FRANCHISING OPPORTUNITIES
By Carl Agard
By Carl Agard
excerpt from Moves Magazine 2008 Super Bowl Issue
Franchising is a huge and growing part of our nation’s economy. More than 350,000 small businesses are operating as a franchise providing hundreds of thousands of jobs and making trillions of dollars every year. We all know the popular franchises like McDonald’s and Burger King. A famous entrepreneur like Magic Johnson earns millions of dollars per year through his franchised operations such as Starbucks and TGI Fridays.
Franchising has more varieties for an entrepreneur than your usual fast food chain. There are a lot of industries that use franchising as a method to expand their business nationally. There are franchising opportunities in:
Fitness Centers (Curves)
Weight Loss Centers (LA Weight Loss)
Tax Services (Jackson Hewitt)
Daycare Centers (Childtime)
Day Spas (MedSpa)
Postal Centers (UPSstore)
Real Estate Company (REMAX)
Commercial Building Cleaning Services
Residential Maid Services (Merry Maid)
Exterminators (Bugoff)
Shredding Companies (ShredPro)
These are a small sample of hundreds of different industries that are franchised. Franchising works positively both ways for the entrepreneur and the corporate company.
What is franchising?
A franchise is an agreement or license between two parties which gives a person or group of persons (franchisee) the rights to market a product or provide a service using the trademark and proven methods of another business (franchisor). This is done for an upfront fee from the franchisee to the franchisor, and a percentage of the royalties. In return for the fee and the royalties, the franchisor will provide to the franchisee the support, product knowledge, and training needed for the success of the business.
Both sides have a vested interest in the joint success of the business. The franchisor wants to keep the brand name strong and visible in the market, the franchisee wants the financial opportunity of working with an already established enterprise. Franchises offer the franchisee the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch.
The three most popular forms of franchising are the Business Format Franchise, Product/Trade Name Franchise, and Distributorship.
Business Format Franchise – This is the most popular form of franchise. The franchisee purchases the rights to operate a business model from the franchisor for an upfront fee and annual royalties. An example of a business format franchise is fast food restaurants such as Wendy’s and Arby’s. This format is used by other industries such as Real Estate companies, automotive services and temp agencies just to name a few.
The franchisor will provide the franchisee the usage of logos and trademarks as well as a complete system of doing business. They will assist the franchisee with site selection, interior layout and design, hiring and training, advertising and marketing, product supply and more.
The franchisee will sell the products or provide the services of the franchise in a manner to satisfy the franchisors standard of quality. The franchisor will give the franchisee significant assistance in meeting these criterias.
Upfront fees for this type of franchise can range from $25,000 up to $500,000. This depends on the type of company and what they provide. Also, an established history and proven track record of the franchise is a determining factor in the price of the upfront fee. The purchase of real estate may be required to house the business.
Product/Trade Name Franchise – This gives the franchisee the right to use the name or brand of the parent company in association with the operation of their business. Here, a product or service is franchised or licensed, not the business. An example of this is a sporting goods store that has the exclusive rights to sell Addidas apparel. A beverage store that has the rights to distribute Pepsi products is another example.
Distributorship – The franchisee is granted the right to sell the products of the parent company. A great example of this is car dealerships. The franchisee may have to pay an initial upfront fee to get the right to use the name, but not as much as a business format franchisee. In a distributorship, the profits are split by a percentage agreed by the two parties.
Network marketing companies use this model. You pay small fee to become a distributor of that company. You are able to use their logos and trademarks in the marketing of the products. Upon sales, profits are split by you and the parent company. The franchisee has access to product information and sales support, the franchisor gets to expand their network very quickly and penetrate the market nationally.
Pros & Cons of FranchisingThere are advantages to starting a franchise as well as disadvantages. Do a lot of research to find out the best franchising opportunities out there. Speak to current owners of franchises and ask their opinion. You probably walk into a different franchise operation everyday and do not realize it. The franchise owner will tell you the costs involved, the marketing assistance that they get from the franchisor, and they may even tell you if they will do it again.
Pro’s of Franchising
Turnkey Operation – You will be following a proven model of a successful business with a track record. A lot of risk and mistakes that are made by independent business owners are eliminated here. The franchisor will provide you all the support and training you will need to succeed. You’re in business for yourself, but not by yourself.
Brand Name – This is one of the biggest advantages of buying a franchise. You will get the strength of brand name recognition and a loyal customer base. It will take you years to build up a brand name for your business as an independent owner. As a franchise owner, you get instant recognition. The more established the franchise, the more recognition you will get.
Financial Assistance – Some franchises provide in house lenders or locate preferred lenders to help new franchisees startup. Conventional lenders are more comfortable lending to a franchise than an independent business. A franchisee can obtain an SBA backed loan to acquire the franchise and even the real estate in which the business will be in.
Con’s of Franchising
High Startup Fees & Ongoing Royalties – Buying an established franchise brand name is very costly for an entrepreneur. Franchise fees can range from $25,000 up to $250,000. This discourages a lot of entrepreneurs who want to get into franchising. Even though the risk of failure is lower with a franchise as opposed to an independent business, the risk of never recouping your initial outlay is greater.
Besides the startup fee, you also have your ongoing royalties that you have to pay to the franchisor. Royalties can be from 4% to 10% annually. If your overhead is high and your revenues are low, you can end up being “a glorified store manager”.
Loss of Independence – As a franchisee, you are associated very closely to the brand of the company. This can be good or bad. If the company is doing well, you will profit from the positive exposure. However, if the company is having a downturn, it will affect your company as well. If a franchise in another part of the country has a problem, that problem is yours as well since the consumer does not differentiate franchises from location to location.
Buying a franchise works best for individuals who work well in a team environment and have limited business and industry background. For others, the road to "true" entrepreneurship could represent the ideal path to business ownership. Take the time to consider your options. Buying a franchise may be right for you.
Real Estate Broker/Author Carl Agard has created over ten successful business ventures from the age of 15. From owning a hot dog stand as a teenager, to now operating real estate and publishing companies, Carl has a wealth of knowledge in entrepreneurship. He has represented such notable clients such as NFL Player Kalimba Edwards, Former NBA Player Derrick Coleman, and Harlem Globetrotter Legend Jumpin’ Jackie Jackson. He published Getting the Real out of Starting a Business to teach business owners on how to build wealth through Entrepreneurship.
For more information about Getting the Real out of Starting a Business, you can go on his website http://www.carlagard.com/ .
Contact Info: e-mail carlagardbooks@gmail.com
Franchising has more varieties for an entrepreneur than your usual fast food chain. There are a lot of industries that use franchising as a method to expand their business nationally. There are franchising opportunities in:
Fitness Centers (Curves)
Weight Loss Centers (LA Weight Loss)
Tax Services (Jackson Hewitt)
Daycare Centers (Childtime)
Day Spas (MedSpa)
Postal Centers (UPSstore)
Real Estate Company (REMAX)
Commercial Building Cleaning Services
Residential Maid Services (Merry Maid)
Exterminators (Bugoff)
Shredding Companies (ShredPro)
These are a small sample of hundreds of different industries that are franchised. Franchising works positively both ways for the entrepreneur and the corporate company.
What is franchising?
A franchise is an agreement or license between two parties which gives a person or group of persons (franchisee) the rights to market a product or provide a service using the trademark and proven methods of another business (franchisor). This is done for an upfront fee from the franchisee to the franchisor, and a percentage of the royalties. In return for the fee and the royalties, the franchisor will provide to the franchisee the support, product knowledge, and training needed for the success of the business.
Both sides have a vested interest in the joint success of the business. The franchisor wants to keep the brand name strong and visible in the market, the franchisee wants the financial opportunity of working with an already established enterprise. Franchises offer the franchisee the advantage of starting up a new business quickly based on a proven trademark and formula of doing business, as opposed to having to build a new business and brand from scratch.
The three most popular forms of franchising are the Business Format Franchise, Product/Trade Name Franchise, and Distributorship.
Business Format Franchise – This is the most popular form of franchise. The franchisee purchases the rights to operate a business model from the franchisor for an upfront fee and annual royalties. An example of a business format franchise is fast food restaurants such as Wendy’s and Arby’s. This format is used by other industries such as Real Estate companies, automotive services and temp agencies just to name a few.
The franchisor will provide the franchisee the usage of logos and trademarks as well as a complete system of doing business. They will assist the franchisee with site selection, interior layout and design, hiring and training, advertising and marketing, product supply and more.
The franchisee will sell the products or provide the services of the franchise in a manner to satisfy the franchisors standard of quality. The franchisor will give the franchisee significant assistance in meeting these criterias.
Upfront fees for this type of franchise can range from $25,000 up to $500,000. This depends on the type of company and what they provide. Also, an established history and proven track record of the franchise is a determining factor in the price of the upfront fee. The purchase of real estate may be required to house the business.
Product/Trade Name Franchise – This gives the franchisee the right to use the name or brand of the parent company in association with the operation of their business. Here, a product or service is franchised or licensed, not the business. An example of this is a sporting goods store that has the exclusive rights to sell Addidas apparel. A beverage store that has the rights to distribute Pepsi products is another example.
Distributorship – The franchisee is granted the right to sell the products of the parent company. A great example of this is car dealerships. The franchisee may have to pay an initial upfront fee to get the right to use the name, but not as much as a business format franchisee. In a distributorship, the profits are split by a percentage agreed by the two parties.
Network marketing companies use this model. You pay small fee to become a distributor of that company. You are able to use their logos and trademarks in the marketing of the products. Upon sales, profits are split by you and the parent company. The franchisee has access to product information and sales support, the franchisor gets to expand their network very quickly and penetrate the market nationally.
Pros & Cons of FranchisingThere are advantages to starting a franchise as well as disadvantages. Do a lot of research to find out the best franchising opportunities out there. Speak to current owners of franchises and ask their opinion. You probably walk into a different franchise operation everyday and do not realize it. The franchise owner will tell you the costs involved, the marketing assistance that they get from the franchisor, and they may even tell you if they will do it again.
Pro’s of Franchising
Turnkey Operation – You will be following a proven model of a successful business with a track record. A lot of risk and mistakes that are made by independent business owners are eliminated here. The franchisor will provide you all the support and training you will need to succeed. You’re in business for yourself, but not by yourself.
Brand Name – This is one of the biggest advantages of buying a franchise. You will get the strength of brand name recognition and a loyal customer base. It will take you years to build up a brand name for your business as an independent owner. As a franchise owner, you get instant recognition. The more established the franchise, the more recognition you will get.
Financial Assistance – Some franchises provide in house lenders or locate preferred lenders to help new franchisees startup. Conventional lenders are more comfortable lending to a franchise than an independent business. A franchisee can obtain an SBA backed loan to acquire the franchise and even the real estate in which the business will be in.
Con’s of Franchising
High Startup Fees & Ongoing Royalties – Buying an established franchise brand name is very costly for an entrepreneur. Franchise fees can range from $25,000 up to $250,000. This discourages a lot of entrepreneurs who want to get into franchising. Even though the risk of failure is lower with a franchise as opposed to an independent business, the risk of never recouping your initial outlay is greater.
Besides the startup fee, you also have your ongoing royalties that you have to pay to the franchisor. Royalties can be from 4% to 10% annually. If your overhead is high and your revenues are low, you can end up being “a glorified store manager”.
Loss of Independence – As a franchisee, you are associated very closely to the brand of the company. This can be good or bad. If the company is doing well, you will profit from the positive exposure. However, if the company is having a downturn, it will affect your company as well. If a franchise in another part of the country has a problem, that problem is yours as well since the consumer does not differentiate franchises from location to location.
Buying a franchise works best for individuals who work well in a team environment and have limited business and industry background. For others, the road to "true" entrepreneurship could represent the ideal path to business ownership. Take the time to consider your options. Buying a franchise may be right for you.
Real Estate Broker/Author Carl Agard has created over ten successful business ventures from the age of 15. From owning a hot dog stand as a teenager, to now operating real estate and publishing companies, Carl has a wealth of knowledge in entrepreneurship. He has represented such notable clients such as NFL Player Kalimba Edwards, Former NBA Player Derrick Coleman, and Harlem Globetrotter Legend Jumpin’ Jackie Jackson. He published Getting the Real out of Starting a Business to teach business owners on how to build wealth through Entrepreneurship.
For more information about Getting the Real out of Starting a Business, you can go on his website http://www.carlagard.com/ .
Contact Info: e-mail carlagardbooks@gmail.com
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