Franchising Advantages
History of Franchising
The word franchise is rooted in the French word "franchir" meaning to free. This privilege of freedom is at the core of the possibilities that can be realized through franchising.
From about 100 franchising companies in 1950 to approximately 2,500 franchising companies today - in the U.S. alone - franchising continues to grow, with the total number of franchised business units now surpassing 900,000. A report from Price Waterhouse Coopers found that franchised businesses are responsible for:
- $2.3 trillion in total economic output
- 11.4% of the U.S. private sector economy
- 1/3 of all retail sales in the U.S.
- 15% of all private sector jobs
In the United States, franchising has demonstrated an ability to flourish regardless of economic factors and the outlook for franchising in the coming years and beyond is ripe for continued growth. As the population grows, so does their need for a wide variety of products and services, almost all of which fit into the franchise arena. Currently there are over 200 types of businesses that are franchising and the U.S. Department of Commerce predicts that by 2010 one out of every two businesses will operate under some form of franchise system!
Franchising Works
As a business owner you have developed a proven system. You have faced the challenges of starting the business and created and refined the strategies and procedures responsible for its success. You know how to market your business, where to buy your products, who to hire, how to train employees and how to make your pizzas, cloths, dog baskets, or widgets better than everyone else. Many of these have been learned through hard, exhaustive and expensive mistakes – mistakes which you now know not to repeat. This experience is invaluable!
Franchisees benefit from the lessons you have learned, enabling them to open their business faster and less expensively. Being a part of your system allows franchisees to integrate your methods for generating sales and operating the business thus increasing their likelihood of success. Sharing these valuable experiences with your Franchisees is what allows your Franchisees to be in business "FOR themselves and not BY themselves."
As the franchisor, you benefit from having franchisees that will help you overcome and conquer the three biggest obstacles to expansion: money, time and people.
- Money. Franchising allows you to use other people's money to grow your business. The cost of expansion is shifted to the franchisees, as they bear the financial obligation of opening the business, purchasing inventory, providing personal guarantees on leases, managing employees and providing the working capital. In most cases, the cost for a complete franchise startup program and first year marketing expenses necessary to generate franchise leads is less than the cost of opening one additional company owned location. The best part is that franchising provides you with a perpetual, residual revenue stream in the form of royalties, rebates and supplies that will continue to reward you well into the future.
- Time. Competition is quick to move on market opportunities. Franchising provides a vehicle for growing your business quickly, whether your intent is to grow locally, regionally, nationally or internationally. The best part is that you will continue to grow and expand as long as there are available territories and people that want to purchase the product or service that your program offers.
- People. As an owner, you understand that good employees are hard to find. You also know that dealing with personnel and human resource issues consumes time that could otherwise be spent expanding your business. So why not build your business around other owners - people that care about the business as much as you do? Remember while this is your concept and your business model, the individual franchised businesses belong to the franchisees. They own it. They work it. They are financially and emotionally invested in it.
