Each day people across the United States and the world patronize franchised businesses. Whether they walk into a McDonald’s, A 7-11 or a Howard Johnson’s, they are walking into a franchise. The first franchise effort in the United States is credited to Isaac Singer, the man who revolutionized sewing machines. Not long after the owners of the first fast food restaurants jumped into the game. Today, there are thousands upon thousands of franchised companies. For would-be business owners, franchises are among the safest investments possible. A business owner who purchases a franchise is offered a great deal of support, and an established brand to work with, but before one gets involved in the world of franchises and franchising, they should ask themselves “should I open a franchise?”
Type of Franchises
There are several types of franchise formats and structures that can be purchased. A would-be business owner should explore each option prior to committing to buying a franchise. There are three basic franchise structures to consider. Within those structures exist sub-structures.
A product franchise, a franchise agreement in which an owner of an existing business makes a deal to sell a specific product within their location, such as a specific type of tire in an automotive shop.
A single-unit franchise, an agreement in which a business owner buys the rights to operate a single, brand-driven shop.
A multi-unit franchise, an agreement in which a business owner buys the rights to operate multiple shops within a specified geographical location.
The Price of Franchising
Franchising comes at a cost, and there are several ways the cost of a franchise is figured out. For example, more recognizable brands, in a more urban area will be more expensive than a smaller, or lesser known brand. For example, a franchise that has been operating in the eastern US for several decades will be more expensive than a franchise that has just begun to enter the market. Additionally, the location chosen for the franchise will affect the cost. For example, a more rural location, where sales are expected to be more modest will be cheaper than a location in a budding metropolis.
Should I Open a Franchise?
Once completely educated on the world of franchises and franchising, one might ask themselves; “should I open a franchise?” There are plenty of pros to opening a franchise. In fact, there are more pros to opening a franchise than there are cons, but don’t forget that the cons do exist.
First and foremost a person who decides to open a franchise is offered support by the company they are dealing with. Additionally, the individuals who owns a franchise does not have to deal with the task of marketing a brand new business, rather the brand’s persona are already established. Everyone knows the name of the big franchises, and thus, it is easier for a brand new business to get off the ground. Additionally, a new business owner if offered access to a preexisting, proven business plan that simply works.
While the pros are many, there are also cons to operating a franchise, namely the restrictions that are placed on the franchise owner by the company itself. Additionally, there is a cost associated with franchises, in which a royalty must be paid to the parent company on all sales. While the cons to owning a franchise exist, it can safely be said, that for many people opening a franchised business is a solid and beneficial road to business ownership, for the right business owner