What Is Franchising

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 to marketing system for creating an image in the minds of current and future customers about how the companys 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, eg, 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. You and everyone in the system are licensed to use the brand name and operating system. 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 reason destroys the franchised and company-operated units are successful. Think about it. If you think you bought a franchise, become an owner and you 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 for the royalty, 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 elses 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 elses brand and according to their operating 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 2500 franchise systems. These systems have in excess of 534000 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. Your success as a franchisee is based on the proven success of the company to operate Franchisor units and upon the success of existing franchisees. [It should be able to show that the business can be successful in various markets and in different conditions.] A company franchises because it wants to quickly and in great numbers replicate its successful company operations without significantly increasing its debt. Because it has been successful at teaching its own employees to operate the business, the company believes it can repeat the same success by teaching others to do it. 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 dont 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 to franchisors 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 doingnot just the job, but the profession? Have you made a decision to become a part of another organization? Remember that you joined in franchising someone elses 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 elses 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 open and financial resources to 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 territory has Franchisor 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 can not 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 marketing fee low 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 franchisees involve input in decisions? Be sure you can answer the question How will I make money in this business? There should be a very simple to answer this question. It will not violate restrictions earnings claims 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 franchisors ongoing support adequate and helpful? The answers to these questions will help you make your decision. Step 3: Evaluate the Franchisors Business Plan The Franchisor should have a business plan for the system that covers at least the length of the agreement are you 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 franchisors give any help for site selection and lease negotiation. Be clear about what the Franchisor provides ongoing support to the franchisees.
You are an executive being displaced or who are not satisfied with the manner in which you are being treated for his company. Recently you’ve been thinking of putting your resume in the street, but more often than not find you thinking about going into business for himself.

Whenever you think of going into business for yourself, think of the horror stories and statistics to read today in the U.S. and the Wall Street Journal about the failure rate of independent companies. These statistics dampen their desire to own their own businesses.

However, each week in the same newspaper ads you see companies offering franchise opportunities. If you want to be autonomous and are intrigued by the idea of operating a franchise and the desire to learn more about how to select the most suitable for you, read on.
What’s a franchise?

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

Franchising is a business strategy to secure and retain customers. It was a marketing system for creating an image in the minds of current and future customers about how the company products and services can help them. This is a method for distributing products and services that meet customer needs.

The franchise is a network of interdependent business relationships that allows a number of people to share:

* An identification mark

* One method of doing business

* A result 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, namely to acquire and retain more customers than its competitors.

There are many misconceptions about the franchise, but probably the most widespread is that you as a franchisee is buying a franchise. Actually you are investing their assets in a system to use the brand name, operating system and ongoing support. You and everyone in the system licensed to use the brand name and operating system.

The commercial relationship is a joint commitment of all the franchisees to obtain and retain customers. Legally you are required to achieve and maintain prescribed by the marketing and operating systems of the franchisor.

To succeed in the franchise, we must understand the business and legal consequences of his relationship with the franchisor and franchisees all. Their focus should be on working with other franchisees and managers of companies to market the brand, and fully utilize the operating system to acquire and retain 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 the company operated units are not within its competence. The opposite is true. They and you share the task of setting the mark as the dominant brand in all markets and entered reinforce familiarity with clients and confidence in the brand. Therefore, in this regard that are working together with others in the system. Other franchisees to share responsibility for the quality, consistency, convenience and other factors that define their vote and ensures repeat business for everyone. The increase in the value of the mark is a responsibility shared by the franchisor and franchisee.

An ownership mentality destroys the rationale for franchise and company-operated units are successful. Think about it. If you think you bought a franchise, you become a homeowner and start thinking and acting as a landlord. You want to change the system because of their needs, you wonder what you are paying the fee, and you begin to think of other franchisees as its competitors. For these and many other reasons not want to think of yourself as an independent owner.

As a franchisee you own the assets of his company, which has chosen to invest in other more that you make and operating system and ongoing support. You have your business assets, but that they are licensed to operate another que mas te management system.

Lastly, his desire to become a franchisee should be based on its belief that it can be more successful using other more that you make and operate according to their systems and methods, than you could, if he opened his own independent business and competed against him. You want to find a franchisor that is building a system of interdependent franchisees who are committed to getting and keeping customers, which is growing faster than the market, growing faster than competitors, and to do these things with a high margin. When you discover a franchisor understands that this relationship is worth consideration franchisor.
The strength of the franchise

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

In the U.S., there are over 2500 franchise systems. These systems have excess franchise 534000 units, representing 3.2% of all enterprises. This 3.2% of all companies controlling more than 35% of all retail services and income in the U.S. economy.

Franchisings advantages over going into business for you include the opening of faster, experience success before, developing a customer base faster, less risky and more profitable.

His success as a franchisee se basa en el successful franchisor to operate units of the company and the success of existing franchisees. [You should be able to demonstrate that the business can succeed in different markets and different conditions.]

A company franchises because it wants so quickly and in large numbers to replicate the success of your business operations without significantly increasing its debt. Because it has been successful in teaching their own employees to operate the business, the company cree that can repeat the same success of teaching others to do so.

In franchising, the operating system becomes identified with the mark or trade name that you leave as franchisee. Each franchise system uses precise methods for service and satisfy the customer. By documenting these practices, the franchisor institutionalizes shopping experience. Since customers dont surprises like this consistency in operations, unit to unit, se basa customer loyalty to the brand.

The franchise is successful because Americans are people of habit and are driven by brand when buying goods and services. We trust that the brands that we see everywhere, every day. We tend to be loyal to a product or service delivered to us the same way every time.
Investing in a franchise

Actually you’re taking your assets that you own, and invest in other more that you make and operating system. You always masters of their heritage. You always owns his company. But you do business as (DBA) a licensee of the franchise.
Before selecting a franchise …

Step 1: Assess your

His job is to make a business decision about whether franchisors a business opportunity meets your needs and if the franchisor can provide what they want and need in a franchisee.

We need to ask yourself basic questions:

What do you want from life right now? What are your desires, needs and desires? What are your goals, objectives and dreams? What you’re looking at a business? Has decided to stop what you’re now doingnot just work, but the profession?

Has taken the decision to become a part of another organization? Remember that you joined other franchises that you more business. You will be using its marketing system to generate customers and their operating system to meet them.

Does the type of personality that can accept the operation of businesses that agree to another more you plan without feeling that the commitments of their individuality? Are you interested in doing this kind of work for the duration of the agreement? Have you ever worked for a company five or ten years? Does related skills, knowledge, skills and work-related experiences similar to those required for the operation of the franchise that you are considering? Does the necessary financial resources to open and operate a successful business? Can the business support the needs of your lifestyle? Which of the franchises that are reviewing meet their financial needs in the short and long term?
Step 2: Assess the Opportunity Franchise

To assess the legal documents from a business perspective. To determine whether the franchisor has political territory that might make it less competitive franchisees in a highly competitive environment. Many potential franchisees erroneously believe that having a large territory is best for them. It could, indeed, the worst thing for them. For example, if you have very few franchisees in a market and competitors have more units you have, you can leave at a disadvantage in terms of dominating the market for your product or service in your area.

Look for a franchisor that can communicate a strategy not only for market presence, but to dominate the markets; seek a franchisor interested in establishing a competitive advantage and increased market share. If a franchisor can not talk about these issues, it is perfectly possible the franchisor is using franchising as a way to generate franchise fees and royalty revenue instead of establishing a competitive position in the market.

To assess the marketing and advertising to pay. Many franchisors and potential franchisees mistakenly believe that a low rate of commercialization is a good thing. Indeed, the marketing of pay should be related to the amount of money that each franchisee must contribute to support an advertising campaign that will generate enough new business and repeat for each one. A 1% of paid advertising can look good now, but when you need a 5% of everyone to be competitive, it may not be possible to convince all franchisees to participate.

To evaluate the effectiveness of the Franchise Advisory Council. Does the franchisor incorporate the franchisees input in decisions affecting the future direction of the system? Does the franchisor franchisees participate in the decisions of entry?

Make sure you can answer the question How am I going to make money in this business? There should be a very simple answer to this question. No income claims violate restrictions for the franchisor to answer, because you’re not asking How much money will I win? You just want to know how money is made in the business. Spend as much time as possible speaking to existing franchisees. Ask if they would do it again. How long did it take them to recoup their investment? How much money are you doing? Does the operating system works? Are always with good marketing programs? Do franchisees and get along with each other and with the franchisor? What are the main problems with the business? Do you use the entire operating system? The franchisor is the constant support appropriate and useful? The answers to these questions will help you make your decision.
Step 3: Evaluate franchisors Business Plan

The franchisor must have a business plan for the system to cover at least the duration of the agreement which calls for commitment a. Ask about the plan for where the market is going to locate the operation. Ask for his analysis of competition. Ask how many units are planned for their area and the reason that many. Why not, why not less? Ask how much will be spent on marketing in your area.

Ask to see the operations manuals or at least to see a description of them. This is important because the operations manuals are its guideline to a successful operation. You need to feel comfortable that are complete and clear and comply with their abilities, needs and goals.

Ask to receive a full explanation of the initial and subsequent training programmes. Ask people how they are trained. Is the class or hands-on practice? Are there case studies and discussions or is straight conference?

Ask for a full explanation of the pre-opening of the assistance offered by the franchisor. Understand any help give franchisors for site selection and lease negotiation. Be clear about what the ongoing support of the franchisor provides the franchisee.

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