What is Franchising and How Can It Affect My Small Business?

logoThere are a million and one misconceptions about franchising today but the truth is that most people don’t have the slightest clue as to what franchising really is nor how it works. You hear it all the time in the media, from friends, and possibly even business partners. People say things like franchising is “selling out” or “it will dilute your brand”. People making such remarks have unfortunately never taken the time to fully understand the concept of franchising. So good thing for you I am here to set the record straight on franchising, once and for all.

Contrary to popular belief, becoming a franchised business does not mean you are going to transform from “friendly mom and pop operation” into some evil money hungry corporation dead set on maximizing profits even if it means lowering product quality. When you take that step into franchising your business, you begin to dictate to others how this business should be run. The guidelines to run this business on a day to day basis will be purely determined by you. You are in full control.

Now that we have gotten the control issue of the way, let’s explore the concept of franchising a bit more. Take “John Smith’s Bakery” for example. John Smith has been running his bakery for 5 years and the bakery has turned into a thriving profitable business. John wishes to expand and have multiple locations but doesn’t want to sacrifice the time or money required to open a second, third and fourth location. So what does John do? John does the smart thing and contacts Franchise Creator (www.franchisecreator.com), a local firm based in Miami (Doral), Florida headed by serial entrepreneur and a veteran in the franchise industry, Hossein Kasmai. Through a free consultation session, Hossein explains to him how through franchising he is able to open multiple new locations seamlessly without investing much of his own time or money.

A franchise, very loosely put is an exact blueprint of a successfully operating business. This blueprint and the details of the day to day operation are provided to a new franchise owner in a document called the operations manual. The operations manual along with the training and the on-going support that is provided by the business owner (franchisor) to the person buying a franchise (franchisee) allows for a seamless duplication of the business and its operations in a new location.

Franchising your business allows you to make money from each new franchised location in multiple ways. When a person buys a franchise from you, they pay you a substantial sum of cash in exchange for your trademark, training and the general know-how of the business. This fee is also known as the initial franchise fee. In addition to the initial franchise fee, each franchisee also pays you royalty which is based on a percentage of their gross revenue. This provides for an on-going income from each location. To ensure consistency of the brand, each franchisee is required to purchase all goods and products from you or a vendor associated with you. This makes for a grand total of three separate new revenue streams that franchising can bring to your business. Additionally, each new location has to contribute to a national advertising campaign that is fully and solely managed by you. All of this without you having to run in between multiple locations constantly tending to each one. Also franchising puts the burden of all liabilities, risks and expenses on the franchisee and not you. All you need to do is to guide your franchisee to success using your time tested knowledge and expertise. Contrary to a manager that runs your own location, each franchisee has a vested interest to make the business succeed and just like you, they will put their best effort in running the operation.

If you are interested to learn more about franchising or if you would like to get a free franchisibility consultation for your current business, please contact Franchise Creator at 305-592-9229 or visit them at www.franchisecreator.com.

Did you know…?

• There are More than 300 different industries and business categories that use the franchising business model as a means to distribute goods and services.

• It is estimated that the franchise industry accounts for approximately 50% of all retail sales in the US.

• A new franchise business opens every 8 minutes of every business day.

• A study by the United States Chamber of Commerce found that 86% of franchises opened within the last five years were still under the same ownership and 97% of them were still open for business. The same study found that only 25% individually started (non-franchise) businesses make it beyond the first 5 years.

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