Why Franchise?

Business format franchising is the granting of a license by one person (the franchiser) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchiser and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.

Franchises Are...

  • Successful: because they use a proven business formula they reduce the incidence of failure
  • Profitable: because they give you immediate benefits of scale and brand recognition
  • Saleable: because people buy success
  • Protected: You get exclusivity in your territory
  • Synergistic: You benefit from the power of using the same trademark as other stationers throughout the market place
  • Value: You benefit from buying imported good value products sourced globally with other franchisees around the world

Franchise Statistics

  • Franchise business account for 50% of all retail sales in the United States.
  • Franchise business employ more than 10 million Americans
  • There are an estimated 1500 franchise companies operating in the U.S. doing business through more than 316,000 retail outlets.
  • Seventy-Five (75) industries use franchising to distribute goods and services to consumers.
  • A 1999 study by the United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business.
  • A U.S. department of commerce study conducted from 1971 to 1997 showed that during that time less than 5% of franchise businesses were closed each year.
  • Compare that to a U.S. Small Business Administration study conducted from 1978 to 1998, which found that 62% of non-franchised businesses closed within 6 years of their existence due to failure, bankruptcy, etc.
  • Total sales by franchised businesses are projected to reach $1 trillion, this year.
  • 1 out of every 12 businesses is a franchised business.
  • A new franchised business is opened every 8 minutes of every business day.
  • Before taxes in 2000, the median gross annual income of franchisees was in the $75,000 to $124,000 range with over 30% of franchisees earning over $150,000 per year.

Advantages To Buying A Franchise

  • The Marketplace has already been checked out by the franchiser and determined the system to be successful.
  • The franchiser utilizes collective buying power and passes the discounts on to you.
  • The franchiser supplies local and national advertising for the franchise operation as a whole.
  • Supervision, training programs and consulting are readily available from the franchiser.
  • Managerial, operational and accounting systems are in place to facilitate your success.
  • Franchisers insist that you are adequately capitalized.
  • The franchiser provides ongoing research and advertisement.
  • Location! Location! Location!
  • Franchises have vested an interest in your success.
  • Franchises have a 97% success rate. Most people can't even predict that they can keep their jobs with a 97% certainty.
  • In a Franchise you are a business for yourself, not by yourself.

Disadvantages To Buying A Franchise

  • You have to pay the franchiser royalties even when not making profit.
  • The contract with the franchiser must be renewed after a certain period of time.
  • There is a lack of flexibility because the franchiser dictates business methods.
  • The franchiser's problems are also your problems.
  • You may be forced to buy products by the franchiser rather than the most cost effective product available.
  • You don't get to make all of the decisions in how to run your business.
  • In some ways, owning a franchise is like a cross between business ownership and employment.

Questions To Ask Yourself

  • How much capital do you have to invest?
  • How many liquid assets do you have?
  • Do you require a specific level of annual income?
  •  Are you interested in pursuing a particular field?
  •  Are you interested in retail sales or performing service?
  • Do you want a part-time or full-time opportunity?
  • How many hours are you willing to work?
  • Do you want to operate the business yourself or hire a manager?
  • Do you want to have employees?
  • Do you want to have inventories?
  • Do you want to have Accounts Receivables?
  • Will franchise ownership be your primary source of income or will it supplement your current income?
  • Would you be happy operating the business for the next 20 years?
  • Would you like to own several outlets or only one?

Is Franchising Right For You?

  • Can you follow somebody else's rules, even when you think you have a better way?
  • Do you think you can change the franchiser's system after you are on board?
  • Do you think that your local market is different from all others in the system and that the franchiser will modify the system just to suit your needs?
  • Can you trust (with some honest skepticism) that your franchiser is working for the benefit of the entire system - even when his or her decisions do not necessarily go your way?
  • Are you willing to share financial information and provide required reports each month? Are you prepared to accept coaching and advice on business practices from your franchiser's field staff?