What is franchising?

You want to be your own boss running your own business, but are not sure where to start, what
resources you need, how to market products and services, how to hire and train employees etc.
Dont despair a franchise opportunity could the right choice for you.
Youve seen the slogans:
Be in business for yourself, but not by yourself.
When you succeed, we succeed.
Weve been successfully putting people like you in business for 16 years!
Be your own boss; well help you get there.
These quotations from franchisors convey the idea that even though you work for yourself,
franchising is first and foremost about partnership. Franchising is everywhere in the first decade
of the 21st century so partnership with a proven brand is clearly a winning formula for many
small business owners.
When people think of franchising, the most common example that comes to mind is
McDonalds. But franchising has older roots, and it is Isaac Singer, the inventor of the sewing
machine in 1858, who is credited with starting the franchise concept. After successfully
inventing the new machine, he needed a way to distribute them by people trained to use the
machines. So a legal system for selling the rights to distribute a service or product was born.
Put simply, a franchise is a method by which the owner of the business, the franchisor, confers
on investors, the franchisees, the right to operate the business in an agreed manner and style in
return for ongoing fees. The agreement is governed by a contract, the Franchise agreement,
which runs for a defined period of time, generally renewable and ranging from five to 20 years.
What is it you are buying when you invest in a franchise? A franchise operation is a fully
operational business concept that is proven, with operating processes clearly mapped out in an
Operations Manual. Most franchisors provide comprehensive training in how to operate the
business, and give clear instructions on all the visible trappings such as trademarks, logos,
uniforms, furnishings etc. The Franchise Agreement spells out all these details.
Franchise opportunities are everywhere, and their success and widespread popularity offer
endless potential. Think about the purchases you make in a single day -- many are from
franchised businesses:

You stop on your way to the office for coffee.

You arrange to have your dry cleaning picked up and returned to you at work.
You call a company to clean your carpets later in the week.

You have an important document fast-tracked to a client overseas.

You schedule a meeting with your business coach before enjoying a sandwich at your
desk.
You collect your child from her day care on the way home.
You stop by your local garage to have your cars transmission checked.
You get home and are pleased the cleaners have done a good job.
You order a meal on the phone to be delivered.

Every one of those product or service purchases is likely to be franchised, including the day
care. Franchising has become part of the fabric of peoples lives because it provides an
increasing array of familiar products and services.
And you can bet that when new trends emerge and grow popular -- be it in food, exercise, home
improvement, pet care, party planning, etc. franchised versions ready to profit from these
trends are sure to follow.
What types of new franchises will be popular in the near future? Anything that helps busy people
manage their home lives and domestic tasks. And the current concerns about global warming are
sure to generate companies that offer green eco-friendly products and services, such as lawn
care, prepared foods, cosmetics, and cleaning supplies.
For the individual who wants to start a business, franchising offers a wide array of new
opportunities. For the existing successful business, franchising can be the model for rapid
expansion.
It should also be noted that there are several types of business opportunities that involve
partnership but are not franchises. These include:

Dealerships where an existing business owner, such as a home dcor store, is licensed
to sell a companys line of products, such as floor tiles or paint.
Distributorships this is an opportunity where a business owner invests in equipment,
such as DVD kiosks or coffee makers, and distributes them in high traffic locations, like
malls or offices.

Why invest in a franchise?

Franchise Ownership Provides Competitive Advantages

Business Based on Proven Systems More Likely to Succeed

In business for yourself, but not by yourself thats a common adage used to describe the
advantages of franchise ownership. And there is real validity to that statement

An independent business operator takes on a lot of risk when trying to launch a new business.
Starting a business from scratch is hard work, and more than half of new businesses fail to
become profitable.
The success rate for franchises is 90+ percent. Franchising is a growing industry consider
these facts:

The Franchising industry employs over 8 million people in the US.

The annual payroll for franchises is more than $229 billion.
A new franchise is 2.5 times more likely to succeed than a non-franchised business.
Franchising generated one out of every seven jobs in the private sector.

The whole beauty of franchising is that someone has already done the work for you. The
wrinkles are ironed out, and the system has been proven through real-world experience.
Franchise owners dont have to reinvent any wheels. Instead they drive a complete, roadtested machine.
Buying a franchise dramatically decreases the learning curve for the business. Most franchisors
provide the necessary training on how to run the business. Its like a fast conveyor belt to
acquiring a lot of knowledge instead of learning by trial-and-error, which is the difficult, and
often costly, course facing solo business owners.
As a franchise owner, you get to be your own boss within the comfort zone of a tried-andtrue business. Its a proven commodity that works. The franchisor has demonstrated the success
of the system, and can share a repeatable formula for a financial consideration the franchise
fee.
For those thinking about buying a franchise vs. starting their own business, consider these
benefits:

The franchise has already been proven successful.

The franchisor and active franchisees can testify to the reliability of the systems and
business operation.
Training is provided and greatly accelerates the time to start up a business.
The operating system can be learned and then followed to duplicate positive results.
Brand name recognition customers already exist and are loyal to the brand.
Many franchisors provide location assistance, which can range from finding the right
site to sales or rental negotiation.
Franchisor input on location can be a key factor in success because of previous
experience with other locations.
Marketing support in the form of national and local advertising, as well as advertising
and public relations templates to use, allow franchise owners to cost-effectively spread
the word about their business.
Franchisees can expect to get ongoing support from regional representatives, toll-free
numbers, company intranet, meetings and conventions, as well as more training.

The franchisor wants franchisees to succeed and typically does whatever it takes to get
make a new franchisee competent and confident as quickly as possible.
Discounted purchasing of supplies and goods used in the business thanks to the power
of group buying.

How franchising works?

The partners in a franchise agreement are the franchisor, who grants the franchise license to the
franchisee, who invests in it.
Remember, a franchise is NOT an independent business. The franchisee buys the opportunity to
run a business based on the franchisors established operational methods, often detailed in an
Operations Manual. These methods ensure that all the products and services offered by the
franchisee conform to consistent quality standards.
An Operations Manual eliminates the need for the franchisee to create a strategic plan on how
the business is run. The business logistics, such as marketing, product assembly, service delivery,
accounting, store layout, employee recruitment and training, are all mapped out. Most
franchisors provide extensive training to the franchisee to help ensure that the business is run
according to proven methods, making it more likely to succeed.
The obligations of both the franchisor and the franchisee are fully laid out in the Franchise
Agreement. Some franchisors use a standard agreement, and some are customized.
It is essential for any prospective franchisee to consult with a lawyer experienced with franchise
agreements and business contracts before signing any of these documents.
The agreement will stipulate all the terms of the business relationship, such as initial fees,
ongoing royalties, territory restrictions, operational support provided, the length of the franchise
license, license renewal, and selling or closing the franchise.
When you buy a franchise, you are agreeing to uphold the franchisors way of doing business. In
return, you gain the right to run an individual (or multiple) business unit(s) built on proven
methods and with a high probability of success.
The advantages of franchising
You could start a business of your own without involving anyone other than your advisers an
accountant, a lawyer and banker. But, there are many people who want to be their own boss but
within the comfort zone of a tried and tested business. They dont want to make a painful journey
around the learning curve reinventing the wheel.
In franchising, someone has already done the work establishing the business, and has ironed out
the wrinkles. A franchisor is now prepared to share that expertise with franchisees for a financial
consideration. Basically, a franchise is conveyor belt to faster business ownership.

And though like anything else in life, there are pros-and-cons involved, the benefits of
franchising outweigh the disadvantages. Obviously no business alliance should be entered into
without diligent evaluation but, subject to satisfaction at the end of that process, franchising has
advantages that suit ambitious individuals.
Consider these benefits:

The business has already been proven to work. The franchisor and the network of busily
trading franchisees are testimony to that.
You are fully trained in all aspects of the business, and sometimes your business partner
and/or key staff receive training too.
There is an operating system that can be learned and then implemented to the letter, or
with a degree of flexibility.
The brand is established. People recognize it. Its embedded.
The franchisor helps with finding a good location that will deliver traffic if thats what is
needed (e.g. for retail or food outlets) or will be cost efficient if visibility is not
paramount (e.g. for cleaning or home improvement businesses).
Marketing tools and ad campaigns are provided, both nationally for the brand and
locally for individual franchisees. The majority of franchisors also help franchisees make
a major local impact with a publicized launch of the business.
Franchisees receive ongoing support from good franchisors, delivered via toll-free
numbers, a company intranet, newsletters, and regular visits by a representative from the
corporate office, regional meetings and annual conventions.
Centralized purchasing is a feature of many franchises where the franchisee benefits
from discounted pricing on goods for a retail store or ingredients for a restaurant and
other supplies.

There are many different types of franchise opportunities available, with various investment
commitment levels that can range from minimal to more substantial. For those not ready to leave
their day jobs, there are plenty of offerings that require only a part-time commitment that
grows gradually. Ambitious entrepreneurs, who want to totally commit themselves to owning a
business, have a vast range of choices.
Franchise Success. First, Know Yourself!

To succeed as franchise owner, you must be able to follow the rules, and conduct the business
according to the book, in this case, the Operations Manual. If you find it hard to follow someone
elses rules, then a franchise probably does not suit you. You must be happy following an
established system, without constantly trying to improve or change it; and be able to promote
your franchise with pride, even though you did not invent the business yourself.
Knowing yourself sounds like obvious advice, but it entails examining important issues about
your objectives, talents and strengths, finances, family commitments, and even your personal
habits, like sleeping pattern and clothing preferences. By knowing yourself, what it is you want
to achieve, and the most practical way for you to do it, youll eliminate wasting time on
researching franchise choices not suited to your temperament and abilities.

Grab a pen and paper, and consider these some points to honestly evaluate yourself:
1. Your goals:
Where do you want to be in five years? In ten years?
Do you want to make a full-time commitment, or start out slow?
How important is money vs. job satisfaction?
Are you motivated by personal challenge?
2. Your talents, abilities and temperament:
What activities, such as sports, computers, decorating, etc, do you like to do?
Are you better at physical or mental tasks?
Are you good at interacting with people or organizing things?
Are you an outgoing people person or more introverted?
Are you patient in the long term or eager for fast results?
Do you prefer to wear business attire, a uniform or casual dress?
Do you want to be outside and on the go, or work inside the same premise each day?
Can you accept the discipline of a franchise system?
3. Demands on yourself and family:
What about your physical endurance can you work long hours on your feet or do you
prefer sedentary work?
What is your preferred work schedule fixed hours or flexible? Do you want to have your
weekends free? Are you a morning or night person?
Is your family supportive of this venture? How will it impact their lives? What are your child
care commitments?
Do you want clear separation of your business interests from your home and personal life?
What about leisure time -- do you want to be able to attend evening social gatherings or
school events? Take time away for vacations?
4. Your financial situation:

Do you have the resources to buy a franchise and survive the initial start-up phase?
Can you cope with unexpected losses or setbacks?
What is your risk tolerance? How much of your assets are you willing to put on the line?
What is your credit history and can you raise financial backing?

Recognizing your true abilities, natural preferences, and real limitations is the first step to
success in any type of business. By having some clear direction as to your goals, personal
commitments, and lifestyle choices, youll have a better idea of the most realistic way to achieve
your ambitions.