What
is Franchising?
Definition
Franchising offers an excellent opportunity for you
to be in business for yourself. When you hear the word "
Franchise" you probably think of fast food restaurants
such as Burger King, McDonald's or Subway. But the truth is
Franchising is so much wider than that.
In
simplistic terms, franchising is where a successful business
format is replicated. This will involve the setting down into
an operations manual all the systems and procedures that the
business owner has found gives them the best chance of success.
Anyone joining the franchise will be expected to operate the
business exactly as set out in the manual.
The
purchase of a franchise will involve the payment of an initial
fee to the franchisor for the right to use the brand name as
well as ongoing royalty or management fees. The franchisor will
provide initial training and support and will have an ongoing
involvement in your business to assist you and support you in
all aspects of the franchise operation.
The
Practical Elements
Compared
to starting your own business from scratch franchising can provide
a relatively safer route into self employment. The franchisor
has established a tried and tested path through the maze, and
will have eliminated many of the mistakes that are often made
when starting a business. It is this experience and system that
you are paying for when you buy a franchise.
One
element with franchising to be wary of is also part of franchising's
strength. As a franchisee you will be expected to follow the
system that you have purchased. This can be difficult if you
are an entrepreneur. Franchisor's will always listen to new
ideas and improvements but for the most part will expect the
system to be followed to the letter. Each outlet should have
a standard look and feel which builds confidence in the consumers
eyes.
Whilst
franchising is a safer route into self employment, it is not
just a question of turning up, paying your money and being successful.
The franchisor will not do your work for you and cannot be expected
to. What is supplied is a proven format, name awareness, support
and guidance. It will be still be your hard work and skills
that make the business work in your area.
As
a franchisee you will have access to market knowledge, established
name awareness in the business sector that you will be operating
in, training and marketing help. You will often take part in
and contribute to national advertising campaigns which would
otherwise be outside your reach.
Franchisors
not only have sound training programs, but also knowledge of
financial requirements, marketing, competition & buying
contracts - knowledge that might take you years to collect on
your own.
Financially
You will pay the franchisor an initial franchise fee
and the costs of shop fitting (where necessary) together with
the costs of equipment required to run the business. Once established,
you will normally pay the Franchisor a further monthly payment
based on your turnover. This is known as royalties or monthly
management fees. Effectively this is where you are paying for
the ongoing support of the franchisor and his team. As the royalties
are based on your turnover, it can be clearly seen that it is
in the Franchisor's interest to help you succeed.
Relationships
A successful franchise relationship is like a partnership.
It combines your talents with the experience and knowledge of
the franchisor. It is important that before you purchase a franchise
you talk to existing franchisees. You need to establish whether
the franchisor has fulfilled his commitments to them and what
their experience has been. Talk to more than one and get a balanced
view.
With
franchising, you are in business for yourself not by yourself.
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