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What Is Franchising?

Franchising is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units. Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs. Franchising is a network of interdependent business relationships that allows a number of people to share:

• A brand identification
• A successful method of doing business
• A proven marketing and distribution system

In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.

The evolution of franchising can be traced back to the 1850s, but franchising today started in the 1950s and has reached almost mythical stature over the last fifty years. A new franchise opens every 8 minutes of every business day and drives over 40% of all retail business. In the United States, there are over 2,500 franchise systems. These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses. This 3.2% of all businesses controls over 35% of all retail and service revenue in the U.S. economy. Annually, franchising accounts for over $800 Billion in sales, and employs over 8 Million people. Franchises are the most successful businesses on the planet with over 95% success rate and at the same time creating over 170,000 new jobs per year.

Strength of Franchising

Franchising is the most popular system for growing a business in the United States today. According to every government survey, franchising has experienced explosive growth since the mid-70s and is expected to be the leading method of doing business in the new century. Franchising's advantages over going into business for yourself include; opening quicker, experiencing success sooner, developing a customer base faster, having less risk and being more profitable. Your success as a franchisee is based on the proven success of the franchisor to operate company units and upon the success of existing franchisees.

Franchising Misconceptions

There are many misconceptions about franchising, but probably the most widely held is that you as a franchisee are "buying a franchise." In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support. You and everyone in the system are licensed to use the brand name and operating system. The business relationship is a joint commitment by all franchisees to get and keep customers. Legally you are bound to get and keep them using the prescribed marketing and operating systems of the franchisor. To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system to get and keep customers.

Who Buys Franchises?

The majority of franchise buyers are success-oriented, educated, family minded, corporate people. As corporations switched their focus from employees to investors, they realized how expensive their senior level employee had become and they began down-sizing their mid and upper level managers to save money and improve investor stakes in their companies. This growing number of outstanding corporate managers are now the driving force behind franchising and represent a constant stream of qualified franchise buyers through BBNY offices. In a 25 year study conducted by the International Franchise Association pinpointed the "Typical Franchise Buyer". Franchise buyers will come from all walks of life, educational and economic backgrounds, but some of the typical qualifications are:

• Between 35 and 55 years old
• Corporate Management Background
• Income Avg. $80 to 150K
• Net Worth of $300 to $800K
• Majority Have IRA/401K Retirement Plans
• Men, Couples, Women in that order
• Most Have Not Owned a Business
• Want to Build a Business That Will Allow Them To Retire
• Looking For On-going Marketing, Training and Support

These are the same outstanding clients that contact BBNY offices seeking to buy their own businesses.

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