Useful Advices - Business

Franchising is, was, and will continue to be hot! And with good reason. Not only is it a reduced-risk way to launch a business, but there are many other benefits, along with a few drawbacks. Is franchising right for you?

There's no way to completely elimina

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

te risk from business. It comes with the territory. The key is risk management, based on the rough formula that says: the fewer variables (risks), the greater the probability of success. That's the concept behind the phenomenal boom in franchising -- from au

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

to dealerships to fast food to print shops to lawn services, pest control and more. That's also why, over the last several decades, the franchise form of doing business -- now with more than 3,000 franchise companies and better than 750,000 franchise units in

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

peration -- has changed the way small business does business in this country.

THE FRANCHISE BOOM

The franchise concept is not new. The first franchises appeared shortly after the Civil War (established by the Singer Sewing Machine Company and other large cor

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

porations to distribute their products). The idea took off earlier this century with the rise of auto dealerships.

But franchising has truly come of age in the decades since World War II, with the boom in retail and service franchises. Franchises now account

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

for account for between 40% and 50% of all retail businesses, employ more than 18 million workers, and generate better than $2 trillion annually in economic output, creating what would be the fourth largest GNP in the world!

The franchise concept is simple.

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

he franchisee or franchise buyer purchases a legal right to sell a good or service from the franchisor. This includes the parent company's trademark and other services. In return, the franchisee agrees to certain restrictions and pays an ongoing fee.

That's

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

perhaps why franchises have become the domain of the small business owner. In fact, about two-thirds of franchises are organized as single establishment sole proprietorships, with approximately 5 employees per establishment.

FRANCHISES REDUCE RISK

The number

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

one advantage of franchising for the business owner is risk reduction. Purchasing a franchise gives franchisees the opportunity to build a business of their own, but not necessarily on their own. They share in the expertise and support of the parent company.

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

This is especially significant in the start-up, since new businesses, as a group, have the highest failure rate. However, franchises from established companies generally have a lower failure rate than businesses either started from scratch or bought as a goin

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

g enterprise. A study by the U.S. Chamber of Commerce found that, after five years, 86% of new franchises opened are still under the same ownership and 97% of them are still open for business. That’s a phenomenal track record.

Other advantages for franchise

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

buyers include:

* Availability of start-up funding and ongoing credit (a key factor, since many banks are reluctant to lend money to start-ups, and many start-up companies fail due to undercapitalization).

* The ability to tap into the established goodwill an

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

logo/name recognition of the franchise.

* Ongoing professional management support, training and promotional assistance.

* Cost savings for supplies and equipment.

THE PRICE OF REDUCED RISK

Each of the above benefits reduces the risk factor for the franchis

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ee, thereby increasing the probability of building and maintaining a successful, profitable operation. But there are drawbacks. These include:

* Start-up costs can be high, from several thousand to several hundred thousand dollars ...excluding real estate.

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

r>

* There is a loss of independence. As one franchisee explained: "You might feel more like a worker or a junior partner than a boss."

* There is limited if any control over product line and pricing.

* There is ongoing revenue splitting, with the

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ranchise company receiving from 1 % to 20 % of gross, with the average being 3 % to 4 %.

* There is potentially heavy administrative paperwork, since a high degree of documentation must be provided to the franchisor.

* Perhaps the greatest drawback is

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

lack of equity in the business. The franchise contract generally includes a buy-back clause that sets the price at the time of the franchise purchase. Under most circumstances, the franchisee does not have the option to sell on the free market the business h

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

e or she has built. It is possible that a franchise purchased for several thousand dollars, then built up to a multi-million dollar enterprise, will revert to the parent company upon termination of the agreement for little more than the original purchase price

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

IS FRANCHISNG RIGHT FOR YOU?

A well-managed parent company can greatly increase the probability of long-term success for the franchisee. However, risk -- both long-term and short-term -- cannot be eliminated completely. Is franchising right for you?

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

The best answer is to do your homework. Shop around. Two good places to start include The American Franchisee Association at www.franchisee.org, as well as the American Association of Franchisees and Dealers at www.aafd.org.

Work hard. Make money. Have fun

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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“A penny saved is a penny earned”, the old adage attributed to Ben Franklin, only tells half of the story. A penny saved is really better than a penny earned, because you don’t have to pay taxes on it. Here, then, are some time-honored ways for you to save money and improve the bottom line for just about any business:

All managers hope for an employee whose contribution outweighs the effort required to manage them. But it doesn't always work out that way. Some employee require a greater investment of time and energy to manage than what they contribute to their job. That's what we call a 'High Hassle Factor Employee.' How would your boss rate you?

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