The Franchise Advantage

by Myers, Ford R. Monday, June 04, 2007
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In today’s challenging economy, many people feel that they have lost a sense of control over their careers. Widespread corporate layoffs and downsizings have made the job market a tenuous environment in which to build a solid future. As a result, a growing percentage of my career consulting clients are turning to entrepreneurship as a viable alternative.

Indeed, one of the best ways to gain more control over your career is by owning your own business. Your options include: (1) becoming a consultant; (2) starting a business “from scratch;” (3) buying a franchise; and (4) buying a non-franchised business.

Of the clients who have elected to pursue the “entrepreneurial option,” most have invested in franchises. Franchising has never been more popular, and the range of opportunities has never been broader. Owning a franchise combines the stability of a proven business model with the independence and income potential of self-employment.

Joining with an “established business system” is generally comfortable and familiar for executives who have spent their careers within corporations. It is important to understand, however, that acquiring a franchise is NOT “just buying a job.” When you purchase a franchise, you OWN the business.

Such notable publications as Business Week and The New York Times have recently published articles stating that franchising may be the BEST option for mature executives who have been displaced, but who are not ready to retire!

In order to make an intelligent determination as to whether franchise ownership would be right for you, it is important to first gain a basic understanding of the industry and the opportunities it affords.

What is Franchising?

According to the International Franchise Association, the leading professional organization in the industry...
Franchising is a method of distributing products or services. At least two levels of people are involved in the franchise system: (1) the franchisor, who lends its trademark or trade name and a business system; and (2) the franchisee, who often pays a royalty and an initial fee for the right to do business under the franchisor's name and system. Technically, the contract binding the two parties is the "franchise," but that term is often used to mean the actual business that the franchisee operates.

Franchising is also known as "a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management, in return for a consideration from the franchisee."

History of Franchising

The concept of franchising was born centuries ago. During the Middle Ages, local rulers granted to their subjects rights pertaining to specific activities, such as holding fairs or hunting on the ruler’s land. Later, monarchs granted similar rights on a larger scale, such as building roads or brewing ale. The Church granted the same kind of commercial interest when it allowed its tax collectors to retain a portion of what they collected.

In the middle of the 19th century, the Singer Sewing Machine Company began granting franchises for distribution of its sewing machines. By the beginning of the 20th century, the emerging automobile industry and the increased demand for local dealerships was contributing to the growth of franchising.

The modern age of franchising began in earnest around the middle of the 20th century, when Ray Kroc bought the rights to franchise a California drive-in restaurant owned by the McDonald brothers. The success of McDonald’s franchises led to explosive growth in Business Format Franchising. The increased standardization of operations now found in most major franchise businesses has played an important role in making franchising an attractive business model for both franchisor and franchisee!

Benefits of Franchising

Franchising is about minimizing risks and maximizing returns. It has often been said that franchising allows entrepreneurs to “be in business for themselves, but not by themselves.” A quality franchisor provides proven operating systems, solid research and development, established marketing methods and instant credibility – plus extensive training and support – all of which can reduce risk and build success more rapidly and affordably than in an independent business.

Franchising is also about “the big idea.” As an aspiring entrepreneur, you may have all the ability and ambition necessary to succeed – but without a compelling concept to sell, your business will not go very far. As a franchisee, however, you will be in a position to leverage some of the most innovative products and services available in today’s marketplace!

Business success requires going through a learning curve for the type of business you’re in. With franchising, the franchisor has already gone through that process and is highly motivated to share with you everything that has been learned. Franchises succeed because the franchisor has invested the resources to truly understand the business. There is a proven formula for success ready and waiting to be adopted by the new entrepreneur. How many non-franchise, independent businesses can say that?

And, because a franchise represents a large number of units with established track records, the prospective buyer has access to much more of the data required for sound investment decisions than would be available with a non-franchise start-up. Being able to study the actual performance of identical business entities is invaluable – as is the contact you’ll have with other franchisees, who can provide real-world insights into what it takes to succeed in the specific business you’ve selected.

Conclusion

Franchising is certainly not for everyone, and every business model has its “pros and cons.” But if you've always yearned to own your own business, can’t return to your old career, or just want to escape the "corporate rat race," franchising may offer the solution you've been looking for. Franchising has many appealing and practical elements, and it just might be the best path for you to regain control of your future!