FRANCHISING A BUSINESS

Decades long history of proven success

 

Franchising has been proven to be a tested and proven method on business. Over 1 in 12 businesses in the US are franchises, with a new franchise opening every 8 minutes of every business day.

Decades long history of proven success

Franchising has been proven to be a tested and proven method on business. Over 1 in 12 businesses in the US are franchises, with a new franchise opening every 8 minutes of every business day.

 

Definition of a Franchise

WHAT IS A FRANCHISE

“A legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchiser or that meet the franchiser’s quality standards.”

All about the franchising business

BUSINESS FORMAT OF FRANCHISE

The most common and widely used form of franchise model is the business format franchise. Franchises that start under this model involve a ‘Franchisor’ granting a ‘Franchisee’ the right to market goods and/or services within a specified area using the Franchisors’ brand and operational systems in exchange for a payment of a franchise fee and ongoing perpetual royalties.

The Franchisor decides the process and operational procedures that the franchisee must follow in order to start a franchise location and during the operation of the business. Franchisors provide franchisees various forms of support to assist the franchisee in starting the franchise, some of these may include site selection assistance, initial training, supplier sourcing and marketing programs.

CONSIDERATIONS

The consideration of capital costs is a major factor when deciding to franchise a business. Franchising offers tremendous advantages over the high capital costs associated with internal expansion in addition to the infrastructure and employee issues that accompany this traditional form of expansion.

On top of this, common problems faced by organisation such as managing, recruiting, training and the retention of qualified workforce as well as the responsibilities of day-to-day operations of individual business units are dramatically reduced under a franchise system. Additional benefits of franchising a business include significant cost savings that can be achieved by the franchisor and franchisees from the high volume purchasing, shared advertising and marketing expenses.

PROVEN FORMULA FOR PENETRATION

Many established national and international companies have chosen to franchise their business due to the fact that franchising provides the opportunity for maximum market penetration with minimum financial risk to the Franchisor.

At the same time, a franchise system permits the Franchisor to maintain maximum control over the individual franchise locations thereby protecting the reputation and system of the Franchisor. Franchisees benefit by investing in a proven system of operation that eliminates many of the pitfalls associated with starting a business.

ALTERNATIVE TO START-UPS

Each year, tens of thousands of would-be entrepreneurs choose to start a franchise business rather than “go it alone.” They seek to minimize their risk by purchasing a proven system of operation that enables the franchisee to operate a profitable, successful business much soon than with a traditional startup.

Franchisees benefit tremendously by joining an established and successful operation that has already demonstrated the need in the marketplace for the products and/or services, in addition to providing a proven system of operation and credibility to the franchisee.

BENEFITS OF FRANCHISING

The Franchisor benefits from the fact that a franchisee is an owner rather than an employee of the company. A franchisee is much more motivated than an employee to ensure that their business grows and operates profitably. This solves a major problem experienced by most companies today related to hiring and retaining qualified and motivated employees when expanding the company’s operation.

Under a franchise system, day-to-day operation of the franchised business is the responsibility of the franchisee. Consequently, the Franchisor is freed to focus on overall business development, including processes and procedures, product and/or service development, advertising and marketing, franchise training, and providing administrative and/or technical support to franchisees.