Franchising
You are a nine-to-five worker, and are noticing that nothing is happening. “Playing by the rules” only made you tired and old.
Becoming an entrepreneur had come into your mind, but news of traditional businesses failing everywhere and it scares you.
Yet, you still find in the newspapers, in the TV and in the world wide web that there are companies offering franchising. Maybe this is the type of business for you. And you are intrigued. You ask yourself, what is franchising, anyway?
This article will tackle the meaning of franchising.
Franchising is the practice that a company allows another entity to use and capitalize on its already successful business model and/or existing brand awareness, most often called Goodwill, for a faster return of capital.
In return, franchisees expend two payments in general. First is a one time investment, called the franchise fee, and the other is royalty fee, which is a recurring payment, for the continuous usage of the business model, advertising and training costs. Royalty fee is usually 3-10% of gross sales.
Franchising is a network of mutual business relationships that grants a number of people to share: 1) brand recognition 2) A successful method of doing business 3) A proven marketing and distribution system.
The phrase “I am buying my franchise” is actually not correct. You are not buying the business model, you are capitalizing on it. What you will own are the tangible assets need to run the franchise like the building or equipment.
For a company to work in the franchising world, the company must have a good record of profitability and the business solution it employs is easily duplicable.
What are the benefits of franchising?
For the franchisor, the business will grow while lessening the risk and liability that comes with expansion. It is also an ideal way to gain more brand awareness.
For the franchisee, they are investing in a already recognized brand and on a successful business model. With a business of a 90% success rate, who can go wrong?
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