Does franchise ownership interest you?Franchising is often described as a business or industry. It is not. Franchising is a method of doing business. You can become a business owner under a franchise agreement.
By: Red Wing SCORE, The Republican Eagle
Franchising is often described as a business or industry. It is not.
Franchising is a method of doing business. You can become a business owner under a franchise agreement.
Franchising has been adopted and used by a wide variety of industries and businesses as a means of efficient expansion. Under a franchise system, an individually owned business is operated as though it were part of a large company.
The parent company acts as the umbrella organization. This company authorizes the franchise outlets to use its trademark and benefit from the image of a larger organization.
Generally, the franchisor or umbrella organization will dictate standard design for business facilities; specify the use of certain equipment, products or services; and provide instruction on operating the franchise in accordance with the standards set forth for all franchise operations.
While most people think of a franchise as being product or service oriented, such as the case with fast food, restaurant or hotel businesses, franchises also are found in the wholesale and manufacturing industries.
Franchising offers many advantages to an entrepreneur.
As a small businessperson you can “buy into” a well-established venture, with a proven formula for success. This offers you significant odds for success, when the franchise formula is carefully followed.
The franchisor should provide solid advice (often mandates), site selection, management, advertising, accounting and product research and development to aid the overall franchise organization’s success. Greater efficiency and profitability result from uniform coordination.
Is the concept of a franchise right for you?
To make your business a success, you must be willing to accept the orders, vision and procedures set forth by the franchisor. Any ideas you have for customizing the proven formula must typically be approved by the franchisor.
In a sense, you forgo some of the independence you may have sought as an entrepreneur. Of course, the trade off in autonomy for the support system must be weighted against the increased chances for success.
As in any small business, long hours and hard work are required. There is usually a long payout period in the business. With many franchises, it’s likely to be three or more years before you can begin to take money, other than your salary, from the business.
However, there is not guarantee that you will earn a profit any sooner than if you started a small business on your own, rather than going for franchising. Carefully evaluate whether a particular franchise is right for you.
To request a free copy of the pamphlet “A Consumer Guide to Buying a Franchise,” call the Federal Trade Commission Public Reference Branch at (202) 326-2222. Stay on the line for a specialist — do not enter the voice mail selection system for this item.