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What is franchising?
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 his trademark or trade name and a business system; and (2) the franchisee, who pays a royalty and often 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.
How big is franchising?
Franchising directly, or indirectly generates $1.53 trillion per year, and creates 18.1 million jobs. The business services sector of franchising, of which FASTSIGNS is a part, generates $119.8 billion per year and creates 1.3 million jobs*.
What are some of the advantages of franchise ownership?
- Established operating systems
- Nationally known brand name
- Complete training programs
- Thorough and ongoing business support
- Protected territories
- Research and development of products and services
- Network of peer owners
- National marketing initiatives
- National buying power
Franchising allows you to be in business for yourself, but not by yourself. You can avoid many of the pitfalls of new business ownership if you follow the proven systems of a franchise concept.
*International Francise Association, 2003
How should I begin evaluating a franchise opportunity?
The first place to start is to evaluate the franchisor.
- You will be able to get a great deal of important information from their Uniform Franchise Offering Circular (UFOC). In this document, you will see a company’s financial statements, litigation history, and a list of the franchisor’s directors and officers with their business experience. In some cases, you will also see average store earnings and expense items, although franchisors are not required to disclose this information.
- Asking questions of current franchisees within the system is a necessary component of your due diligence process. You want to find out if they are satisfied or not, and why. They will let you know whether the support and training is valuable and comprehensive. They can give you insight into return on investment and break-even timeframes that the franchisor, by law, cannot.
As you continue through your due diligence with FASTSIGNS®, we will send you a comprehensive franchising checklist of important items to investigate prior to purchasing any franchise.
Visit the International Franchise Association (IFA) website at www.franchise.org to view a list of educational materials about franchising. |
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