What is Franchising

Brand Awareness

When you franchise, you create a brand customers come to expect, no matter where you serve them. This uniformity and replicability drives the success of franchises. Customers know this and seek out the reliability and familiarity of their favorite brands.

Control & Autonomy

Franchising is an agreement that outlines rules laid out by the franchisor. It permits use of the franchisor’s brand name, operations, equipment, and more, that have been fine-tuned and perfected over the years. Franchisees control their units, but only within the scope of the franchisor’s system.

Equipment & Supplies

Franchisors provide their franchisees with knowledge of what to buy and in what quantities. They even go so far as to negotiate reduced prices based on purchasing power.

Economies of Scale

Sole entrepreneurs have the buying power of one. Franchising allows for bulk purchasing rates. Having the power of a recognized brand often eases the mind of a supplier in extending credit.

Legal Disclosure

Franchisors are required by law to disclose certain information about their business in documents regulated by federal and state law. If you’re looking to buy an existing business from an individual, can you (and your attorney) trust the seller? And if the seller disappears, where’s your recourse?

Financing

New businesses require startup capital, especially for retail space and equipment. Franchisors may not supply financing, but many have relationships with lenders who will view that brand’s referrals more favorably than an independent business owner just starting out.

Operating System

Franchising is a ready-made system. One that provides a complete, out-of-the-box business, ready to go. Success of franchisees comes by way of monitoring and ensuring adherance to the system.

Marketing

Marketing through franchising harnesses the power of the entire brand – including regional advertising in the form of a monthly contribution to a marketing fund.

Franchising is the process by which an individual establishes a relationship with a successful business to use its systems and capitalize on its existing brand awareness to obtain a quicker return on investment.

Franchising

Utilizes other individuals’ capital and resources to aid in expansion of the business. The best way to think about franchising is that it is a system focused on pooling resources and capabilities. Typically, a license is granted by the franchisor to the franchisee for the development of a business, an operating system for the business and a trade identity under which the business will operate. Additionally, structural emphasis is placed on the franchisee such as maintaining specifications, standards and operating procedures that will reflect the franchisor’s format, system and quality and service standards.

Corporate Growth

In short, means that a company is using its own capital to expand the business. Furthermore, the company will be responsible for all aspects of setting up the business, hiring and recruiting human capital, investing in machineries, etc. The risk associated with corporate growth can include expansion outpacing the ability to effectively manage, stretching resources too thin, capital strains, or a divergence from the business’ core mission.

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Speed to Market

Franchisees utilize the knowledge of pre-opening steps to ensure exactly what is needed to set up their location. The research has been done by the franchisor and franchisees are provided this information to quickly open their business.

Faster ROI

When a known franchise brand is advertised, customers come ready-made and cash flow begins flowing faster than trying to build a client base and local reputation.

Training

Franchisors provide new franchisees with extensive training in every aspect of their new business, from flipping burgers to which point-of-sale system to buy. And many offer advanced training to help you stay on top of your business as it grows.

Franchisor Support

Many franchisors provide field support specialists to help keep their franchisees on track, training them to become managers and leaders “working on the business, not in it.”

Peer Support

As a franchisee, you receive ongoing support not only from your franchisor, but also from your fellow franchisees. This can be locally, regionally, at annual national conventions, through an online support network, or just by picking up the phone.

Product/Service Innovation

Franchisors develop new products, try them in their company-owned stores or with other franchisees willing to test them. While it may cost a franchisee some money to install new equipment or introduce a new store design, the ROI is more likely than with your own new great idea.

Site Selection

There’s a lot of competition out there in the retail sector. A franchisor can provide teams of real estate experts, advanced site selection software, and years of experience in finding the best sites for their brand. They also can provide expert assistance negotiating leases with landlords — an often ignored, yet critical component of profitability.

Exit Strategy/Resale Value

Selling an independent business can be very lucrative — but the pool of potential buyers is smaller than with a known brand. With a franchise, there’s always a buyer of last resort: the franchisor, who can always buy your unit and run it as a company store until they find a suitable buyer.