What is Franchising

Franchising is a partnership between franchisor and franchisee where franchisor provides expertise on a proven business plan. This expertise is normally transmitted through training and ongoing support. The franchisee brings to the table motivation - the best motivation for a successful business which is private ownership.

In very general terms, a franchise exists if one party grants another the right to distribute services, while using the grantor's trademark, logo, trade name, commercial symbol or advertising. In addition, the grantor prescribes a marketing plan or allows the franchisee to be involved in group distribution. Payment is made for the right to become or remain a distributor or dealer, above and beyond the wholesale price of initial inventory or goods.

Why Franchising

A franchise is normally a proven way of doing business. Even though it is not a guaranteed formula for success, much has been written and there is additional research that has been done to support the concept that it is very often economically advantageous to capitalize on someone else's game plan and not have to spend time and money reinventing the wheel.

A franchise system most often provides a security blanket of working with an expert while still maintaining one's independence of being one's own boss. The extent of independence depends on the type of franchise one purchases and should be evaluated in light of one's individual personality based upon how much free expression as opposed to how much control the franchisee would feel comfortable with.

A franchise normally provides training and ongoing support and therefore previous experience is not normally necessary. There are however exceptions to this general rule.

According to the International Franchise Association (IFA), Franchising constituted over $800 billion dollars in sales in 1992 and sales are estimated to reach $1 trillion dollars by the year 2000. Currently, over 40% of all retail sales are made by franchise companies and 1 out of every 12 business establishments is a franchise. No wonder the Department of Commerce has called franchising "the leading method of doing business in the 1990's."

What makes franchising such a popular way for entrepreneurs to go into business? 94% of franchisees reported their own franchise operation to be successful as reported by a Gallop survey. A new franchise opens every 8 minutes of each business day!

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