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What is Franchising?

Franchising is a method of distributing products and services that involves a franchisor who lends their trademark and business system to a franchisee who, in return, pays a royalty for the right to use the franchisor's trademark and system in their business.

Advantages Of Franchising

  1. Chances of Success: A franchise increases your chances of business success because you are associated with proven products and methods. You can check how successful other franchisees are before committing yourself. Franchising puts you on the road to success without the risks experienced by independent businesses.
  2. Avoiding Startup Mistakes: The business you are buying is a replica of a system of successful franchises. The kinks have already been worked out, so you now have the advantage of avoiding the initial developmental issues and going straight to operating your franchise.
  3. Brand Awareness: You have the advantage of brand awareness. When you buy into an established national or international brand, you are enjoying the automatic name recognition that comes with being associated with a large and familiar company.
  4. Product and Service Acceptance: franchise provides an established and proven product or service which already enjoys widespread acceptance. This gives the franchisee the benefit of customer awareness which may ordinarily takes years to establish.
  5. Independent, But Not Alone: Whether you're sick of being told what to do as an employee, you've been downsized, tired of making others wealthy, or you want to provide your family with greater financial security, it's nice to be independent. A franchise is a great stepping stone. As a franchise owner you can be your own boss and gain independence, but not be alone. Being part of a franchise network will reduce your risk and allow you to enjoy the success from your hard work.
  6. Training And Support: You receive training and support that incorporates proven techniques and best practices so you can achieve faster success. Having access to the franchisor's experienced support staff will help keep you on track and reduce costly mistakes.
  7. Peer-to-peer Networking: You have access to a network of business owners who have been through the exact same experience. Networking and support from other owners is a priceless resource in business ownership.
  8. Buying Power: As a part of a franchise network you enjoy the benefits of collective purchasing power. The franchisor has already established a relationship with many suppliers and negotiated favorable prices and terms for their products and services. The franchisor manages these relationships to provide value to all the stakeholders, including customers, franchises, suppliers and the franchisor.
  9. Ongoing Development: The Franchisor will usually carry out and incur the costs of ongoing product development. A vital factor in the long-term success of any business is its ability to develop products to meet future needs. Ongoing product development enables the business to adapt as the demands of the market change, and to expand by adding to its range of products and services. Few individual business owners are able to free themselves from the day-to-day running of their business in order to give sufficient attention to product development.
  1. Financial Support: If you're seeking finance to buy or grow a business, banks and other financial institutions are more likely to lend to you if the business is part of a well-structured and successful franchise system. Many franchisors have established relationships with lending institutions and some provide financing.
  2. Company-wide Connections: If your customers have a need for a job that's outside your capacity or territory, you can still get the job done through working with other franchisees in the network, helping you build satisfaction and loyalty. Just as important, other franchisees can send similar business to you.
  3. Individual Roles With Common Goals: Each franchisee's role is to run a profitable business, grow a base of happy customers and support the franchisor's systems and brand values. The franchisor's role is to provide clear and positive leadership, help franchisee's achieve their financial and personal goals, and protect the strategic position of the brand. Together the franchisee and franchisor share a common goal of delivering a relevant customer promise, growing the business and brand.
  4. Gaining a Competitive Edge: The power of franchising is in gaining a competitive edge through the sharing of knowledge and resources. Various studies in different industry sectors have demonstrated that franchised businesses are typically superior over their non-franchised rivals.
  5. Selling Your Business: When you decide to sell your business, a franchise is often more attractive and may likely fetch a higher price than an independent business. You and the buyer should significantly benefit from the experience, knowledge and support of the franchisor both before and after the sale. Independent businesses are on their own.
  6. Working Together is Smart and Fun: There's a reason why franchising is the world's most successful method of bringing a product or service to market. Franchising provides people with an opportunity to operate an independent business, but have most of the advantages of being part of a large organization. Working together is smart and fun.

Disadvantages Of Franchising

  1. Following A System: Franchisee's are typically required to operate their business according to the procedures and restrictions set out in the franchise agreement and operating manual. These procedures and restrictions vary significantly between franchise businesses.
  2. Fees: Franchisee's pay initial franchise fees, training fees, ongoing royalties and marketing fees.
  3. Trading Area: Franchisee's typically have a trading area or territory to operate within.
  4. Restrictions: Franchisors often impose restrictions such as: Where you can buy your products and services to be offered in the franchise; If you want to sell your franchise, you may need approval of the buyer from the franchisor; You may not be able to do other related activities that may compete with other franchisees or the franchisor.
  5. Controls: Some franchisors, especially more mature ones, may impose a degree of control that you may find excruciating, while newer franchisors don't have the resources to provide and insure proper controls. These controls or lack thereof may affect the brand and your business.

 

Additional Information on franchising

DEFINITION: On this website, Magnetsigns Corporation means collectively the group of Magnetsigns Head Office companies.

DISCLAIMER:
The communications made through this web site should not be construed as an offer to sell a franchise in, nor are the communications directed by or on behalf of Magnetsigns Corporation to the residents of, any jurisdiction that requires registration of a franchise prior to offering and selling the franchise in that jurisdiction. No franchises will be sold to any resident of any such jurisdiction and the required Franchise Disclosure Document, if any, has been delivered to the prospective franchisee before the sale in compliance with applicable law. Nothing in this disclaimer should be construed as a waiver of any applicable exemption provisions that may be available to Magnetsigns Corporation.

© Magnetsigns Corporation 2010