What is franchising?

Franchising is a commercial procedure in which a franchising company enables an individual or other company to pay for use of its brand name and reputation for sale of products and services. This agreement is usually augmented by the franchisor’s assistance with setting up branch outlets, staff training and other aspects of business. Once the branch is set up, the franchisor maintains an interest in the franchisee, facilitating and supervising business management.
 

How does a franchisor get started?

When a certain company succeeds in its field and decides to expand, it may choose either to open wholly-owned branches or sell franchises to independent entrepreneurs.
 

How common is the franchising system?

Franchising is very common in the American economy, where about half of all retail businesses are franchises, with a total sales turnover exceeding one trillion dollars. All in all, there are about 320­,000 franchisors in the United States in 75 different fields, employing over eight million people. In Europe, France is the country with the best-developed franchising system. Franchising has proved itself and is common in most Western countries thanks to its numerous advantages. Every shopping center and main street has shops with familiar brand names run by local franchisees.
 

In which fields is franchising popular?

Franchising has flourished in parallel to overall economic development. Today, it covers about 75 areas of activity, including fast food, fashion outlets, hairdressing, cafés, real estate brokerage, houseware stores, garages, language schools, employment agencies, home renovations, transportation and many other fields.

I would like to acquire a franchise. Where do I start?

First, decide what type of business you would like to operate. Remember that you’ll have to work at it for long hours daily. When you have a personal interest and/or appropriate training in a given field, your chances of success increase. It is important to decide how much money you are willing to invest in your business, including savings and loans. We recommend that you contact franchisors that meet your conditions and assess the business terms they offer. Do they help you find a location, recruit and train personnel, contact suppliers, market your products and offer other types of assistance? Examine the pace of company development, analyze its potential and assess the business performance of its franchisees. In all such activity, it is highly desirable to rely on professionals with experience in the relevant fields, such as IFPC and other business consultants, attorneys and accountants who specialize in franchising.

How much will I have to invest to acquire a franchise?

The scope of investment varies from company to company, according to sphere of activity, cumulative reputation and projected profits. The overall investment in acquiring a franchise (franchising fees, branch setup costs and returning capital for the first few months of operation) ranges between $20,000 and $1,000,000 or more. It is important to remember that franchise costs are generally subject to negotiation.

What makes a successful franchisee?

A successful franchisee embodies a rare combination of business experience, knowhow and a good head for business who is also capable of working within an organization, adhering to guidelines and upholding the principles of transparency and full reporting.

How do I know that my decision to acquire a certain franchise is the correct one? How can I be sure I’m not wasting my money?

One may never be 100% certain that a given business decision was correct. It is interesting to note that according to surveys, most franchisees are satisfied with their decisions – although there are still some who are not. Consequently, it is of vital importance to examine all franchisor particulars thoroughly and seriously. Do not rely solely on information provided by the franchisor. Check newspaper and Internet articles about the company. Ask other franchisees in the same business for financial reports. Speak with suppliers, visit active branches, examine the geographic area in which your branch would be located and so on, accomplishing all that is necessary to reduce the risks of franchise acquisition.
 

What are the implications of franchise acquisition?

In exchange for training, assistance with setup and ongoing management and use of a familiar brand, you will have to surrender some of your business independence. Franchising does not suit people for whom independent decision making is of primary importance. Franchisees have to be amenable to franchisor supervision.

 
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