How to Start a Franchise
Starting a Turn-Key Small Business May be Advantageous for Some
Mar 10, 2009
Owning a small business is a major accomplishment for many entrepreneurs.
While some entrepreneurs have made the decision to start a business such as a restaurant, auto repair shop, or a dry-cleaning business, other entrepreneurs wish they could but are intimidated by the risks associated with starting a small business from the ground up.
Entrepreneurs will be pleased to learn of a turn-key business opportunity with a far lower risk of failure and an established customer base: the franchise.
What is a Franchise?
A franchise is a business system whereby the company headquarters (Franchisor) grants independent operators (Franchisees) the right to sell and distribute its products and services along with its trademarks.
Franchisees enter into a contractual agreement with Franchisors and purchase the franchise. Franchisees then pay Franchisors a percentage of monthly sales and a royalty fee. Thus, the Franchisee becomes the independent owner of a business whose product or service line has already been tested and established in the marketplace.
According to the International Franchise Association, 767,483 franchise business establishments employed approximately 10 million people with an output of $625 billion and a payroll of $230 billion by 2001. These franchises include fast food restaurants, retail food, full-service restaurants, and lodging.
Advantages of a Franchise
A franchise is essentially a business with products and/or services that have been tested and proved in the marketplace. Other advantages of a franchise include
- affordability
- faster expansion and achievement of key business goals
- 24/7 support from Franchisor on matters such as advertising, accounting, and personnel management
- established business plan, customer base, and core line of marketplace-proven products and/or services
- established, visible logos and trademarks
What the Entrepreneur Should Consider before Buying a Franchise
Before buying a franchise, the entrepreneur should sit down and research all that is involved in franchising from start to finish. The entrepreneur should then ask the following questions:
- What type of franchise does the entrepreneur wish to buy?
- What will be the location of the franchise?
- What is the cost of buying the franchise, and is it affordable?
- Does the entrepreneur have a comprehensive understanding of the business?
- How much experience is required, and in what areas of business?
- Can the entrepreneur be 100 percent committed to the business?
- Are other Franchisees in the same franchising system succeeding?
- Is the Franchisor profitable, successful, and selling products and/or services that are viable over the long term?
- What are the terms and conditions of the Franchisor-Franchisee contract?
- How much will the Franchisee need to pay to operate the business?
Entrepreneur Resources for Starting a Franchise
An excellent resource on the web for information on how to start a franchise is the International Franchise Association. Two other helpful resources are StartupNation and the U.S. Small Business Administration (SBA).
Franchise small business owners must realize that although the risk is significantly lower, it still takes a lot of hard work and dedication to make the franchise successful.
But understanding a franchise and its advantages along with important considerations and helpful resources may prove a viable alternative to the risks associated with starting a business from the ground up.
See related articles, How to Start a Business, Small Business Ideas, and How to Finance a Small Business.
 |
