What is a Franchise?
- An authorization to sell a company's goods or services in a
particular place
- A business established or operated under an authorization to
sell or distribute a company's goods or services in a particular area.
How did franchising start?
One of the earliest franchisors was the Singer Sewing
Machine® Company, which set up dealers shortly after the Civil War to sell and repair its
revolutionary machines throughout the country. Shortly after the turn of the century,
Coca-Cola® licensed others to manufacture and distribute its wonderful elixir. Ford Motor
Company® later set up dealers to sell and service its products. Of course, McDonald's®
is an example of how an entrepreneur (Ray Kroc) could take an idea and quickly spread it
coast to coast (and eventually around the world) without starting out with millions of
dollars in capital. Many companies turn to franchising as a system for expansion because
they recognize that they can grow rapidly with a minimum amount of capital and enlist
top-notch partners if the company is willing to share the profits. The company that sells
licenses to its system is called the franchisor, while those who open their own units are
called franchisees.
Why franchise?
There are many reasons why franchising is the best type of
operation for the majority of first-time business owners. Most revolve around the
increased probability that the business will succeed and provide profits to the owner in a
shorter time frame than an independent business. This allows the owner to address her or
his personal goals both financially and personally. Here are a few, more detailed, answers
to that question.
Earn what you’re worth
Thousands of franchise owners report they were handicapped
in their corporate careers by company policies and supervisors that put a cap on their
earnings. When you own your own company, your efforts are rewarded and your personal
income shows it!
Satisfaction of Achievement
Many business owners report that seeing their actions
turned into reality without stagnating for months in committee meetings (as often happens
in big companies) is a major reward of owning their business.
Quicker Start-Up than Independents
A proven plan out-paces an independent’s hit &
misses operation almost every time. Looking at just independents that succeed--you'll find
that franchises grow quicker, reach break-even sooner and succeed more regularly than
others in the same industry as depicted in the accompanying chart
What do I need to know?
Another question that arises is “What do I need to
know in building my own franchise?” There are four main ingredients found in each
business...
- The product or service that is delivered to its customers.
- The location that the business occupies.
- The amount of capital that was invested or borrowed by the
venture.
- The management team that runs the company -You!
Making a choice
Choosing the right franchise can be a confusing process.
First, you must believe in the product or service that the
franchise network delivers. Is the niche stable, expanding, long-term, saturated?
Next, you must verify the industry's future. What do the
trade papers predict?
Check your aptitude for the job. If you don't enjoy math,
an accounting franchise isn't for you, etc. Often outside sources can help here. A
personality and aptitude test (similar to those used by major corporations) will help you
discover your hidden talents.
Determine the earnings capability. Most franchisors can't
provide earnings projections, but you must make an effort to determine your future return.
Confirm the potential earnings and the franchisor's
integrity with existing franchisees. Each franchisor will give you a list of its network
members.
You should call them to get their confirmation of your
projections. If a franchisor (or business opportunity seller) will not give you a list of
its franchisees, you should heed the red flashing lights and end discussions.
While this article is just the tip of the iceberg, you can
get a good idea why you should start your own franchise, today. |
