Last Updated 30 Jul 2021

Franchising Business

Category Advertising, Sales
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Franchising Business

I am buying into a business format franchise because I would like to be my own boss and do my own thing.

Anyone can build a dreams, a dream that we could hold on and believing, “Yes this is my house I’ve been dreaming of” for a long period of time”. Owning a business of your own is a huge achievement especially with our family and friends. Perhaps, franchising is the best line of business that could fit the tight competition of modern days. For example Food Chains or Restaurants like Jollibee, McDonalds, KFC, Kenny Rogers and others. As you hold your own business, you will adopt new ideas and techniques on how to handle day to day activities within your business units. It will help more people especially those who are unemployed and less fortunate in life. Many people want to start a business and possibly own a franchise. Promoters advertise many types of franchises, claiming the industry they discuss grows tremendously each year and you should own a franchise in that industry.

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The travel industry never wanes. Even in the wake of the Sept. 11 attacks, consumers continued to look for family vacation packages. Getting away together strengthens the bond between families while making priceless memories. Many people who take the step to own a franchise fail within five years and many fail sooner, according to small business experts. With a franchise that promotes family vacation packages, the one who decides to own a franchise promotes a product sought after by consumes. Whether families seek a cheap Hawaiian vacation package or a closer-to-home Texas vacation package, they want the best deal available. Entrepreneurs who own a franchise that features cheap vacation packages will successfully do business with these families. When consumers find a great family vacation package, they will want to take that vacation again. Those who own a franchise need repeat business for continued success. Those who own a franchise can take advantage of the family vacation packages. This gives the franchise owner knowledge about the product he or she promotes.

This also benefits his or her family when they own a franchise as many people say great vacations create great memories. The entrepreneur who decides to own a franchise may do so for many reasons. They may want to start a home based business to spend more quality time with their family. Perhaps they want to avoid travel agents who charge high fees to book family vacation packages. They may just want to make money and own a franchise. Those who own a franchise need support. Those who sell family vacation packages often rely on a coastal vacation sales center. The employees of the call center support the person who decides to own a franchise by handling calls and explaining travel packages to interested buyers.

The coastal call center does not take away clients from the person who owns a franchise, but closes the sale. This gives the franchise owner more time to look for consumers who want to book a family vacation package. Those who own a franchise may find they can reach the prospects but cannot “seal the deal” The coastal vacations call center gives those who own a franchise a full-time professional sales staff that gets consumers to sign on the dotted line. Those who own a franchise need to remember that any job requires hard work. Just because they use a coastal call center to close the sales, does not mean they should not pursue their business hard. Consumers want family vacation packages and franchise owners who work hard can make a lot of money by pursuing the market actively. Those who own a franchise work smarter, not harder. No one should delay his or her desire to own a franchise. Home based travel agent opportunities exist and produce lucrative profits for those willing to work hard and smart and own a franchise. Whether or not the franchise owner sells family vacation packages or specializes in Bahamas timeshares, hard work  and ingenuity gives franchise owners personal and financial freedom.

Own a Franchise, Help Families Take Dream Vacations By Ben Jordan

When starting a small business, one of the most common problems that entrepreneurs today are facing is the funding. Aside from funding, you have to promote your products and services to the people even before you can sell it effectively. For example, if you are trying to promote a new product with a new brand, you have to be creative in order to catch the attention of potential customers. Indeed, starting your own business is hard. However, what if there's a way to start a business that can guarantee you funding and a lot more advantages? What if you can instantly have clients at the time you open your business?

With this advantage, you will be able to enjoy instant income right after opening your business. This is called business franchising. One of the best advantages that business franchising can offer is usually the brand recognition. This is because since the particular brand is already recognized by the people, you won't have any problems at all when it comes to promoting the products you are selling. However, you also need to make sure that you choose a well-known business franchise in order for it to sell. For example, if you want to open a restaurant, why not franchise a popular fast food chain? This way, more people will know about the food you are selling and you don’t actually need to advertise. Speaking of advertising, you won't worry much about this particular factor as the franchise will be the ones that will advertise for you. They will provide you with posters, with promotional giveaways and other advertising products. If you are lucky enough to join a large business franchise, then you will enjoy having TV commercials for your business. Usually, a business franchise will also provide you with employee and management training.

This way, you will get started immediately once you open your business on the first day. This will be able to help you in getting started and smooth things up in terms of quality employee services, insurance and also conducting payrolls and other concerns. However, it doesn’t mean that you don’t have to work hard when you own a business franchise. You also need to have plans on where you want your business to be. It is important that you should choose a good location to start your business franchise, like it should be accessible for your potential customers, and you also need to plan the system, such as policies, store layout, service standards, and even management practices.

When starting a business franchise, you have to know certain aspects of the franchise you are planning to purchase. For example, you have to know about the trainings they offer, how financially stable the company is and how they perform in the market. By knowing about this, you will have an idea on how well your business will end up in the future. By choosing a stable company that offers a lot of benefits to their franchise owners, you can be sure that your business will be one of the best in your area. Always remember that success doesn’t necessarily depend on the franchise itself. It will depend on positive thinking in your part in order to get it going. You have to consider the fact that it's not everyday that you will experience high income in your business. Expect some losses and learn how to deal with it with positive thinking. In time or after several years as a franchise owner, you will be able to see the rewards of your hard work and dedication.

When starting a small business, one of the most common problems that entrepreneurs today are facing is the funding. Aside from funding, you have to promote your products and services to the people even before you can sell it effectively. For example, if you are trying to promote a new product with a new brand, you have to be creative in order to catch the attention of potential customers. Indeed, starting your own business is hard. However, what if there's a way to start a business that can guarantee you funding and a lot more advantages? What if you can instantly have clients at the time you open your business?

With this advantage, you will be able to enjoy instant income right after opening your business. This is called business franchising. One of the best advantages that business franchising can offer is usually the brand recognition. This is because since the particular brand is already recognized by the people, you won't have any problems at all when it comes to promoting the products you are selling. However, you also need to make sure that you choose a well-known business franchise in order for it to sell. For example, if you want to open a restaurant, why not franchise a popular fast food chain? This way, more people will know about the food you are selling and you don’t actually need to advertise.

Speaking of advertising, you won't worry much about this particular factor as the franchise will be the ones that will advertise for you. They will provide you with posters, with promotional giveaways and other advertising products. If you are lucky enough to join a large business franchise, then you will enjoy having TV commercials for your business. Usually, a business franchise will also provide you with employee and management training. This way, you will get started immediately once you open your business on the first day. This will be able to help you in getting started and smooth things up in terms of quality employee services, insurance and also conducting payrolls and other concerns.

You also need to have plans on where you want your business to be. It is important that you should choose a good location to start your business franchise, like it should be accessible for your potential customers, and you also need to plan the system, such as policies, store layout, service standards, and even management practices. When starting a business franchise, you have to know certain aspects of the franchise you are planning to purchase. For example, you have to know about the trainings they offer, how financially stable the company is and how they perform in the market. By knowing about this, you will have an idea on how well your business will end up in the future. By choosing a stable company that offers a lot of benefits to their franchise owners, you can be sure that your business will be one of the best in your area. Always remember that success doesn’t necessarily depend on the franchise itself. It will depend on positive thinking in your part in order to get it going. You have to consider the fact that it's not everyday that you will experience high income in your business. Expect some losses and learn how to deal with it with positive thinking. In time or after several years as a franchise owner, you will be able to see the rewards of your hard work and dedication.

Bob Gappa is president of Management 2000, Houston, TX, a firm specializing in assisting companies in the use of franchising as a growth strategy. A respected leader in the field of franchise consulting, Bobs 25 years experience includes design and implementation of systems in franchise development and operations, compensation planning, human resource management, strategic planning, and marketing strategies. Bob has an in-depth understanding of the process of connecting franchisors with franchisees and is currently offering a program for franchisors on the subject entitled. How to Recruit and Select More Qualified Franchisees? Management 2000 has been responsible for innovative thinking in getting people to understand franchising as a business strategy. Management 2000 has offices in Houston, Texas and Edmonton, Alberta, Canada.

Abstract

You are an executive who is being displaced or who is dissatisfied with the way you are being treated by your company. Recently you have been thinking about putting your resume on the street, but more often than not you have found yourself thinking about going into business for yourself. Whenever you think about going into business for yourself, you think about the horror stories and statistics you read in USA Today and the Wall Street Journal about the failure rate of independent businesses. Those statistics dampen your desire to own your own business. Yet every week in those same newspapers you see ads by companies offering franchise opportunities. If you want to be self employed and are intrigued by the idea of operating a franchise and want to find out more about selecting the right one for you, read on.

What Is Franchising?

Franchising is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units.

Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company’s products and services can help them. It is a method for distributing products and services that satisfy customer needs. Franchising is a network of interdependent business relationships that allows a number of people to share:

  • A brand identification
  • A successful method of doing business
  • A proven marketing and distribution system

In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.

There are many misconceptions about franchising, but probably the most widely held is that you as a franchisee are buying a franchise. In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support.

The business relationship is a joint commitment by all franchisees to get and keep customers. Legally you are bound to get and keep them using the prescribed marketing and operating systems of the franchisor. To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system to get and keep customers. Throughout this article we will discuss in detail some of the benefits of conducting business as part of a larger group. Other franchisees and company operated units are not your competition. The opposite is true. They and you share the task of establishing the brand as the dominant brand in all markets entered and reinforcing the customers familiarity with and trust in the brand. So in this respect you are working as a team with others in the system.

Other franchisees share with you the responsibility for quality, consistency, convenience, and other factors that define your franchise and insures repeat business for everyone. Increasing the value of the brand name is a shared responsibility of the franchisor and franchisee. An ownership mentality destroys the reason franchised and company-operated units are successful. Think about it. If you think you bought a franchise, you become an owner and begin to think and act like an owner. You will want to change the system because of your needs, you will wonder what you are paying the royalty for, and you will begin thinking of other franchisees as your competitors.

For these and many other reasons you do not want to think of yourself as an independent owner.As a franchisee you own the assets of your company, which you have chosen to invest in someone else’s brand and operating system and ongoing support. You own the assets of your company, but you are licensed to operate someone elses business system. Finally, your desire to become a franchisee must be grounded in your belief that you can be more successful using someone else’s brand and operating according to their systems and methods, than you could if you opened up your own independent business and competed against them. You want to look for a franchisor who is building a system of interdependent franchisees who are committed to getting and keeping customers, to growing faster than the market, to growing faster than the competitors, and to do all of that with high margins. When you discover a franchisor who understands this relationship, you have a franchisor worth your consideration.

The Strength of Franchising

Franchising is the most popular system for growing a business in the United States today. According to every government survey, franchising has experienced explosive growth since the mid-70s and is expected to be the leading method of doing business in the new century.

In the United States, there are over 2,500 franchise systems. These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses. This 3.2% of all businesses controls over 35% of all retail and service revenue in the U.S. economy.

Franchisings advantages over going into business for yourself include; opening quicker, experiencing success sooner, developing a customer base faster, having less risk and being more profitable.

In franchising, the operating system becomes identified with the brand or trade name that you license as a franchisee. Each franchise system uses precise methods to service and satisfy the customer. By documenting these practices, the franchisor institutionalizes the buying experience. Because customers don’t like surprises this consistency in operations, unit to unit, builds customer loyalty to the brand. Franchising is successful because we Americans are people of habit and are brand-driven when we purchase goods and services. We trust brands that we see everywhere, every day. We tend to be loyal to a product or service delivered to us the same way all the time.

Investing in a Franchise

In reality you are taking your assets, which you own, and investing them in someone elses brand and operating system. You will always own your assets. You will always own your corporation. But you will do business as (dba) a licensee of the franchisor.

Before You Select A Franchise...

Step 1: Evaluate Yourself

Your job is to make an informed business decision about whether a franchisor’s business opportunity meets your needs and whether you can provide what the franchisor wants and needs in a franchisee.

You need to ask yourself basic questions:

  • What do you want from life at this time?
  • What are your wants, needs, and desires?
  • What are your goals, objectives, and dreams?
  • What are you looking for in a business?
  • Have you decided to leave what you are now doing not just the job, but the profession?
  • Have you made a decision to become a part of another organization?

Remember that in franchising you joined someone else’s business. You are going to be using their marketing system to generate customers and their operating system to satisfy them.

Do you have the kind of personality that can accept running the business according to someone else’s plan without feeling that it compromises your individuality? Do you have an interest in doing this kind of work for the length of the agreement? Have you ever worked for one company for five or ten years? Do you have related skills, knowledge, abilities, and work-related experiences similar to the ones required for running the franchise you are considering? Do you have the financial resources to open and operate the business successfully? Can the business support your lifestyle needs? Which of the franchises you are reviewing meets your financial needs short and long term?

Step 2: Evaluate the Franchise Opportunity

Evaluate the legal documents from a business perspective. Determine whether the franchisor has territory policies that might make franchisees less competitive in a highly competitive environment. Many prospective franchisees erroneously believe that having a large territory is best for them. It could, in fact, be the worst thing for them. For example, if you have too few franchisees in a market and competitors have more units than you have, it could leave you at a disadvantage in terms of dominating the market for your product or service in your area.
Look for a franchisor who can communicate a strategy not just for market presence but for dominating markets; look for a franchisor interested in establishing a competitive edge and increasing market share. If a franchisor cannot talk about these issues, it is entirely possible the franchisor is using franchising as a way to generate franchise fees and royalty revenue rather than to establish a competitive position in the marketplace. Evaluate the marketing/advertising fee. Many franchisors and prospective franchisees erroneously believe that a low marketing fee is a good thing. In fact, the marketing fee should be related to the amount of money each franchisee needs to contribute to support an advertising campaign that will generate enough new and repeat business for each of them. A 1% advertising fee may look good now, but when you need 5% from everyone to be competitive, it might not be possible to convince all franchisees to participate. Evaluate the effectiveness of the Franchise Advisory Council. Does the franchisor incorporate the franchisees input in the decisions that affect the future direction of the system? Does the franchisor involve franchisees input in decisions? Be sure you can answer the question

Franchising Business 11

How will I make money in this business? There should be a very simple answer to this question. It will not violate earnings claims restrictions for the franchisor to answer it because you are not asking How much money will I make? You simply want to know how money is made in the

business. Spend as much time as possible speaking to existing franchisees. Ask them if they would do it again. How long did it take them to recoup their investment? How much money are they making? Does the operating system work? Are they provided with good marketing programs? Do the franchisees get along well with each other and with the franchisor? What are the major problems with the business? Do they use all of the operating system? Is the franchisor’s ongoing support adequate and helpful? The answers to these questions will help you make your decision.

Step 3: Evaluate the Franchisor’s Business Plan

The franchisor should have a business plan for the system that covers at least the length of the agreement you are being asked to commit to. Ask for the plan for the market where you are going to locate the operation. Ask for their analysis of the competition. Ask how many units are being planned for your area and why that many. Why not more, why not less? Ask how much is going to be spent on marketing in your area. Ask to look at the operations manuals or at least to see an outline of them. This is important because the operations manuals are your guideline to a successful operation.

You need to feel comfortable that they are complete and clear and meet your abilities, needs, and goals. Ask to receive a full explanation of the initial and subsequent training programs. Ask how people are trained. Is it classroom or hands-on practice? Are there case studies and discussions or is it straight lecture? Ask for a full explanation of the pre-opening assistance offered by the franchisor. Understand any help franchisors give for site selection and lease negotiation. Be clear about what ongoing support the franchisor provides to the franchisees.

Special Edition: Why Choose Franchising?

"Franchising works by combining the drive and energy of the entrepreneur with the experience and expertise of the franchisor."
This wonderfully concise description of franchising comes courtesy of a franchisor from Down Under: Jesters Franchising, purveyor of Jesters Jaffle Pies (all-natural meat, vegetable, and fruit pies) with 50 units in New Zealand and Australia.
Worldwide, franchising is currently riding a wave of global growth unparalleled in its history. And for the right kind of person, franchise ownership can provide the perfect vehicle for achieving financial success. That type of person thrives in a space somewhere between the Lone Ranger and the Corporate Drone. In other words, franchising provides the opportunity to be master of your own financial destiny, while enjoying the support of an established organization and the resources it commands. Statistics vary widely on the success/failure ratio of franchised versus non-franchised startup businesses, but franchises invariably come out on top. Rather than cluttering the page with numbers, let's apply common sense: Comparing the payment of:

  • an up-front fee to buy into the support, reputation, and track record of a franchise system with
  • the research, development, and startup costs involved in creating your own, independent business, the odds of survival clearly favor franchisees.

As the truism says, franchising is aboutbeing in business "for yourself, not by yourself." For those new to the franchise business model, the notion of writing a large check at the outset (the franchise fee) and another every week or month (the royalty) may seem strange, objectionable, or even a deal-breaker. But those fees buy you security in the form of the experience and expertise mentioned above--including a proven business model, a system to make it work, the value of a recognized brand name, and a dedicated team of people whose only job is to help you, the franchisee, to grow and succeed. Why? Because every savvy franchisor knows one essential truth: the more each franchisee succeeds, the more the brand succeeds. In the race to grow and expand the brand, their money is riding on you. Despite the definite advantages and benefits offered by franchising, nothing is certain in business; success is neither automatic nor guaranteed. Assuming a solid business model, a brand that sells, and proper training and ongoing support from the franchisor, franchise ownership still requires hard work, with results accomplished over time. Otherwise, everybody would hop on board. Franchising is not for everybody. Franchising, like anything, has its drawbacks. These include lack of independence (no Lone Rangers, please), inflexibility (franchisees must follow the system), and the risks associated with the brand's overall performance. For instance, if some franchisees run a sloppy operation, it reflects poorly on the entire brand; if one restaurant makes headlines for customers falling ill, it can hurt sales nationwide for months or years. What follows are some of the major reasons to consider franchising. Remember, for both franchisee and franchisor, it's all about fit--not only in financial goals, but in personality, style, and values.

Be your own boss

This ranks atop of the many good reasons to choose franchising. The desire to control your own destiny, to build a business for yourself and a legacy for your children, has always been a powerful motivator in business and in life. If that's not enough on its own, further motivation is provided by the never-ending cutbacks in corporate life, not only in job security and benefits, but in pensions and health insurance for retirees. Franchise ownership combines a sense of independence (within limits) with a greater level of security.

Hard work is rewarded

There's nothing better for the entrepreneurial spirit than being rewarded directly for their effort. That usually is not possible in corporate life, where bonuses (if any) are based more on salary or employment level than on individual merit or performance. Hard work may be its own reward, but it's even better when the income directly reflects the output.

Proven business system

New ideas are great. They're what makes business and the world go round. From new restaurants and retail stores to products and services that make life easier, innovation is a key ingredient in success (as is consistency). But, as noted above, new businesses are prone to failure, and most new ideas take time to catch on. Franchising allows entrepreneurs to plug into a proven, successful idea and operating system, and focus their efforts on running the business, rather than on adjusting it in midstream. The wheel's been invented, perfected, branded, and marketed. As a franchisee, it's time to roll.

Training and Support

Franchisors want franchisees to succeed. In fact, they need franchisees to succeed. That's why intensive training is included in the franchise fee. It can take days or weeks, depending on the brand. Prior to opening for business, franchisees are trained in all the brand's specifics, from cash registers and point-of-sale systems to brand identity and culture, sales and marketing, and everything and anything that makes that brand unique. They also benefit from instruction in business, technical, financial, and management skills.
After opening, any franchisor worth its salt will provide not only ongoing technical training (new haircutting styles, new tax rules, new equipment, new technologies, etc.), but also mentoring and career growth opportunities for its franchisees. This can include resolving daily problems, marketing more effectively, and hiring, training, and retaining employees. Franchisees and their managers also benefit from business coaching and training--lifetime skills that are transferable to any other franchise or any other business.

Financing

To grow, franchisors must add new franchisees (but not at a rate too rapid to support their existing ones). If a franchisor finds a qualified candidate, it's in their own best interest to help get them on board. Yet for a startup, financing a new business can prove difficult, even with the weight of an established brand name and track record behind them. While few franchisors offer direct financial help, many are glad to provide referrals to known sources favorably disposed toward the brand, and thus more likely to view the candidate in a favorable light.

Site selection

For retail concepts, finding the best site (or sites) is do-or-die. Independent business owners often think they've located the perfect site--only to discover they've overlooked a key detail that a more experienced set of eyes would have spotted. Established franchisors have been through the site selection process hundreds (or thousands) of times before, and have access to extensive databases, demographic research data, and their own years of experience. Many have in-house site selection and build-out specialists, or work with national real estate consultants and local agents experienced at finding the optimal sites for their franchisees.

Peer networking

Competitive pressures are fierce in any business. Independent business owners can join local business associations or trade groups to network and discuss common problems - but who knows more about your business than someone who's also doing it? Peer support from fellow franchisees is an invaluable benefit of franchising. Since each franchisee has an exclusive territory, cooperation is not only possible, but is built into the franchising business model through annual conferences, regional meetings, intranet sites, and daily phone calls where franchisees can share tips, ask for help, and gain from the experience of older franchisees.

Brands

You can spend months thinking up a clever name, logo, signage, uniforms, and the exact look and feel you want to attract customers to your new business--but you won't know if it's truly effective until you open for business. But if you hang out a sign that says McDonald's, Dunkin'

Donuts, Subway, or Midas, everybody knows your name. Whether it's locals or strangers passing through, you have a built-in clientele. As noted, franchisees pay, sometimes dearly, for the right to use a brand name. But that investment is quickly repaid, many times over. The power of a well-known brand? Priceless!

Marketing/advertising

One of the sometimes contentious hot spots in franchising is the cooperative advertising fee, which can shave a couple of percentage points off your top or bottom line each week or month. The payback comes in the value of a national or international brand identity, national and regional advertising campaigns, and online access to promotional materials that can be personalized and tailored to your local market.

Bulk purchasing

Franchised businesses frequently have a pricing advantage over independent, non-franchised competitors. Whether the brand sells a product or a service, or is retail- or home-based, the greater the size of the franchisor, the greater its bulk-purchasing discounts and economies of scale - which creates a competitive advantage for franchisees scrapping for market share within their territory.

Exclusive territories

Another thing your franchise fee buys you is the right to an exclusive territory, designed to provide a sufficient number of the right kind of customers for your investment to succeed.

Franchisors generally are reluctant to award territories too large for a franchisee to serve adequately (and because they want to sell as many as they can, within reason), the smarter ones will err on the side of awarding territories that give their franchisees the best chance of success.

The ownership factor

Then there's the final advantage: pride of ownership. Even within a franchise brand, units or territories owned by franchisees do better than units run by corporate managers. Having a stake in the outcome of the operation, knowing that you will be rewarded directly for your efforts (versus pulling a salary), gives franchisees additional incentive to go that extra mile every chance they get.

Yes, franchising has many built-in benefits and advantages, but it's not for everybody. Some people thrive on the challenge of being out there on their own, inventing a new wheel each day, making all their own decisions, answering to no one but themselves (and their customers and creditors). Others crave the structure, reduced responsibility, and perceived security of a day job they can forget about as soon as they punch out or close the door behind them. And others still thrive on the challenge of climbing the corporate ladder, being an integral part of a team.

As with all things, priorities and values change, depending on one's station in life. Age, marital status, parenthood, and more can point a person in a new direction. What's yours?

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