FRANCHISING

Franchising
A web page information on franchising
Franchising is used to expand a business and distribute goods, and services. A franchise happens when a business “Franchisor”, licences its trade name and operating methods to an individual or group (Franchisee), in exchange a franchisee usually pays the franchisor an initial fee (called the franchise fee), and a continuing fee called a royalty.
In emerging industries franchising can act as a stabilising force, and as a force of consistency and as a way of educating new entry businesses in an industry. Often franchises can give business advice to skilled people who have skills for the industry but no experience of planning a business.

There are two types of franchising

Product distribution franchises
The franchisee Sells products made by the franchiser.
Often popular with fizzy drink manufacturers.

Business Format Franchises
A format is sold such as trade name, design, logo, and operating system. The franchise is often trained in how to provide these services.
A confidential operating and procedure manual is used to guide the franchisee.

Franchises can provide different opportunities, even in the same industry.

Types of franchise available
Single unit where the franchise just has one shop or centre.
Multi Unit Where the franchise has numerous shops.

An “area development” agreement determines what area is granted to the franchise.

A Master franchise is when a franchisee can sell franchises in an area to other franchisees.

Mass gathering locations are a useful place to put franchises such as an airport, or mall.

Opening up a business can cost more than the fees. Money is needed to maintain the business before
the company can make a profit, especially during the learning curve, remember the training cost.
In the USA the UFOC is the Uniform Franchise Offering Circular is designed to give the frnachisee a guide of what to do.

In many nations and States in the USA there is a rule that a potential franchise cannot sign a UFOC for a certain period of time. The franchisee must be given a cooling off period to research the franchise.

Advice
Get training before and after starting the franchise. Often a field consultant is used to examine how well franchises are doing.

Where is the best location a mass gathering location is important in some businesses but in some this would be paying a high rent or house price for space that is not required,

When establishing a location research the surrounding area, is the area saturated, does it have traffic links, how is safety, is it easy to get employees, size, appearance, visibility, environmental concerns, hidden cost.

Avoid encroachment onto another franchisees area.

Do market research

Make sure the stuff you buy from the franchise company is not at prices that the franchisee would have to sell at a loss. Often some companies us a con where they use the monopoly of being a company’s supplier to raise prices and make excessive profit on the company.
When evaluating a vendor make sure there is a consistent product, delivery is consistent, pro advice on pricing, sensible credit terms, documentation that is clear and detailed.

Often franchisees can join together and can even act as unions to change the system.

Customers accept consistency from a franchisee.

When trying to innovate and develop ensure the agreement allows this.
If the franchise goes well it might be an idea to set up more franchises make sure the agreement can allow this.

Questions to ask before buying a franchise
Has the franchisee genuinely researched the franchise,

Can a hobby be a business
Can such a franchise be afforded
Can the franchisee run a business.
Does the franchise have a history of legal issues
Is it likely to be a profit making franchise
Is the franchiser making money from the franchise business
Does the franchiser understand franchising,

Wanring:
Watch out for franchisee wannabes, and con artist companies, often some companies will try to defraud potential franchisees with fees that cover more than the franchisee can afford. Some create unrealsistic quality standards, that the franchisee cannot really meet. Some franchise companies do not provide help for the franchisee.

Franchises often

Famous franchises KFC,

Franchise opportunities
Fast food
Vending machines
Car repair
Private doctor surgery
Private dentist
Car cleaning
Carpet cleaning

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