6 issues for $14.97 Subscribe Now
Subscribe via RSS Feed

Franchising Questions and Answers

[ 0 ] Apr. 2, 2014 | SBO Editor

franchising

The International Franchise Association (IFA) was established in 1960 to build and maintain a favorable economic and regulatory climate for franchising.  It is the only association serving as the voice for franchising in the United States and is a major participant in the international franchise arena.  IFA’s mission is to enhance and to safeguard the business environment for franchising worldwide.  Today, more than 75 industries operate within the franchising format, and IFA’s membership and network encompass some 1,000 franchisors, 350 suppliers, and over 7,000 franchisee members.

Franchisors and Franchisees

Unhindered opportunity for all Americans is essential to our economic and political well-being.  To retain leadership in bringing new products and services to the marketplace both in the U.S. and abroad, franchise systems continue to provide the widest possible entrepreneurial opportunities for everyone. They also provide expanding opportunities and strong growth possibilities for minorities, women, veterans, and the individuals with disabilities.  Franchised businesses are rapidly adding jobs to a broad range of industries.  In addition, franchise companies are major contributors in the development of management and technical skills that are vital in the creation of an experienced work force, which is so important in building and strengthening both American and foreign economies.

The mutually beneficial relationship that exists between franchisors and franchisees makes franchising unique in the world of business.  It provides entrepreneurs with an affordable means of accelerating expansion and achieving development goals more quickly than might otherwise be the case, and with far less risk.  Similarly, franchisees have a head start because of the support provided by the franchise system.  Franchising means being in business for yourself but not by yourself.  Whether it’s accounting and financing, advertising and public relations, personnel management, purchasing, or inventory control, franchisors are there to provide “hands on,” one-to-one assistance. While franchising does provide opportunities, it does not create miracles.  Franchisees combine knowledge and resources with entrepreneurial drive and spirit to form a business relationship unique to franchising.  Franchising is a field of expanding economic opportunity in which each and every person can play a part based on talent, initiative, and dedication.

FAQ’s of Franchising

SPECIFICALLY, WHAT KINDS OF BUSINESSES LEND THEMSELVES TO FRANCHISING?

Virtually every business form you can imagine. The International Franchise Association now lists more than 75 different categories to describe its members. Typically, you would think of fast food and restaurants first when thinking of franchising, but franchising covers the spectrum from almost A to Z, from advertising/direct mail to construction to dating services to home inspection to security systems to video sales and rentals. Printing and copying services, maid services, computer services, cleaners, lawn care services, real estate, hotels and motels, and travel agencies are excellent examples of successfully applying franchising to established industries.

ARE THE “LOOK-ALIKE” CHARACTERISTICS OF FRANCHISES A DISADVANTAGE? DON’T CONSUMERS WANT VARIETY?

The increasingly mobile American consumer has come to depend on and appreciate the consistent quality of franchised products and services. Today, no matter where they go, people expect and want the same quality, which is why consumers so often stop at franchised establishments. The ability to easily recognize a franchised store, restaurant or hotel from the outside guarantees there will be no surprises or disappointments on the inside. Quite simply, the public knows what to expect and likes it that way.

WHAT SHOULD I CONSIDER BEFORE BUYING A FRANCHISE?

Among the points which IFA recommends for investigation are:

a.     the type of experience required in the franchised business;

b.     a complete understanding of the business;

c.     the hours and personal commitment necessary to run the business;

d.     who the franchisor is, what its track record has been, and the business experience of its officers and directors;

e.     how other franchisees in the same system are doing;

f.      how much it’s going to cost to get into the franchise;

g.     how much you’re going to pay for the continuing right to operate the business;

h.     if there are any products or services you must buy from the franchisor and how and by whom they are supplied;

i.      the terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years;

j.      the financial condition of the franchisor and its system.

Both the Federal Trade Commission (www.ftc.gov) and IFA (www.franchise.org ) have many helpful publications and resources.  Equally important, IFA recommends that you engage an attorney to examine the contract.  It is important to work with an attorney who understands franchising, especially the antitrust laws, the trademark laws, the Federal Trade Commission Franchise Rule, and applicable state laws.  It is also recommended that you ask a competent accountant to examine your anticipated expenses, your financing needs, and your prospects for achieving your desired level of profitability before you sign any agreement.

 

Tags: , , ,

Category: Features