How to choose a great franchise? | BusinessTrade.org

The franchise model has a long and tested history. ?Here is an explanation of what this business model entails.?

A franchise refers to a business model where you, as an entrepreneur, can be granted a licence to market a company?s products or services within a certain area or location.?The franchise company will thereby expand their brand by having another branch of business that fall under their name and image, but the operations and success of the business will depend on your skills.

There are many different categories of franchises; some of the most familiar are popular fast food businesses, such as Macdonalds or KFC. There are over 120 different categories of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises.

As an entrepreneur investing in a franchise business you will be allowed to open your own outlets of an established company, using its name, brand and logo. This way you can already capitalize on past marketing strategies of the brand, that have made consumer familiar with the brand. The more familiar consumers are, the less work do you need to do to market you franchise shop locally. The company also allows the third party operators to use its tested management, marketing and sales systems, as well as their future promotion material.

To be given these rights, the third party operator (the person considering buying into the franchise) has to pay an initial fee to the franchise owner, after which they are referred to as a franchisee. As a franchisee, you will also have to pay annual royalties to the franchise owner. In exchange the franchise business, referred to as the franchisor, will offer the franchisee support such as training and management assistance. Before taking over an established franchise or starting a new franchise, you can save yourself a lot of work by finding out from other experienced franchisees the level of oversee the franchisor demands. Some franchisors demand strict adherence to their guidelines, such as colours you may use in your shop or the variety on the prescribed menu. Other franchisors are more relaxed with regard to guidelines. Also find out the level of management support the franchisor will give your franchise. If the management training is very comprehensive, you may not need to recruit too highly skilled staff. This could help you save on initial hiring cost and high wages, by offering their training opportunities instead.

When choosing a franchise business to invest in, you should consider the potential of the business to capitalize on current or future trend and generate profits. Look out for trends that are expected to endure.? You should also do research to find out more about the company, the industry it operates in and the local consumers.

Source: http://www.businesstrade.org/business-finance-advice/2012/07/31/how-to-choose-a-great-franchise/

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