Buying a franchise
An important step in the small
business start-up process is deciding whether to buy a franchise,
buy an existing franchise, buy an existing non-franchise
business, or just go completely on your own. Because of the
risk and work involved in starting a new business, many new
entrepreneurs choose franchising as an alternative to starting a
new, independent business from scratch.
One of the biggest mistakes you
can make is to hurry into business, so it's important to
understand your reasons for going into business, and to determine
if owning a business is right for you.
If you are concerned about the
risk involved in a new, independent business venture, then
franchising may be the best business option for you. But remember
that hard work, dedication, and sacrifice are essential to the
success of any business venture, including franchising.
What is a franchise?
A franchise is a legal and
commercial relationship between the owner of a trademark, service
mark, trade name, or advertising symbol and an individual or group
wishing to use that identification in a business. The franchise
governs the method of conducting business between the two parties.
Generally, a franchisee sells goods or services supplied by the
franchisor or that meet the franchisor's quality standards.
Franchising is based on
mutual trust between the franchisor and franchisee. The franchisor
provides the business expertise (marketing plans, management
guidance, financing assistance, site location, training, etc.)
that otherwise would not be available to the franchisee. The
franchisees brings to the franchise operation the entrepreneurial
spirit and drive necessary to make the franchise a success.
There are primarily two forms of
franchising:
- Product/trade name franchising
and
- Business format franchising.
In the simplest form, a
franchisor owns the right to the name or trademark and sells that
right to a franchisee. This is known as "product/trade name
franchising." The more complex form, "business format
franchising," involves a broader ongoing relationship between
the two parties. Business format franchises often provide a full
range of services, including site selection, training, product
supply, marketing plans, and even assistance in obtaining
financing.
To learn more about:
- The advantages and
disadvantages of franchising,
- The franchisor's
responsibilities,
- What is contained in a
franchise packet, and
- Understanding the franchise
contract,
Franchise
Registry
Franchise
Directories & Evaluation
