
It is reasonable to assume that many people offer cooking and baking parties already. What you are probably talking about is an approach that has market appeal. Write a book – THAT you can copyright.
Teaching kids to make candy is high risk because everyone sues everyone for everything. Food handling is not for the faint of heart. It involves too many occasions for law suits (ovens, stoves, blenders, implements, and health issues). The reason the company does not offer “food making parties” might well be for those reasons. I don’t want to break your heart but I had candy from a candy making party years ago. I love my little nieces but they do not have a sufficient hygienic standard to handle food. (I still have to remind them to wash their hands after crawling on the floor and using the bathroom.) I advise you not to open yourself up to any high risk operation. To test my theory, call your insurance company and tell them what you have in mind. IF they cover this expansion at all the premium would reflect their estimate of your exposure.
As for independent contractors: they should be required to carry their own insurance policies. Do you want to hire uninsured private contractors? Do you want to pay for their insurance? Consult your lawyer about your Corporate Shield. My guess is that you are getting in over head. Don’t take my word but don’t ignore it either. Research every element to your satisfaction and as due diligence demands.
A “Business Opportunity” is what you were offered, essentially, a “book” of their IDEAS on what type and how to operate a business. All those get rich quick schemes that we see on TV are (gasp!) “Business Opportunities.”
A high profile “Franchise” is an arrangement with a parent company (Ex: McDonalds, Dunkin Donuts, Starbucks) wherein (over simplification) you open a branch outlet and use the company name and products. The advantage is the name recognition, start up assistance etc. Some franchises simply offer exclusive distribution territories. Obviously, an attorney is required to oversee such an arrangement.
I urge people to open their own small business all the time but there are two key elements – a product – and the business of running a business. You might have your foot in the door product wise. Don’t slam the door on your foot for expanding faster than your knowledge and experience justifies.
Keep in touch,
Everybody’s Uncle
Why not call my New York radio show? Saturday noon – 2PM. 1-888-845-UNCLE 1-888 845-8625
