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Franchising 101 – Dispelling the Myths with Facts by Sylvie Giguère

Franchising 101 – Dispelling the Myths with Facts by Sylvie Giguère

It is through many years of coaching clients, hosting seminars, attending shows & networking events that the same questions or Myths about FRANCHISING keep coming up. Let’s clear the air and learn the facts about franchising…

HOW DOES A FRANCHISED CHAIN START?

Imagine a store owned by an individual with a particular concept, any concept, name me a job and I will give you a franchise that offers the service. If the business is successful, the owner may develop a second or third store and hire employees for the day-to-day operations. At that point, if the entrepreneur still wants to expand but prefers not to operate additional stores himself or herself, he or she may decide to “franchise” the store name and business system to an independent business person known as a franchisee. In return, the entrepreneur may ask for an initial fee and/or a continuing royalty payment based on a percentage of that franchisee’s sales. The business is now franchised, and the newly created franchisee shares in the success of the already existing business model. One doesn’t BUY a franchise; we invest or go into partnership with the franchisor. We could say that we are buying the territory that allows us to Do Business As, DBA other franchises of the same name.

HOW WIDESPREAD IS FRANCHISING?

The answer may surprise you. By 2001, there were 767,483 business establishments in all domestic franchise systems (either owned by franchisors and franchisees), which employed almost 10 million people, with direct output close to $625 billion, and a payroll of $230 billion. One new franchise location is opens every 8 minutes in the US, 365 days a year!

DID you know that Franchise command disproportional market shares? The numbers show us that 8% of all business outlets are franchised. This 8% generates 41 cents of each dollar spent in business outlets in the US, The remaining 92% independent businesses share 59 cents!

WHAT IS “BUSINESS MODEL” FRANCHISING?

Investing in a franchise is not just buying a name, one invest in a model. In Franchise world, the franchisor prescribes for the franchisee a complete plan, or model, for managing and operating, purchasing, demographics, marketing strategies for a specific establishment or location. The plan provides step-by-step procedures for major aspects of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the franchisees. The major advantage of investing in a business model franchise is that the “system,” the means for distributing goods and or services, has been developed, tested, and associated with the trademark. As a result, rapid expansion of a successful concept can occur more quickly than through company-owned expansion. Franchisors continued to increase steadily throughout the 1990s and into the 21st century. In 2001, comparing business model franchising to product distribution franchising, business model franchising had about 4.3 times as many establishments, employed 4 times as many workers, generated 2.5 times the payroll, and produced nearly 3 times as much output.

We will continue to explore deeper the wonderful world of Franchising as a viable option for building your own empire. In the meantime if you would like to discuss further and see don`t hesitate to call at 902-482-0518 or email me at sylviegiguere@eastlink.ca. I will be happy to answer any questions you may have. As a coach, it is my mission to ensure that you are provided the facts and your decisions are based on more than assumptions, Remember, you too can harness the power of the Franchise and apply the lessons of distribution or expansion for any business model!

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