The franchising concept was born in the second half of the 19th century and has been expanding ever since.
Undoubtedly, the USA is the largest franchising market, followed by France, Canada, the United Kingdom, and now China.
No one can seriously dispute that unprecedented changes are occurring in our daily lives, and chances are that the rate of change will only increase with time.
Some of the fastest changing areas are demographics, technology, communications, food preferences and food costs.
While operating a hospitality business, be it a fast food or white-table-cloth restaurant or hotel, there are exciting challenges and opportunities.
For some people, managing a hospitality enterprise looks scary. But not to worry, it is still not rocket science. Anyone willing to learn work hard and with some education, can master a well-thought-out franchise operation.
In fact franchisers prefer franchisees to follow their manuals tot eh letter and never question any of the rules and regulations. This may be advantageous to franchisers but not always to franchisees.
Franchising is the practice of using another firm’s successful business model.
There are thousands of people with funds to invest, and interested in franchise operations as they lack a successful business model. Reputable franchisers can be of value to such individuals.
Successful franchises have:
• A good track record of profitability
• A system that is easy to duplicate
• Detailed systems, processes, procedures, manuals and training programs.
• Unique, unusual, and easy-to-implement concepts
• Broad geographic appeal
• A system that is relatively simple and inexpensive and easy to operate
A typical food franchise operation costs, pending on location and the fame of the franchiser, anywhere from $ 250 000.00 (2012 costs) up to one million.
Typical franchisees are former executives or those who have been “laid off” or army veterans with well-off relatives, or entrepreneurs looking for opportunities.
Well-established franchisers have developed systems to prevent costly learning experiences from mistakes made.
It is important for any franchisee to consult other franchisees, and seek their opinion about the company envisages.
Franchisee agreements must be thoroughly evaluated before signing and ideally vetted by a specialized lawyer. In general, franchisers take percentage of the revenue, also from pre-tax profits, plus a standard fee for national advertising pending on revenue.
Some franchisers insist that franchisees buy their foodstuffs from the head office, claiming that standards must be maintained, while the same ingredient may cost far less in the free market. All of the above and more must be studied and agreed upon before signing a contract. If, as a franchisee, you feel the agreement is of advantage to the franchiser rather than you, walk away from the deal.
A franchise must be beneficial to both parties. Some franchisers train thoroughly and expertly in their specially designed and staffed facilities. Others promise to train, but hardly do, and let the franchisee “sink or swim”.
Some jurisdictions regulate franchising agreement (the USA and China), others rely on existing business law, and yet others have no regulation at all. In continental European countries franchising is poorly or not at all regulated, because Americans invented this type of enterprise.
Franchisers typically establish territories guaranteeing that a franchisee will have no other competitor of the brand in his/her territory. If the franchise becomes successful, an unscrupulous franchiser divides the territory limiting the trading area and thus eliminating increased revenue stream.
The recent American recession put the franchising industry on a slow path of recovery.
Some franchisers have proven willing to delay cosmetic investment requirements in the name of short-term viability.
Franchisees must be aware that franchisers can and do impose policy changes, or concept changes to capture market share. Costs are borne due to such changes must be borne by franchisees.
There are all kinds of franchise concepts starting with food, hotels (of all levels of quality), hair cutting, postal and printing services, stationary and office supply, gifts, variety stores, income tax preparation, financial services, bookkeeping, payroll calculation and cheque issuance delivery just to name a few.
Mc Donald’s, Subway Sandwiches, H and R Block accounting, Hampton Inns, & Eleven, Holiday Inn, Dunkin Donuts, Mini Markets, Pizza Pizza, Best Western Hotels, The Sandwich Tree, First Choice Hair Cutters, Burger King, Tim Horton’s Coffee Shops, Hertz Auto rentals, Rent-a-Car, Motel 6, Motel 8, Best Value inns, Boston Pizza are just a few that come to mind.
Before you decide to become a franchisee, think what you like to do most, then contact a matchmaker or franchise broker.
Before you consider signing the agreement, visit a few franchisees, and ask questions.
If and when you are satisfied, ask for the agreement but make sure to read it carefully including the small print, or contact a specialized lawyer to do it for you.