www.citylocal.co.uk started this topic @ 08:49 on 30/11/2007
A franchise is simply a business where a tried and tested format is applied to businesses in each territory. All the guidelines for managing the business are clearly set down in a manual. The owner of the franchise business will be expected to follow all the procedures laid down in the manual
When you start a franchise business, you have to pay an up front franchise fee. This will then give you the right to use the brand name of the franchiser and his confidential business system and know how.
You will also have to pay the franchiser a monthly royalty payment. This payment is needed by the franchiser to ensure that you have ongoing support and assistance when required.
The franchiser will guide you in choosing the right location, train you in the operation of your business, help you in the marketing of your business and assist you in overcoming any issues that may arise.
Franchising is much safer then starting your own business. The choice of location, how to market, where to buy supplies and accounting procedures are all laid down exactly. All you have to do is to follow procedure and the chances are that you will have a successful business.
According to the US Department of Commerce, after completing a 7 year study, over 90% of franchises are still trading profitably.
When people choose to go it alone, 80% of business start ups fail within 5 years. This is because they are entering a market where their business knowledge is usually poor, although their product knowledge might be good. All their experience comes from trial and error, and the banks are quick to pull the plug if cash flow projections are not met.
The limitations to a franchise are that you will not be able to deviate from procedures. You will have to buy from predetermined suppliers and use the computer systems and software that has been chosen by the franchiser. You will also be limited to where you can operate the business as the franchiser will not allow you to endanger his reputation, in a location, where he believes that there is little chance of success.
This can be extremely difficult for an entrepreneur who likes to "be his / her own boss".
All in all, what you are entering into is a partnership, whereby it is in both parties interest for you to succeed.
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Naz
