FRANCHISING is a method of doing business. A franchisor licenses
a tried and proven method of doing business to a franchisee in exchange for a recurring payment
(called a royalty) , usually a percentage piece of gross sales or gross profits .
Successful franchises did not become successful overnight. The development of a
franchise takes a lot of hard work and determination.
The world of franchising began to develop and to take off in America in the late
1940's. Baby boomers became enthusiastic about the
idea of franchising, and this new industry took
off with a bang. Marketing schemes, advertising, and the general way in which the parent company wants
its franchises to do business are all passed along to the franchises. Thus, franchise owners can operate
their own business and be their own boss without having to worry about coming up with original ideas
for their company.
Franchising opportunities are increasing every day. Thorough research and
investigation and careful investment of capital are the keys to owning a successful franchise. This can
be accomplished with the right amount of determination and hard work.
Franchising offers many benefits to both franchisor and franchisee. For the
franchisor, franchising provides a means to grow a business in part using the capital and efforts
of others, while at the same time, establishing brand name recognition. Franchising gives a franchisor
the flexibility to control all of the details of its franchisees' operations to create a uniform system
for the delivery of the franchisor's products and services.
Franchisees benefit from the experience and guidance provided by the franchisor.
As a result, franchisees can often avoid many of the pitfalls that plague and ultimately cause the
demise of startup businesses. Statistics indicate that approximately 90% of startup businesses fail
within their first 5 years of operation. In stark contrast, a study conducted by the U.S. Chamber of
Commerce in 1999 revealed that 97% of franchises established within the 5 preceding years were still
open for business!
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