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Franchising Overview

The Small Business Administration defines a franchise as "a legal and commercial relationship between the owner of a trademark, service mark, trade name, or advertising symbol and an individual or group wishing to use that identification in a business." When franchising a business, the most widely used model is called a business format franchise. Starting a franchise under this model involves the franchisor granting a franchisee the right to market goods and/or services in a specified territory using the franchisor’s trade name and system of operation in exchange for payment of a franchise fee and usually, ongoing royalties. To assist the franchisee in starting a franchise, franchisors provide support, which may include site selection assistance, initial training, approved sources of supply, and advertising and marketing programs.

Many established national and international companies have chosen to franchise their business due to the fact that franchising provides the opportunity for maximum market penetration with minimum financial risk to the franchisor. At the same time, a franchise system permits the franchisor to maintain maximum control over the individual franchise locations thereby protecting the reputation and system of the franchisor. Franchisees benefit by investing in a proven system of operation that eliminates many of the pitfalls associated with starting a business.

The Power of Franchises!

  • Franchise businesses account for approximately 50% of all US retail sales
  • 1 out of every 12 businesses is a franchised business
  • A new franchised business is opened every 8 minutes of every business day
  • More than 75 industries use franchising to distribute their goods and services
  • 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.
  • Total franchised sales are projected to reach $1.7 trillion this year
  • In 2000, the median gross annual income, before taxes, of franchisees was in the $75,000 - $124,000 range, with over 30% of franchisees earning over $150,000 per year.
  • Franchisor business practices are tightly regulated by the federal government for your protection
  • Franchisors have a vested interest in your success
  • The marketplace has already been checked out by the franchisor and determined the system will work in that market
  • The franchisor utilizes collective buying power and passes on the discounts to you allowing you to be more profitable.
  • Franchisor supervision and training programs are available on a regular basis
  • Managerial, operational and support systems are in place to facilitate your success.
  • Ongoing research and product development is provided by the franchisor saving you time and money
These are all aspects of business that you would need to figure out if you were to do it on your own.

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