Franchising Defined
Thinking about buying a franchise? You're not alone. Two words currently describe franchising: growing and thriving.
John Naisbitt, author of Megatrends, calls franchising "the single most successful marketing concept ever." Its dramatic growth continues. Its competitive edge is documented.
Franchising is a business method, a system of selling goods and services. A franchise exists when:
- The use of a trademark is authorized.
- There's an ongoing relationship between a franchising company and a franchised business owner.
The Franchising Success Story
Why is the franchise system succeeding? The answer lies in the important advantages it offers both a company wanting to finance its growth and the entrepreneur looking for opportunity.
From your perspective, you want to invest your capital in yourself. You're confident you can make it but want a safety net to reduce risk. You have read about the success of many franchises and probably have a friend or neighbor who is a highly successful franchisee. How could you better capture the ready asset of trademark identification, capitalize on the accumulated experience of others, and buy into advantages such as advertising assistance and proven operating systems?
From the franchisor perspective, franchising is a provider of external capital. There is no need to go deeply into debt or give up a large part of the company to a venture capitalist, and the system will potentially grow much faster. Also significant is the opportunity to attract talented, often experienced franchisees, thereby positively leveraging both the quality and quantity of future growth.
The prospective franchisee has another important advantage---the self-policing effort of the International Franchise Association. IFA members have agreed to a Code of Ethics providing for full disclosure and accuracy of all materials they distribute. Be sure your potential franchising partner is an IFA member.
When the franchisor and entrepreneurial franchisee join forces it creates the best of all possibilities. The entrepreneur benefits from the market-proven opportunity, and the franchisor attracts the capital for expansion and the talent for success.
Franchising can provide a firm foundation for a fertile future. Every entrepreneur looking to expand business horizons should examine this method closely.