There are distinct differences between franchising and licensing businesses. The chief one concerns establishment and operation costs, but there are others as well. It is important to know about as many of these differences as possible before deciding which one is best for you.
Let's talk about the difference that has already been mentioned: establishment and operating costs. A franchise requires that a significant amount of money be paid at the very beginning. Additionally, you will continue to pay royalty, advertising, and other fees to the parent company.On the other hand, you only pay for a licensing fee one time, and the cost is usually lower than that of a franchise fee. Because you are not connected with a franchise, however, you do not have to pay royalty fees or provide financial information on your business. You are pretty much responsible, however, for your own advertising and other business-related expenses that might be covered in a franchise.
Relationships between franchisees and parent companies and licensees and those from whom they obtained the license are different. Franchisees can expect to work a little more closely with the parent company; this may be especially true in the areas of training and support. Further, as a franchisee, you retain certain rights to company trademarks and logos.
Also, as a franchisee, you may be limited in some areas, such as where your branch can be located, which products and services you can offer, and possibly even price amounts.A licensee, however, may not have much contact with the original license holder at all. Further, the license agreement may not include the use of a brand or trademark; rather, as a licensee, you will be expected to make your own mark in the particular market for which you hold a license. You probably won't get a lot of training or support from the original license holder, either.
Further, as a general rule, you do not have any territorial rights. In other words, the original licensor can sell as many licenses, along with the products and services they offer, as he wishes in the same geographic area.
On the bright side, about the only time you will even be in contact with the licensor is when you're buying his product to sell in your store. However, that's all you'll pay, is the purchase price on the product. You won't have to pay royalty, advertising, or other fees to support the licensor.
Wednesday, October 27, 2010
Wednesday, October 20, 2010
How Franchising Works
Here is a concise, "pocket-guide" on How Franchising Works.
The Merriam-Webster dictionary defines a "franchise" as "the right or license granted to an individual or group to market a company's goods or services in a particular territory"; also "a business granted such a right or license".
A "franchisor" is defined as "one that grants a franchise", while a "franchisee" is defined as "one granted a franchise". The phonetic pronunciation for franchisor is fran-chi-zor; the phonetic pronunciation for franchisee is fran-chi-zee.
The reader may now be asking himself why, if this is an article on how franchising works, was it necessary for the short lesson in Language Arts? The answer is because for the remainder of this article, we are going to be discussing some fascinating creatures called "Zors" and "Zees", and it's important to know how they got their names.
(Seriously, in the franchise industry, it is common to drop the first seven letters, thus referring to those who sell franchisors as "zors", and those who buy and/or operate franchises as "zees".)
In Franchise World, "Zors" are the people who own businesses that operate as franchises. An example of a franchise in the "real world" would be McDonald's®.
"Zees" are people who live in Franchise World and want to own or operate one of the "Zors" franchises for themselves. In order to do this, a "Zee" enters into a business arrangement, usually by paying a certain amount of money, with a "Zor" which allows him to establish or operate a particular franchise in the "Zee's" desired location.
When "Zors" and "Zees" enter into this business arrangement, both of them reap benefits. "Zors" see a profit from the money that has been paid to operate a franchise. "Zees" have the opportunity to go into business for themselves, thus providing them with steady incomes and employment opportunities.
When you think about it, though, "Zors" and "Zees" actually need each other. Without "Zees" to buy into their franchises, "Zors" may actually start to see a decline in franchise growth.On the other hand, many times, the purchase of a franchise is a "Zee's" first time to operate a business. And, as is so often the case, the "Zee" is going to need all the help and guidance he can get from his "Zor".
This article may have been written in a light vein, but the fact is that both franchisors and franchisees serve a distinct purpose in their own right. For this reason, it is important that franchisors consider franchisees as partners or equals, affording them all the support and respect they need and deserve. Franchisees need to prove to franchisers that they have earned the respect shown to them, and acknowledge the support by making the franchise as successful as possible.
If you're looking for additional help, there are experts in the industry who work with beginners, they are franchise consultants. Reach out to one today, they can provide the next level of information.
The Merriam-Webster dictionary defines a "franchise" as "the right or license granted to an individual or group to market a company's goods or services in a particular territory"; also "a business granted such a right or license".
A "franchisor" is defined as "one that grants a franchise", while a "franchisee" is defined as "one granted a franchise". The phonetic pronunciation for franchisor is fran-chi-zor; the phonetic pronunciation for franchisee is fran-chi-zee.
The reader may now be asking himself why, if this is an article on how franchising works, was it necessary for the short lesson in Language Arts? The answer is because for the remainder of this article, we are going to be discussing some fascinating creatures called "Zors" and "Zees", and it's important to know how they got their names.
(Seriously, in the franchise industry, it is common to drop the first seven letters, thus referring to those who sell franchisors as "zors", and those who buy and/or operate franchises as "zees".)
In Franchise World, "Zors" are the people who own businesses that operate as franchises. An example of a franchise in the "real world" would be McDonald's®.
"Zees" are people who live in Franchise World and want to own or operate one of the "Zors" franchises for themselves. In order to do this, a "Zee" enters into a business arrangement, usually by paying a certain amount of money, with a "Zor" which allows him to establish or operate a particular franchise in the "Zee's" desired location.
When "Zors" and "Zees" enter into this business arrangement, both of them reap benefits. "Zors" see a profit from the money that has been paid to operate a franchise. "Zees" have the opportunity to go into business for themselves, thus providing them with steady incomes and employment opportunities.
When you think about it, though, "Zors" and "Zees" actually need each other. Without "Zees" to buy into their franchises, "Zors" may actually start to see a decline in franchise growth.On the other hand, many times, the purchase of a franchise is a "Zee's" first time to operate a business. And, as is so often the case, the "Zee" is going to need all the help and guidance he can get from his "Zor".
This article may have been written in a light vein, but the fact is that both franchisors and franchisees serve a distinct purpose in their own right. For this reason, it is important that franchisors consider franchisees as partners or equals, affording them all the support and respect they need and deserve. Franchisees need to prove to franchisers that they have earned the respect shown to them, and acknowledge the support by making the franchise as successful as possible.
If you're looking for additional help, there are experts in the industry who work with beginners, they are franchise consultants. Reach out to one today, they can provide the next level of information.
Wednesday, October 13, 2010
What Franchise Makes the Most Money?
You’re asking yourself, “What Franchise Makes the Most Money?” Good question.
A person can’t really point to a particular franchise and say, “There’s the money maker,” because the fact is any franchise can be profitable. So, instead of trying to determine which franchise will make you richer faster; look for things that must be present in order for any franchise to be profitable.
•One of the key indicators to a profitable franchise is how well it is managed. As with any business, franchise or otherwise, if it is struggling or otherwise unproductive, often the blame, or at least part of it, is going to rest with management.
•The home real estate industry likes to say that the key to a successful home sale is almost always “location, location, location”. In the franchise industry, those words could be “market, market, market”. There have been instances of franchises succeeding in markets that previously did not seem as though they would support them. However, these are usually the exceptions to the rule: most of the time the success of a franchise will depend on whether or not the services it provides are needed or wanted.
•If you want to try to get a clear picture of a franchise’s profitability, ask to see the Franchise Disclosure Document (FDD). This is a publication that franchisors—those who offer franchises for sale—are obligated to provide to prospective buyers. If a franchisor is dragging their heels to provide the document, or if there is evidence that certain sections of the document may not be a true reflection of the franchise’s profitability, this can be a sign that the franchise is not doing well.
•Consider whether or not the franchise has good investment possibilities. If lenders or other financial backers seem reluctant to provide all or part of the money needed to start a franchise branch, this may indicate that the master franchise itself, or at least a good portion of it, is experiencing profitability difficulties. Keep in mind, however, that a number of factors can affect profitability at any given time, so a little more research may be in order to try to ascertain the reason for the investors’ reluctance.
•One of the best indications of a successful franchise is sound strategy development. The franchise that combines tactics that are known to be successful with others intended to further growth are often the ones with the highest profitability.
The more of the above key indicators, as well as others, that are present, the more likely it is that a franchise will be successful. By looking for these and other signs of good business practices, you can determine which franchises are indeed the most profitable. To aid you in evaluation these indicators, one of many franchise consultants can assist you.
A person can’t really point to a particular franchise and say, “There’s the money maker,” because the fact is any franchise can be profitable. So, instead of trying to determine which franchise will make you richer faster; look for things that must be present in order for any franchise to be profitable.
•One of the key indicators to a profitable franchise is how well it is managed. As with any business, franchise or otherwise, if it is struggling or otherwise unproductive, often the blame, or at least part of it, is going to rest with management.
•The home real estate industry likes to say that the key to a successful home sale is almost always “location, location, location”. In the franchise industry, those words could be “market, market, market”. There have been instances of franchises succeeding in markets that previously did not seem as though they would support them. However, these are usually the exceptions to the rule: most of the time the success of a franchise will depend on whether or not the services it provides are needed or wanted.
•If you want to try to get a clear picture of a franchise’s profitability, ask to see the Franchise Disclosure Document (FDD). This is a publication that franchisors—those who offer franchises for sale—are obligated to provide to prospective buyers. If a franchisor is dragging their heels to provide the document, or if there is evidence that certain sections of the document may not be a true reflection of the franchise’s profitability, this can be a sign that the franchise is not doing well.
•Consider whether or not the franchise has good investment possibilities. If lenders or other financial backers seem reluctant to provide all or part of the money needed to start a franchise branch, this may indicate that the master franchise itself, or at least a good portion of it, is experiencing profitability difficulties. Keep in mind, however, that a number of factors can affect profitability at any given time, so a little more research may be in order to try to ascertain the reason for the investors’ reluctance.
•One of the best indications of a successful franchise is sound strategy development. The franchise that combines tactics that are known to be successful with others intended to further growth are often the ones with the highest profitability.
The more of the above key indicators, as well as others, that are present, the more likely it is that a franchise will be successful. By looking for these and other signs of good business practices, you can determine which franchises are indeed the most profitable. To aid you in evaluation these indicators, one of many franchise consultants can assist you.
Wednesday, October 6, 2010
Which Franchise Should I Buy?
The question of which franchise should you buy is definitely a personal one. Only you know what you do and don’t like to do, what you are good at, and what you will honestly admit that you absolutely stink at. However, by answering the questions below, and of course, any others you may think of, you can get a picture of exactly which franchise you should buy and which ones you shouldn’t even consider.
• What do you like to do? What do you think you would like to do?
When you patronize an establishment, do you find yourself thinking, “If this was my business, I’d…(fill in the blanks).”If so, you might want to conduct your own research into franchises dealing with that particular business, and what exactly is involved in owning one.
Remember, however, that when you into any business as a patron or customer, you are not seeing very much of the behind-the-scenes operation. There is inventory control, State and Municipal rules, regulations, and guidelines to be followed, and other things that come with running a business.
• How “hands-on” do you want to be?
Do you want to be the one behind the counter, or do you want someone else greeting and assisting customers? Some franchises require that the owner be just as involved as other employees, while others allow the owner more flexibility in delegating tasks and responsibilities.
• Why do you want to buy a franchise?
Has it always been your dream to work in a particular field, and you find yourself in a position, financial and otherwise, to fulfill that dream? If so, buying a franchise in the area where you have always wanted to work can help you realize that dream.
• What are some of the advantages to starting your own business?
When you are a franchise business owner, you are literally your own boss, at least in your particular branch. You may have to answer to an area or district manager, but you still own your little piece of the enterprise, and it’s yours to run as you please, as long as you follow the master franchise rules and regulations.
If the franchise is a success, you never have to worry about being out of work again. As long as your branch is in business, you have a job to go to every day, which will get you out of the house and into the business world.
Consider leaning upon the expert advice of a franchise consultant, many have found the answer to the “Which Franchise Should I Buy?” question by working with one of many franchise consultants.
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