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Franchising
• A company (franchisor) that already has a successful product or service enters into a continuing contractual relationship with another business.
• The franchisee operates under the franchisor’s trade name in exchange for a fee.
• The franchisor gives guidance to the franchisee.
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Franchising
• As a Franchisee, you use the franchisor’s name, special supplies, and method of running a business.
• You pay for the opportunity and operate the way the franchisor tells you.
• It’s your business, but the franchisor controls what you do.
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Advantages
• All the planning comes prepackaged.• The price is often far lower than if you were to
start fresh.• You avoid the problem of raising large sums of
money, often the most difficult part of establishing a new business.
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More Advantages
• A respected identity• A successful operating system• Training and ongoing management assistance• Site selection help
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A Respected Identity
• The most important advantage a franchisor offer is a good name in the industry.
• The worth of a franchise identity comes from the recognition, reputation, and goodwill of the franchise organization.
• People who invest in franchises are looking for a successful image.
• When you take on a franchise, your franchisor’s character, helps create your identity.
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A Successful Operating System
• When you buy a franchise you are counting on the proven formula for success.
• One of the most important element of franchising is the simplicity with which the organization’s systems and procedures can be transferred to a franchise.
• Some franchise will offer you complete turnkey outlet.
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Turnkey
• When you are finished with franchise school, you receive the keys to a business in which everything has been set up for a ready-to-run operation.
• Other franchisors will provide you with blueprints, manuals, specifications, and training. Then it’s your responsibility to use your own drive to get the business established.
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Training and Ongoing Management Assistance
• Most people buy a franchise have no experience in the business they are entering.
• That’s natural because a majority of them are changing careers.
• In order to succeed, new franchisees must learn a great deal about what’s involve in their new career before opening for business.
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Training
• The best way to learn is to make the most of the franchisor’s training program.
• The franchisor may offer training at a headquarters college.
• These training program are usually well-planned to provide the background and know-how the franchisor has to offer to help you get your business off to a good start.
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Formal Training
• Formal training sessions are one of the most helpful supports a franchisor can provide to a franchisee.
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Site Selection Help
• Each business requires unique features from a location
• The best franchise companies will help you find a good location and acquire it on the best available terms.
• Site selection, new construction, and fixing up an existing storefront are critical in the business mix.
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Disadvantages
• Lack of guarantee• Franchisor strength• Too many units• Strict contractual relationship
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No Guarantees
• Although franchising is the most foolproof way of getting a business going, there are still failures.
• The failure rate is much lower than for independent small businesses
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No Guarantees
• Statistics don’t tell you about the franchisee in Des Moines who invested $100,000 in a business. He eventually had to sell it to someone for $15,000. The business is still in operation. The $85,000 loss is not shown anywhere
• Length of experience is one good indicator of the kind of success that can be expected.
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No Guarantees
• Consider how many years a company has been in business. Also how many years has the company been offering franchise.
• Example McDonald’s been offering franchise since 1955 .
• No enterprise can stay in business unless it is profitable.
• If it passes the test of time, it’s a good bet it knows how to weather the ups and downs of business conditions.
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Other Disadvantages
• Too many Units, there is a point where there may be too many units. This can dilute the strength of your business.
• Strict Contractual Relationship – as a franchisee, you are required by contract to accept the company’s rules, regulations, and method of doing business.
• If freedom and independence are high on your list of priorities, you would not be content to operate a franchise.
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Explore your options
• Find out more about what franchises are available and what business are for sale. Understanding what others are doing can help you even if you are starting a business from scratch
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