What is franchise is a detailed site on Google that portrays a professional series of articles that are intended to provide the readers with good information and ideas on the subject of building and growing a franchise type business model.
May 23rd, 2012
What Is Franchise?
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. 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's 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 else's 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.
A franchise business is a business in which the owners, or franchisers, sell the rights to their business logo and model to third parties, called franchisees. Franchises are an extremely common way of doing business. In fact, it's difficult to drive more than a few blocks in most cities without seeing a franchise business. Examples of well-known franchise business models include McDonalds, Subway, UPS, and H & R Block. In the United States, there are franchise business opportunities available across a wide variety of industries. Investing in a Franchise Business
To invest in a franchise, the franchisee must first pay an initial fee for the rights to the business, training, and the equipment required by that particular franchise. Thereafter, the franchisee will generally pay the franchise business owner an ongoing royalty payment, either on a monthly or quarterly basis. This payment is usually calculated as a percentage of the franchise operations gross sales.
After the contract has been signed, the franchisee will open a replica of the franchise business, under the direction of the franchiser. The franchisee will not have as much control over the business as he or she would over their own, but may benefit from investing in an already-established brand. Control of the Franchise
Generally, the franchiser will require that the business model stay the same. For example, the franchiser will require the franchisee to use the uniforms, business methods, and signs or logos particular to the business itself. The franchisee should remember that he or she is not just buying the right to sell the franchisers product, but is buying the right to use the successful and tested business process. The franchisee will also usually have to use the same or similar pricing, in order to keep the advertising streamlined. For example, if you saw an advertisement for $75 tax preparation from a well-known tax preparation franchise, you would expect to find this deal in any one of the franchise operations you went into. Aside from using the business model determined by the franchiser, the franchisee will otherwise remain an independent owner of the franchise.
While there are many benefits to investing in an already-successful franchise business model, there are drawbacks as well. As with any investment you make, you should do your research thoroughly before you make any franchise purchasing decisions. If you are considering buying into a franchise, you should contact an experienced franchise attorney for further assistance.
There are excellent alternative franchises businesses available as well. Franchise 2.0 is being seen on Google as a viable alternative to cost prohibitive franchises, and seems to offer a better rate of return on money spent.
