Franchising is a method of product or service distribution that is governed by a contract. It is important for anyone deciding to start a business by becoming a franchisee to remember that in franchising a person is tied into a partnership arrangement for a defined period of time.
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. Don't despair – a franchise opportunity could the right choice for you.
You've seen the slogans
“Be in business for yourself, but not by yourself.”
“When you succeed, we succeed.”
“We’ve been successfully putting people like you in business for 16 years!”
“Be your own boss; we’ll 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 McDonald's. 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 car’s 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 people’s 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 décor store, is licensed to sell a company’s 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.
Be aware of both types of business systems- franchise and business opportunity (dealership and distributorship)- before you enter into a franchise agreement...