The franchising industry has gotten a lot of notice of late from people who are using the tough economic times to re-evaluate their futures. Perhaps you were laid off from a company where you’d worked for decades. Loyalty to employees is no longer a strong suit in corporate America. Perhaps you were determined to take your career into your own hands and not be at the whim of corporate dictates.

It’s no wonder franchising is getting a second look by many during these tough times. It offers a more stable business model and a greater chance for success. But lets step back to the very basics and answer a few questions before beginning the search for a great franchise opportunity:

What Is Franchising?Franchises are generally known to the public under well-promoted brand names like Kentucky Fried Chicken or Burger King not the names of the individual franchise owners. As a result, the general public may not realize that many businesses like the dry-cleaning shop or pizza parlor that consumers utilize everyday are in fact franchises or have the potential to expand their business through franchising.

Definition
Historically a franchise is a business organization in which a company already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee. In more recent times it includes business arrangements known as franchises, licenses, dealerships and distributorships, to name a few.

Regulatory Definition
The Federal Trade Commission identifies three definitional prerequisites to coverage of a business-format or product franchise.
1. Trademark: The franchisor offers the right to distribute goods or services that bear the franchisor’s trademark, service mark, trade name, advertising or other commercial symbol.
2. Significant Control or Assistance: The franchisor exercises significant control over, or offers significant assistance in, the franchisee’s method of operation.
3. Required Payment: The franchisee is required to make any payment to the franchisor or an affiliate, or a commitment to make a payment, as a condition of obtaining the franchise or commencing operations. There is an exemption from coverage for required payments of less than $500 within six months of the commencement of the franchise.
If a business arrangement includes all 3 elements, it’s a franchise. It could be called a license, dealership, distributorship, or association but it’s still a franchise and must comply with the rules of the Federal Trade Commission and certain state regulatory authorities.

Business Definition
Franchising has been seen as:
A method of GROWTH;
A method of MARKETING;
A method of DISTRIBUTION;
A method of CAPITAL ACQUISITION;

And increasingly, franchising has become:

A method of EMPLOYMENT
For a company wishing to expand to multiple locations, franchising offers the opportunity to secure many locations operated by “dedicated” managers rather than company employees. A franchisee is dedicated because he or she has business ownership (operating under the franchisor’s name and guidelines) and have made a time and capital investment. A franchisee will sell more, service customers better, and control costs more tightly than a company employee because their name, resources and continued employment are on the bottom line.

What Franchising is NOT
1. Franchising is not a single industry. There is no such thing; over 300 different industries and 5000 concepts utilizing franchising to expand their brand.

2. Franchising is not a game. Franchising is not about selling some franchises. It’s about building a company - a serious business venture. A person who franchises his restaurant to others will still be in the restaurant business. They will have to develop new menu items, new promotional programs, new decor, and more to expand the concept.

Franchising offers a serious business opportunity for entrepreneurs. Get started searching for the right franchise opportunity.

Written on September 28th, 2009 by Joseph in Franchise Industry.

Source: Brand Expansion Hot Press