Franchising

A franchise is a business model that allows the franchisee (the entrepreneur, possibly you) to start a business by utilizing another person or group’s (the franchisor’s) expertise, ideas, and processes. It is a legal and commercial relationship between the franchisor and franchisee. As a franchisee, you purchase this right through a franchise fee and in return, the franchisor maintains the business model and you agree to operate your business according to their model.The franchisor owns all the trademarks, business methods, and supplies that it allows others to use under its contract.

A person who operates a franchise business owns their business but has an agreement in place with the franchise owner, whereas a company store within a franchise chain is owned by the central corporation and all of its staff members are employed by the parent business. Hence, the difference between a franchisor's and corporation's operating a chain of stores is that the chain store has store managers who are company employees, whereas the franchise operation is owned and managed by self-employed business people.One might prefer to become a franchisee because it offers the lowest risks and the highest level of support in the instigation of a new business. As a part of a franchise, you will have a team of dedicated professionals willing and able to help you every step of the way. Their assistance can range from site selection to employee hiring to grand opening. Franchising enables everyday individuals to change careers and launch a new business without years of schooling.

Benefits of being a franchisee
Research has shown that the success rate of new franchisees is much higher than that for other new business start-ups. Franchisees have an advantage over their non-franchisee competitors because they have the privileges to use the franchisor's image including brand names, trademarks, copyrights, trade secrets, patents, and uniform logos. Additionally by utilizing the franchisor's business practices and offering products that meet the company's standards, franchisees can consistently provide customers with quality produce and services. Franchisees can also take advantage of lower cost materials due to group buying power. They also learn from each other and usually form a peer support system. There is a lot of support offered to the franchisee this allows the business owner to focus on growing the business.

Provisions to the franchisee
As a franchisee you are going in business for yourself but not by yourself. As a franchisee you will have ongoing support from your franchisor and other franchisees in the system. This will be beneficial in helping with the start-up phase and through other rough patches that one may stumble upon. You are a part of a team who has an interest in your success. The service provided by the franchisor is valuable to the nascent entrepreneur because the business has been tested. Business procedures have been developed and are in place so there is no need to start from scratch. As you buy into the franchise you become a part of a team with a proven track record, established system of operating, and recognizable brand. Consumers are comfortable with a familiar, recognizable brand that they can rely on.

Franchisors provide the following to their franchisee:

• A copy of the Uniform Franchise Offering Circular (UFCO). The UFCO will disclose estimates of all initial start-up costs.
• A copy of the franchise agreement, other contracts and the franchisor's financial statements.
• Training to the franchisee, and their manager along with the operational manual and ongoing support and assistance.
• Information on franchisee's initial fees and other costs (e.g., royalties, promotional fees).

Franchisors should:

• Provide a marketing plan, promotional materials and area site selection assistance to franchisees.
• Advise franchisee of necessary insurance coverage. The franchisor knows what kind of insurance and liability protection is needed, as well as what kind of protection they need. The agreement will generally establish what amounts will be required for protection including workman's compensation, general liability, product liability, bodily injury and property damage.
• Provide a trademark or service mark that is known, or will be known through advertising in the geographic area of use.
• Provide guidelines on the purchase of inventory and equipment, requirements on restrictions on goods sold and the terms of agreement and renewal.

Franchising, A Better Way? Franchising is unquestionably one of the most popular ways of operating business in today’s time. It is a mutually beneficial arrangement between franchiser and franchise. The fact that, the franchisor has presence as an established name really helps in the success of a franchise. Franchise business is lucrative, but its success is very much dependent upon the strength of the brand and how it is being operated. There is a higher failure rate among new business ventures when compared to franchises. When evaluating a franchise to its counterpart new start up, there is no franchise support, no franchise community to ask for advice, and it’s often more difficult to get financing for a company that doesn’t already have a track record. There is no brand recognition, and higher costs for things like advertising and design; costs that are shared in a franchise system. The business formula is proven and one does not need to establish the brand name from the scratch. Everything about the venture from name, services, products and quality has already been established. Franchising works for the franchisor, for the franchisee and for the consumer.