The Truth About Franchising And What Is To Be Expected From Each Side.
Feb 24
The term franchising concerns a relationship between 2 parties, the franchisee and the franchisor. We will start with the franchisor; they offer the guidance for the organisation, have an identifiable brand name, a considerable supply chain and give ongoing support to the franchisee. The franchisee will find a Franchise For Sale and lay down an initial investment to the franchisor, which will form the root of the partnership. The franchisee will offer expansion, extra profit and greater brand awareness for the franchisor and then make themselves a viable organisation. The franchisee pays for the business model and brand name which has been tried and tested and therefore if developed correctly should be a root for future gain. On top of this the franchisee will pay a particular percentage of their gross income back to the franchisor, this ranges from monthly payments to yearly payments. The initial investment may take numerous months to be recouped back but that differs with business areas.
The Franchise model has increased dramatically over the past 10 years and is now thought of to be one of the most profitable business methods in the world. Latest studies has shown that franchises represent only about a tenth of the entire number of businesses in the world but the market share that they have obtained is nearly a third.
When deciding your Low Cost Franchise look carefully over the agreement as there can be several different versions. The different versions only differ by the amount of participation a franchisee will have in making business decisions, such as advertising and marketing. Some franchises such as a fast food chains have strict regulations in place as to how the organisation is controlled while other franchises give the franchisee more preference to propose other products or services and alter pricing as they see fit.
A Franchise Opportunity can be thought of a bit like a lego set, all the pieces and the instructions are there it’s just up to the franchisee to put them all together and build the organisation. The instructions will contain all of the vital information such as, pricing structure, ways to market the product or service, terms and conditions, contract length, product and service information and any other criteria to do with organising the franchise. Possible franchisees normally go through a training system to ensure that they are fully conscious of their organisation sector and have the necessary tools to take over the franchise and make it a winner. This training is a must for the franchisor, as this will give them a constant flow of possible franchisees operating at the same high level.
You have got to weigh up the initial investment, the monthly or yearly percentage and decide if all theses costs total up for you to buy into the franchise. Is it worth their brand name, their support and the training presented to you? If you can speak to other franchisees that have been part of the same Franchise Opportunity and ask them about the advantages and negatives when working for the franchisor. Ask comprehensive questions such as the amount of business the franchise produces, if the training system is adequate, what are the monthly percentages and how much backing is given to the franchisee. These questions will give you a greater idea of the franchisor and if you are ready to make a commitment and find a Franchise For Sale.