10 Apr 2012
This is a new series in which we will review the benefits of franchising and why you might consider this as your business strategy for your business.
So, why people use franchising as a business strategy? Most people who start a business are looking to avoid the various pitfalls and mistakes that are possible. These can range from marketing, to product design, implementation, business systems and budgeting. I don?t care who you are, but if you are sailing the high seas without a compass you can get lost. This is where franchising can and should assist.
The mutually beneficial relationship that exists between franchisors and franchisees makes franchising unique in the world of business. It provides entrepreneurs with an affordable means of accelerating expansion and achieving development goals more quickly than might otherwise be the case, and with far less risk. Similarly, franchisees have a head start because of the support provided by the franchise system. Franchising means being in business for yourself but not by yourself. Whether it?s accounting and financing, advertising and public relations, personnel management, purchasing, or inventory control, franchisors are there to provide ?hands on,? one-to-one assistance. While franchising does provide opportunities, it does not create miracles. Franchisees combine knowledge and resources with entrepreneurial drive and spirit to form a business relationship unique to franchising. Franchising is a field of expanding economic opportunity in which each and every person can play a part based on talent, initiative, and dedication.
Typically speaking with a franchise system, there is to some degree, a proven track record of success. In other words, success leaves clues. Follow what others have done or are doing and you too can be successful. There are so many things that a franchise can provide to a business person to help insure their success.
Among the things that a franchisor should provide to a franchisee are Brand, Operating Systems and Ongoing Support. These elements of business allow you to get, keep and grow your business.
HOW WIDESPREAD IS FRANCHISING?
The answer may surprise you. By 2001, there were 767,483 business establishments in all domestic franchise systems (either owned by franchisors and franchisees), which employed almost 10 million people, with direct output close to $625 billion, and a payroll of $230 billion. These establishments account for significant percentage of all establishments in many important lines of business: 56.3% in quick service restaurants, 18.2% in lodging, 14.2% in retail food, and 13.1% in table/full service restaurants
WHAT SHOULD I CONSIDER BEFORE BUYING A FRANCHISE?
Among the points which IFA recommends for investigation are:
a. the type of experience required in the franchised business;
b. a complete understanding of the business;
c. the hours and personal commitment necessary to run the business;
d. who the franchisor is, what its track record has been, and the business experience of its officers and directors;
e. how other franchisees in the same system are doing;
f. how much it?s going to cost to get into the franchise;
g. how much you?re going to pay for the continuing right to operate the business;
h. if there are any products or services you must buy from the franchisor and how and by whom they are supplied;
i. the terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years;
j. the financial condition of the franchisor and its system.
Next up, how to find the right franchise for you.
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