What is Franchise ?

Franchisee lists can be a valuable resource, but consultants caution their clients to make certain that they receive a complete list, rather than a list of selected franchisees who are compensated by the franchisor for giving positive appraisals of the company.

The United States has developed an extensive regulatory system designed to govern franchising practices throughout the business world.

The answer is – it is very much your own business. And while the franchisor will have certain criteria to be adhered to in order to protect their brand identity and to keep the franchise model as successful as possible, the business, running of it and it’s achievements are your own. You will be growing your own business for your own future and adding value to a company that is yours!

Chief among the federal guidelines are the FTC's Franchising and Business Opportunity Ventures Trade Regulation Rules and Subsequent Guidelines.

There are so many different statistics flying around on this one and a cause of much debate as to the exact figures, but whichever pools of data you chose to believe each one clearly shows franchises succeed over start-ups hands down.

Start-up failure rates are quoted in many sources between 75% – 90% with most quoting a 3 year failure rate of 80%, while franchise success rates are quoted anywhere between 67% and 92% with the most reliable source, the bfa, showing data that over 92% of franchises are profitable. Please see our franchise statistics for more information.

There are many significant advantages to franchise ownership. In most instances, an entrepreneur who decides to buy a franchise is purchasing a business concept with a proven track record of success. In addition, a franchise agreement provides instant name recognition for the business, which can be a huge advantage if the name enjoys a solid reputation in the marketplace.

From the initial tools, sales packs, materials, website, marketing and office functions, you will see the cost effectiveness of a franchise. When looking at the breakdown of your franchise fees take into account the savings you are making over and above that which you would spend if you started alone.

Advertising and Promotion Franchisees benefit from any national advertising campaigns launched by the corporation with which they have gone into business. In addition, many franchisors provide their franchisees with a wide range of point-of-sale advertising materials, ranging from posters to mobiles to brochures. Since such materials are often expensive to produce, they would otherwise be beyond the reach of some individual franchisees.

Ongoing you will also find that group purchasing, marketing, advertising and office functions will save your businesses hugely over independent business start-ups.

Operations Franchisors provide franchisees with a wide range of help in the areas of administration and general operations. The entrepreneur who becomes a franchise owner is instantly armed with proven products and production systems; inventory systems

On top of these tangible cost savings, the brand building, reputation, bespoke systems and proven business model bring huge value to your franchise.

financial and accounting systems; and human resources guidelines. Many franchisors also provide management training to new franchisees, and ongoing seminar workshops for established owners.

Buying Power Franchisees are often able to fill inventory needs at discount prices because of their alliance with the franchisor, which typically has made arrangements to buy supplies at large-volume prices.

Opting for a larger, well-known franchise is often a safer bet since it will have a bigger brand name value and a better support system if you run into any trouble. But bigger names require bigger down payments.

Identifying how much you have to invest is important. Giants like McDonald's require a hefty sum of $1,471,100, smaller brands like 7-Eleven require $389,378, and Domino's Pizza a lower $253,950. Some franchises make up for some of the costs in the long run: Domino's Pizza offers news franchises 1,308 hours of training for no added cost.

Most small business owners are able to devote little time or money to research and development efforts. Franchising, then, can provide a huge lift in this regard, for many franchisors maintain ongoing research and development systems to develop new products and forecast market trends.

Some franchises require you to purchase certain products and services at specific suppliers. This can be both good and bad. Good because your franchiser may already have deals set with suppliers to keep costs low, but if that isn't the case, you're stuck footing what could be a higher bill for suppliers authorized by your franchiser.

Some find themselves investing half a million dollars on a franchise only to find a new one built across the street six months later. How to prevent this? Pick a franchiser that gives you the guarantee you'll be the only franchise in the area, or gives you permission to build several franchises in a specific radius.

Consulting Services It is in the franchisor's best interests to do all it can to ensure the success of all of its franchisees. As a result, the entrepreneur who decides to become a franchisee can generally count on a wide range of training and consulting services from the larger company. Such services can be particularly helpful during the startup phase of operations.

Even though most franchises are required to make royalty payments to the franchiser each month based on a percentage of sales, some companies like 7-Eleven take about half of the franchisees' profit. Other franchises are required to contribute to the parent company's annual advertising budget (which isn't specific to any one establishment).

While the benefits of franchising are many and varied, there are well-documented drawbacks that should be considered as well.

Cost The initial franchise fee, which in some cases is not refundable, can be quite expensive. Some fees are only a few thousand dollars, but others can require an up-front investment of several hundred thousand dollars.

When you purchase a franchise, the thing that you are really purchasing is a business model. You are purchasing the rights to use someone else’s idea. This someone (the franchisor) has put their idea into an organized, easy to follow operations manual. In other words, you are replicating the franchisor’s business.

Other costs include insurance, initial inventory purchases, and other expenses associated with equipping a new business.