The Guide to Starting Your Own Franchise

Fact #1 The highest number of franchise establishments are fast food restaurants.

 Almost 50% of all retail sales in the United States are controlled by franchises.

From grocery stores, to car repair shops to delivery companies, franchises are everywhere. 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.

Franchising is a network of interdependent business relationships that allows a number of people to share brand identification, have a successful methods of doing business and 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.

Types of Franchises

Many people are not aware that there are two types of franchises:

  • Product / Trade name
  • Business Format

In Product / Tradename Franchises, the franchisee has use of a product or trade name but has no supporting relationship with franchisor. This means that the franchisee basically operates the business independently but the franchisee does benefit from the marketing and advertising efforts of the franchise system.

The Business Format Franchise is faster growing and is the format most people are interested in today. It is characterized by an ongoing business relationship between franchisor and franchisee. The franchisee is offered not only a trademark and logo but also a complete operational system.

Advantages of Franchise Ownership

The benefits of franchise ownership are only as strong as the franchise you select. Generally speaking, the benefits can be classified in several broad areas:

Overall Competitive Benefits: The public has become accustomed to a certain level of quality and consistency from brand name franchised locations. Whether you believe a company’s product is superior or mediocre, the secret for their success is usually that it is consistent.

Pre-Opening Benefits: Franchisors have made mistakes. Another advantage of franchising is that they have survived their mistakes and can guide their franchisees not to make the same mistakes. Upon joining an established franchise system new franchisees generally receive comprehensive initial training in the operating of the franchise system, its product, services and methodologies. In essence, the major stumbling block for pre-destined failure is removed by the franchisor – lack of preparedness.

Ongoing Benefits: In exchange for paying an ongoing royalty and other payments, franchisees generally receive continual training programs and other ongoing home office and field support and assistance.

Fact #2 Buying a franchise more than doubles your chance to survive as a business owner. And by picking the “right” franchise, your chances can improve beyond 95%.

Steps to Acquiring a Franchise

Step 1: First, you must determine if you would function well as a franchisee.

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.

 Step 2: You then have to choose the right franchise among the thousands of franchise selections available.

You also need to look for a franchisor which is interested in establishing a competitive edge and increasing market share. Evaluate the marketing/advertising fee. The 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.

Step 3: After you narrow down your franchise choices, you must then thoroughly investigate each opportunity.

Generally, a franchise information package will contain a letter, a brochure describing the business and a qualifying questionnaire.

Step 4: Once you have made a choice you must analyze and understand the franchise agreement and, if possible, negotiate points of disagreement with the franchisor.

The disclosure document will provide you with a wealth of information that you should have reviewed by your accountant as well as a qualified franchise attorney.

Step 5:

Finally, you will have to put together a financial package to fund your franchise investment.

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