The ancient philosopher, Lao Tzu said “As for the best leaders, the people do not notice their existence. The next best, the people honor and praise. The next, the people fear, and the next the people hate. When the best leader’s work is done, the people say, “We did it ourselves!”
So with franchising, in the best franchise systems, the franchisees say, “We did it ourselves!”
There is no franchise industry. There is a franchise community. Franchising is a marketing concept, a method of distribution and expansion. More significantly, franchising is free enterprise at the ultimate. It is, in essence, private industry helping create private industry, and by extension creating job opportunities and the local and national economies. Dr. Jeffrey Bracker of the University of Louisville summarized his findings from the 1994 study of Franchising in the Economy by stating, “Franchising is an engine of growth.”
Approximately 65 industries grow through franchising, from accounting services to water conditioning and everything in between. True, the potential rewards are not as great as becoming an independent business owner, but neither is the risks.
There are no guarantees. There are advantages. With a franchise, the franchisee begins the race for business halfway down the
track, while the independent business owner begins at the starting block. The franchisee benefits from a proven business plan, national advertising and marketing support, extensive training specific to the product or service brand recognition, a franchisor and, in some cases, an international network of franchisees who have pledged to work for the success of the entire franchise system.
Franchising is a team effort—a tremendous network of franchisor, franchisees, suppliers…people whose own success depends on your success. It is the relationship of franchising that is the key to its success.
However, the key to the success of franchising is also what makes it a difficult choice for many successful business people. Many entrepreneurs do not want to be told how to market their business, what products to offer, which suppliers to buy from. For these entrepreneurs, franchising is not the right choice. Remember, the franchisee is essentially buying a proven, successful business. To insure success, the business and marketing plans that provided the company’s initial success must be duplicated exactly—after all, that is the plan that works. Using the franchisor’s network of suppliers guarantees consistency in taste, service and quality—the keys to the success of the franchise system.
What is franchising really? John Naisbitt, author of MEGATRENDS has stated that “Franchising is the single most successful marketing concept ever.” For this reason, one cannot give averages or generalities when discussing franchising. What prospective franchisees must realize is that with 65 industries with 5,000 distinct concepts, “franchising is system – master licensees, area sub-franchisors, and franchisees. In addition, each franchise system offers different training programs, start-up equipment or assistance, initial fees and royalty payment schedules. Each system is unique in what it requires in potential franchisees – from individual net worth to business experience.
Potential franchisees must consider their own background when selecting a franchise. For example, Will you seek a franchisor who looks more at your potential rather than your net worth? Do you have extensive experience in the industry or will you need a franchisor that provides initial and or continuing training programs? Do you want to be an owner-operator or are you interested in franchising as an investment only? Also, think about the industry in which you would like to work. Maid services are quite lucrative, but initially, you may be the one cleaning offices, Computer education courses for children are a growing field: Do you have the patience to be a teacher? Do you like working with children? These are only some of the many questions a prospective franchisee must ask. Consider taking at least six months, if not more, to investigate before investing.
Remember, with 5,000 franchise concepts representing 65 industries, the right concept for you is available. This investigation also includes showing all paperwork, the disclosure document and the contract to an attorney who specializes in franchise law before signing anything. Franchise systems are businesses. Make certain you understand and agree with everything set out in the contract BEFORE you sign. Spend at least a day with the franchisor. After all, you are considering signing a contract to work with this company for possibly 20 years; so make certain this is a company with which you want to build a relationship. Contact franchisees in the system. The Federal Trade Commission (FTC) requires that the disclosure document, the Uniform Franchise Offering Circular (UFOC), provides the names of the system’s franchisees, past and ‘present. Try to contact franchisees in territories similar to the one you are considering. Remember, location, location, location. Within the same system, potential earnings of a franchise in Manhattan are, in all likelihood, one vastly different from one in Maui. The territory is different, the demographics are different, and markets are different. The FTC is currently considering requiring franchisors to disclose potential earning claims. With a little homework, this Information is readily available. By contacting franchisees with similar territories to the one in consideration, the potential franchisee can gain insight into what to expect from his or her own franchise experience. Franchisees will talk openly with prospective investors to help strengthen the system. A franchisee who invests after significant due diligence will be a satisfied and productive member of the franchise system. Remember, the strength of the system is the strength of each franchise and vice versa. After all, a customer of the Manhattan franchise may seek the same product or service from the Maui franchise when on vacation!
Such is the franchise relationship. The franchisor provides the tools for success … but it is up to the franchisee to use the tools in order to achieve success.
