How do franchise opportunities work?
Running your own business can be a terrific, albeit risky, experience. More and more small business owners are looking into franchise opportunities because it allows them to explore a wide range of possibility through the help of an established company.
What is a franchise, exactly? A franchise is a business establishment (a store, a restaurant or a service) that is operated by an individual owner called a franchisee. The parent company, or franchisor, sells the franchisee the right to use their brand, trademarks, products, operating system and advertising to set up shop. The franchisor benefits because they are able to expand business without the responsibility of running each individual franchise. The company then makes money by claiming a percentage of the franchise's profits, called a royalty fee.
Franchising can be compared to riding a bike with training wheels because the franchisee is coming into an already established business. The franchisee pays the franchisor a franchise fee for the right to use and sell their brand. The amount (usually around $20,000 to $25,000) pales in comparison when one considers how priceless brand name recognition is in the world of commerce; the U.S. Department of Commerce reports that consumers will choose a recognized brand 2 to 1 over that which is unfamiliar.
There are an unlimited number of franchising opportunities to choose from. Not only are there hundreds of industries to choose from (fast food is the most common) but there are always hotel and coffee franchises, gas stations and real estate, but you can also pick the franchise to suit your individual needs. Do you want something permanent such as a store or restaurant in a shopping center or are you looking into an ice cream kiosk in a mall?
Franchising opportunities vary drastically. Some franchises require you to commit for 20 years and others, only five. There are national and international chains. Some franchises allow you to open one franchise and then gradually purchase more while other franchises encourage their franchisees to dedicate themselves to whole areas of the country.
Franchises are popular because they work. If you run into problems, you have a parent company to fall back on. Since you are one franchise out of many, you also have a community of other franchisees to ask for advice and help. With a franchise, it's rare to break new ground and comforting to know that someone has gone before.