Is franchising a business system that will stand the test of time?
While most people associate franchising with the McDonald's fast food
chain and believe that it found its start there, the concept of franchising can
actually be traced back to the Middle Ages. Historically, there is
evidence of both the government and the church granting individuals exclusive
rights to collecting fees and taxes and keeping the majority of the monies for
themselves while passing the balance to the governing or clerical bodies
under whose auspices they are acting. The concept was further evidenced in
particular merchants being granted the ability to hold fairs and markets
in their local areas once again with the permission of the government or
church. Eventually both the collections and commerce conducted were
incorporated into society and written into European Common Law.
Franchising evolved further during the 1840's when Germany's beer industry
extended exclusive rights to sell their product to certain taverns and in
1851 when the Singer Sewing Machine Company chose to sell its machines
through a limited number of chosen vendors. The framework we now know as
franchising continued to grow and eventually encompassed common practices
in the automotive and oil industry.
However, franchising received its biggest growth as a result of historical
and demographic conditions that existed in the United States during the
post WWII era. The challenges facing society were threefold and these factors
served as a combination to spur growth and cause innovative solutions to
come about. The first factor was that the country's men were returning
from the war and seeking employment in great numbers. The second factor was
that during the men's absence, women had taken to the workplace and this
cultural change extended women both freedom and economic empowerment that they had
not experienced until that date and were loathe to give up when their men
returned. The third factor was the biggest boom in population growth
represented by those born between 1946 and 1964. This population, known as
the "Baby Boom," moved through the fabric of American society and had a
huge impact on every aspect of culture and economy. These factors came in a
sequence that served to create a great demand for more jobs and the need
for an innovative way to create them. Franchising became one such vehicle
whereby businesses, such as franchisor McDonald's, designed a successful
format with which to sell a product or service. The business then created
a recognizable identity and transferred this system including operational,
technical, and managerial training, support, and expertise to a franchisee.
This dynamic growth was not without its negative aspects. The popularity
of franchising also created a faction of dishonest, unscrupulous franchisors
whose goal was to take advantage of franchisees through the
misappropriation of funds. Despite this negative segment, franchising managed to emerge as
a viable business framework that can provide franchisees with a framework
that can be traced all the was back to the Middle Ages!
The FranchisesForWomen team represents over 30 years of franchising
experience. We encourage you to seek advice from our experts by calling
1-888-363-3390 or e-mailing us at contactus@franchisesforwomen.com today!
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How can I decide if a franchise is the best business format for me?
Searching for a new business is a daunting prospect and can be an
overwhelming task. The most challenging aspects include finding a business
that would best suit your individual needs and talents and provide you
with the lifestyle that you are seeking. When entrepreneurs were asked the
reasons why they had chosen to be in business for themselves, there were
several common responses. Their reasons included financial freedom,
flexibility, the ability to create a business representative of their own
efforts, and the opportunity to utilize more of their skills and talents
and build a business reflecting their abilities. Most everyone can relate to
these reasons, but any woman who has been in the business world can also
cite additional reasons why being in business for oneself would be
appealing. Women face unique challenges in the business world. Women face
the demands that not only include overcoming gender bias in the workplace,
but also having to juggle home and career unlike their male counterpart
who is free from such restrictions. While franchising is a vehicle that
appeals to people of all ages, and diverse business backgrounds, it has come to be
especially so for women as it does not have the limitations that women so
often face in the business arena. Women can create the level of income
they aspire to, as there is no glass ceiling in franchising. Whether one has
more or less business experience does not serve as a detriment, and success in
franchising is not contingent upon fitting into a defined mold or gender
and is therefore not restrictive to women.
Franchising appeals as much to those with a great deal of business
experience as it does to recent college graduates. It is as accessible for
a woman who has been in the corporate arena as it is for a woman returning
to the business world after being at home raising children. The wide variety
of franchising businesses provides many franchise choices that would greatly
benefit from the repertoire of unique skills that women bring to the
table. Franchising is also appealing because it is an accessible business vehicle
to those who have a little to invest as well as those who have a lot of
funds available to them and is able to provide investors of all levels
with the opportunity to realize incredible personal and financial benefits.
That said, it is still important to note that franchising is not for
absolutely everyone. Keep in mind that while you have the ability to tap
into your skills and utilize them to the fullest, franchises have achieved
their success through a prescribed formula that is based on established
standards and rules and when you purchase a franchise, you are investing
in this proven system. Before you choose a specific franchise, make sure that
you are in agreement with the rules that you will be obligated to uphold
and that the franchising model is one that is compatible with your personal
and business goals.
Your ultimate success as a franchisee is contingent upon the proven
success of the franchisor you have chosen and if you choose a franchisor with an
established product or service possessing a well-recognized brand name,
then you will also benefit from their history of success. Keep in mind that
while franchising is a very highly regulated industry, it is still your
responsibility to ask the right questions, seek all the advice you need to
make an informed decision, and be clear about your goals and objectives
before investing in any franchise opportunity.
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How popular are franchises?
With the current economic conditions and constant changes in today's
business world, franchises have become more successful than at any other
time in history. There is a myriad of choices available to you in the
franchise industry throughout North America. In Canada, approximately
1,800 franchise systems are currently in operation in approximately 75,000
outlets, 67,000 of which are owned by franchisees. In the U.S., franchises
accounted for $1 trillion in annual sales and with 320,000 franchised
locations in 75 industries, franchises represented more than 40 percent of
the retail sales in the country. This growth has experts estimating that
in 2000 alone franchises provided employment for 1 million Canadians (with
155 new jobs being added daily) and 8 million Americans with about one in
twelve U.S. retail businesses being a franchise. This explosive growth is not
only of benefit to the franchising industry, but also indicates that there is a
great chance of finding successful opportunity for those interested in
participating in the franchising industry!
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Why should I choose a franchise instead of starting my own business?
Starting a new business is not only complicated and costly, but also comes
with great risk. Statistics indicate that 80% of new businesses fail each
year and that starting a new business from scratch requires entrepreneurs
to invest thousands, millions or even billions of dollars to create a
business model that may not be successful even with their best efforts and huge
amounts of dollars behind them. A franchise provides franchisees the
opportunity to be in a business that has an established concept with a
proven track record. This greatly reduces the risk of failure and the
chances of a successful outcome are greatly improved. Anyone seeking to go
into business for himself or herself would be well advised to choose a
vehicle that can maximize the chances of a positive outcome and minimizes
the risks.
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How profitable are franchises?
Franchises have a better success track record than do start up businesses,
but like any other business, no franchise can provide a guarantee for
success in the business arena. This is also the case with regard to
profits you will generate as a business owner. While profit margins are often
indicative of your business acumen and ability to operate your franchise,
you should still endeavor to get a document from a potential franchisor
that would give you an indication of what a franchise would typically generate
in earnings. If the franchisor were reluctant to provide you with this
information, there are other channels through which to secure such
information. You may find what you need from other franchisees already
doing business in the market in which you are interested. Remember that it is
advisable to get in touch with more than one franchisee in order to
determine a franchise's profitability. Do not base your decision upon one
negative operation as it would not be a fair representation of the broad
picture any more than one positive interaction with another franchisee and
their operation would insure success.
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What should I know before deciding on a particular franchise?
When buying any new business it is critical that you become an informed
and educated consumer and conduct the intense investigative process known as
due diligence. With regard to franchises, a document known as the UFOC
(Uniform Franchise Offering Circular) should be acquired. The Federal Trade
Commission (FTC) requires this document to be prepared in accordance with
its prescribed standards. This document provides information about the
franchise including background information about the principal owners,
their audited financial information, and current franchise agreements. Before
committing to a franchise, it is highly advisable that you contact the
list of franchisees included in the UFOC. Assert yourself and generate as many
opportunities as you can to gather a wide variety of information that will
then give you an accurate representation of the franchise. During your
investigation, remain diligent and do not let yourself be persuaded or
discouraged easily. Remember that you can determine the effectiveness or
lack thereof of the business model through diligent fact-finding and
examination.
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How do I know if I can afford a franchise?
As with any investment, prior to deciding on any franchise, make
absolutely certain you have carefully examined your goals and know exactly how much
money you have to invest. Begin by carefully considering how much money
you have on hand or will need to secure with financing, whether or not you
have a positive credit rating that will facilitate your ability to secure the
necessary financing, if you will be the sole investor or have partners
with your venture, and if you have the financial ability to meet your living
expenses while your franchise is getting started.
Statistics indicate that one of the primary reasons businesses are not
successful is due to under-capitalization. Even though a franchisor can
give you estimates for the business' initial costs, remember that there are
circumstances you might not have considered that can impact these figures.
You may not be able to predict unforeseen circumstances, but you should
prepare for them by having funds on hand to deal with the unexpected and
be able to operate your franchise until it is turning a profit. By checking
with franchisees in your market you will learn what they recommend as
start-up capital and then to be safe, add an additional 10-20%.
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Do franchises provide financing?
While some franchisors provide assist with financing, others do not offer
any assistance to franchisees. This varies from franchisor to franchisor
and is information that you should get during your due diligence process. In
addition to securing financing through the franchisor, friends, family,
private investors, traditional lenders, and the Small Business
Administration (SBA) are all possible sources of funding for your new
venture. In addition, FranchisesForWomen offers a Resource Center with
lenders who are ready, willing, and able to provide you with the help you
need.
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How can I get additional funds to invest in a franchise?
We are eager to assist you as you explore your options and gather
information about purchasing in a small business or acquiring a franchise.
FranchisesForWomen has created a Resource Center for you that offers a
wide variety of information and additional sources of capital for small or
start-up businesses. If you wish to visit our Resource Center please click
here.
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