Why You Should Not Franchise
If you are thinking about franchising your start-up medical staffing agency you first need to look at what exactly is expected of you and what you are actually losing in purchasing a medical staffing franchise.
Will you own the Medical Staffing Franchise?
No! When you buy into a temporary staffing franchise you are basically buying the rights to use that company’s name, O’h and it will cost you plenty to do so.
How much does it cost to franchise a medical staffing agency?
Between $125,000 to $175,000 and that’s not part of the Franchise fee, the cost to use the companies name will be some where around $25,000. The $25,000 is the Franchise fee, this usually has nothing to do with getting your office, hiring employees, paying employees, your marketing/advertising costs, it is simply the cost the company charges to allow you to use there name.
Does name recognition guarantee success?
No, Franchises tell you that you will have the benefits of established name recognition loyal to the corporation, this is fine and dandy for existing contracts with the franchise, but you will have to develop your own relationships with the clients. A name in the medical staffing industry has little to nothing to do with being able to provide service continuously and effectively. Your reputation and your ability to generate business is what your success is based on.
Does a franchise have tools and methods to grow significantly?
Not really, usually when franchises speak of tools and methods they are referring to manuals they will provide to you on how to market your company. Many Franchises claim to have proprietary technology to bill and track employees. With today’s marketplace you can find these services readily available and willing to work with you cheaply.
Do Franchises have special forms I need to get started?
Although you will need certain forms to get started, you do not need a franchise to provide those forms for you. You are able to access those forms online at modest fees. There are only so many forms you need and as you grow you purchase more forms or contracts, you can then use the proceeds from the company to purchase more forms.
Are Franchises the only ones capable of providing 100% funding for temporary employees?
Absolutely not, all a franchise did was contract with a vendor that offers factoring. Usually the Franchise is not the one who actually is providing the money. You will find that today there are many companies willing to work with you to cover your payroll 100% and do the billing as well as manage your books. Usually there is no fee to cover your invoices; usually a factoring company can deliver the money to you within days. The fees are usually structured within the invoice, in other words you don’t pay anything directly.
Do Franchises have proprietary technology to track employees?
Perhaps they do or perhaps they don’t. Again, online companies offer Internet based employee tracking software. The fees for this service can range between $50 – $300 depending on the size of your company. If you are small, then perhaps $50 a month will cover your initial need for technology to track and manage your work force.
Do franchises allow for growth?
No! you purchase an area to market based on your region. They call this exclusive territory, you may be able to expand to multiple units but it will cost you. Having your own staffing agency you are not limited to territories, regions or expansion costs based on franchise fees. If you ever wanted to grow to another State or City, you may not be able to because some else in the franchise beat you to it.
What are the benefits of the franchise support?
You will find that once you purchase the franchise, the support structure they claim to provide within Human resources, Legal, Marketing etc will be passed down to an answering service that will require you to leave a message. You may be allowed to visit there website and at times they will return the phone call, but you will find that the person on the other end was only trained in the material given to you and has no field experience within the medical staffing industry.
Is it costly to open a franchise beyond the Franchise fee?
Yes it is? Why? Think about it, do you think a franchise wants you to open up shop cheaply? No, your franchise is a marketing tool for them. If you look bad, they will look bad. It is to the best interest of the franchise that you have the best site selection, the best construction and plan assistance, the best furniture and the best grand opening,. You are at the mercy of the contract you signed with the franchise. That is why they want to make sure you have enough capital to pay for your start-up. They have pre-selected vendors that you must work with. Generally you are required to work with there vendors.
Will a franchise help me secure my first contract?
No, they will not physically help you secure your first or second or third contract. They provide you will marketing manuals, and online assistance but the meat and potatoes of marketing/advertising will be 100% you, as it should be. The problem is that you have dished out over $100,000 opening you business without ever securing one account.
Does a franchise offer business insurance, health insurance or any kind or retirement plans?
No! Franchises are not in the business of providing these services, they are in the business of selling and reselling franchises, they are not in the business of providing benefits. They will refer you two a third party vendor. Something you can do on your own using the Internet.
Franchises claim to have many franchises, is this good?
Absolutely not, the more franchises they have the less potential for growth you have.
What do they mean by ongoing support with a Franchise?
It usually means that you can call the toll free number and leave a message or visit there website and type in your question. They will try to get back to you as soon as they can. If the franchise is huge you may have to wait several days before they get back to you. At this point is when an entrepreneur that made the financial commitment to a medical staffing franchise begins to feel abandoned and left out to dry. In many cases this is the truth. “After all, it is you business!”
What do franchises mean by term?
O’h, good question. It means that the franchise is not yours, you agree to run the business for five years and at the end of the five years the franchise may or may not renew your agreement. Generally upon renewing your agreement you will have to pay another franchise fee. The decision to renew the term is solely based on the discretion of the Franchise company… If they decide not to renew the franchise you will loose the business.
What are royalty fees?
Besides paying the Franchise fee and the start-up expense, you are mandated to pay a royalty fee that is generally between 5% to 10% of the Gross revenue of the business. Most people don’t realize how much money this is. Lets me explain, a Medical staffing agency works on a marginal profit margin of between 20% to 25% of the Gross Revenue. If you are required to pay a royalty fee of 10%, and your medical staffing agency is only producing a 20% Gross Profit you will be left with only 10% Gross Profit after paying the franchise royalty fee. But is does not stop there. The 10% is what you will need to use to pay your in-house employees and any future marketing/advertising expense. The profit margin begins to dwindle down to almost nothing. Very, very important that you understand what we are talking about.
Billing $100,000 per month
Paying Nurses/tech’s $80,000 per month
Franchise Fee $10,000 per month
Gross Margin 10,000 per month
In house employees $4,000 per month
Rent/ Utilities Etc $3,000 per month
Adv/Mark. $1,000 per month
Total $8,000 per month
Net Margin $2,000 per month
Basically for every $100,000 you bill a month, you will only make $2,000 a month. This equals to billing over 1.2 Million dollars a year and you only make $24,000 a years, ouch! Not having a franchise allows you to make over $150,000 a year.
I hope this helps you in your entrepreneur spirit to start your own medical staffing agency. I have been helping many new and existing entrepreneur’s start they’re own medical staffing agency inexpensively for many years and I hope I have helped you.
Source by Roy Vera