If your dream has always been to start a successful business, but you have little business experience, no product, and limited resources then you probably thought your dream would never come true. That doesn't have to be the case. Operating a franchise can allow you to make that dream a reality even with these limitations.
What is Franchising?
We have all heard the term "franchise" thrown around, and most of us know that restaurants like McDonald's and Kentucky Fried Chicken are franchises, but very few of us really understand what that means.
Basically, franchising allows you to open a store under the name of an already successful company. The franchisor (the company with whom you will be working) trains you in the business strategy the company has been using. Additionally, you will have a proven effective method of bringing in customers, a product people want to buy, and a way to deliver that product to them.
In exchange for these benefits, you'll usually pay an upfront fee to the franchisor, a monthly service fee, and a percentage of all the revenue your franchise beings in. You also give up some of your autonomy as a business owner because you do have to answer to the franchisor. For example, you wouldn't just be able to add a new product to your business or chance the exterior of the building without prior approval from the company.
Why "Buy" A Franchise?
First, let me explain why I put the word "buy" in quotation marks. The term "buy" implies that you are going to be owning something which isn't exactly the case here. It's better to think of a franchise as an investment - a solid investment in a company that has a track record of success.
That brings me to the answer to this question: why invest in a franchise?
There are several advantages to choosing this route. First, you'll be getting a brand. If you opened your own business right now, it would take you years to firmly establish the same level of brand recognition that many of these franchisors already have. In many cases, these companies have spent millions (or more) on marketing experts and brand specialists to develop their brands - that's something you probably couldn't do on your own. Yet, if you invest in a franchise, your business benefits from those years of work, too.
Second, you're getting an established product. One of the hardest parts of building a business is determining what people want to buy and creating or finding a product to meet that need or want. With a franchise, all of that work is done for you. In fact, the franchisor will even supply the product.
Finally, franchises are perfect for people with limited or no previous business experience. Because the franchisor wants you to succeed so they can also make more money, they will work hard to train you in how to run the business effectively. They will also be available to answer your questions. Plus, they will be passing on to you a proven management system that has worked for them and other franchisees.
How Common is Franchising?
While you may not hear a great deal about franchising in the financial news, it is more widespread and profitable than you might think. There are more than 320,000 franchise outlets in operation in the United States with a new one opening every 8 minutes. As of 2000, franchises employed more than 8 million people and accounted for 40% of all retail sales in the U. S. - that's a whopping $1 trillion in sales.
If you think fast food is the only franchise option available, think again. More than 75 different industries include franchise operations, and there are more than 1,500 different franchisors available to choose from. That means you should be able to find a franchisor whose products and your business interests mesh nicely.
Franchises can be a great way for you to get into a successful business without having to struggle with many of the problems that cause so many start-up businesses to close within the first three years.