Great Franchise Opportunities
A franchise is a type of business ownership in which the franchisor (the person or company who owns the name) grants an individual or group exclusive rights to use its trade name, intellectual property and know-how.
The franchise agreement typically lasts for a long time, typically 10 years after opening. But it isn't just about owning a business; it's about being part of an established company with marketing support and an established customer base.
There are three main types of business franchises:
Product–based franchising, such as the McDonald's restaurant chain and the 7-Eleven convenience store chain that sell food and beverages. Business format franchising, such as the hotel concept Hyatt Hotels or Marriot hotels. Corporate brand franchising, such as Burger King or Subway, an individual franchisee owns the location but the parent company provides training and support. In these cases, you'll own a franchise instead of an independent business but you'll have all of the support of a large corporation. There are different types of franchise agreements depending on what kind of franchise you buy into. The most common agreement is the "single territory" franchise, which allows you to open up multiple stores within a certain area. The other basic types include:
As with any business ownership, you may want to consider the advantages and disadvantages of working for someone else. While being part of a large corporation isn't for everyone, it can be a great way to start your own business or expand your current business.
Franchising food and beverage services is actually quite new in the restaurant industry; however, it's growing quickly because of the success of concepts like McDonalds and Dunkin' Donuts. With product-based franchises like McDonald's, people can work at one location and experience all aspects of running a successful restaurant.
Product-based franchising is one of the most popular types of franchise. This type of franchise allows the franchisee to open multiple locations throughout a defined area. A franchisee typically receives a percentage of net sales after all expenses have been paid, in addition to an annual royalty fee. Fees are typically charged each year for things like pouring beer, cooking food and refilling soda machines. Typically, a franchisee will be expected to open at least one restaurant per year in order to remain in business, but they could be required to open more restaurants if they can prove that there is demand for the product (i.e. if the franchise has a high number of openings, the franchisee can increase their annual sales).
A standard product-based franchise agreement typically lasts 10 years. At renewal, the franchisee is required to meet certain requirements in order to renew their lease. For example, a franchisor may request that an existing restaurant be renovated or that the store be expanded.
Business format franchising is different from product-based franchising, in that this type of franchisor controls every aspect of a particular business format. With business format franchising, a company will not only require its franchisees to open more stores within defined regions, but it will also oversee all aspects of running each individual location. For example, McDonald's provides the business format franchising of the hamburger restaurant. They own and control the equipment, they hire the employees and they train each location's managers.
Business format franchising allows a company to expand its product offerings and add new concepts. For example, in 1998 Arby's expanded their menu to include chicken sandwiches and will likely do so again soon. The company is also considering adding a frozen beverage bar option to some locations. Business format franchises can be extremely profitable for investors because of this ability to expand their product lines quickly and effectively.
Corporate brand franchising is different from product-based or business format franchising because it involves less control by a third party (the parent company). Corporate brand franchising allows a company to own the franchise, but it doesn't dictate the way that the franchise is run. For example, Burger King or Subway may be owned by a large corporation (Burger King Corp. and Subway Franchising Group, respectively), but they allow each franchisee to keep his or her name and format. The company will typically provide training and support, but it won't oversee every aspect of the franchise. In addition to product-based franchises (such as McDonald's) with single territory operations, corporate brand franchising usually involves geographic product-based franchises (such as Arby's).
There are many advantages to working for a large corporation. You'll have the support of a larger team of experts, you'll most likely have better training programs and you'll have access to more resources. Another advantage is that as the parent company grows, your business will grow with it. A larger company can attract customers, provide better marketing and offer more benefits to its employees.
In order to be successful, you'll need to put in the hard work necessary to get your business off the ground. With a corporate brand franchise, you won't have full control over your business and you may not be able to open as many locations or expand your offerings as quickly as some other franchises allow. You'll also need to be prepared to invest a large amount of money.
Benefits include lower overhead costs than you'd experience with a product-based franchise or business format franchise. Research data shows that the average corporate-owned restaurant is significantly less costly to operate than that of either a single territory or regionally based chain. Often times, these businesses offer less benefits (healthcare, 401(k) plans, etc.) but they are often able to retain employees and provide better quality service because of the reduced costs associated with corporate ownership. The last benefit is that you may have access to new products and ideas from your parent company if you're able to "bid" on future concepts.
As with any franchise, the key to success is a solid business plan. You'll need to know that you can sell enough of your product (i.e. hamburgers or donuts) to make it profitable. There may also be laws that restrict the number of franchise units, so you'll have to make sure you're able to provide enough profit for the franchisor in order to be successful and keep your franchise rights.
Franchising allows small businesses to enjoy many of the same benefits that larger corporations enjoy, but without all of the headaches associated with operating a large corporation. There are many advantages to corporate brand franchising, and you may find that it's the best fit for your business. If you're interested in learning more about franchise opportunities or you'd like to learn more about franchising, take a look at our Directory of Franchises today.
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Conclusion...
Not all franchise opportunities are created equal. You'll want to invest the time and research necessary to find the right franchise opportunity for your business. A good franchise opportunity should allow you all of the benefits of a small business while still providing access to similar resources as your franchisor's parent company (i.e. market research, advertising, training, etc.). Corporate brand franchising is also a great option for many small businesses. You won't be completely in control over your business but you may find that it's an opportunity that will allow you to give yourself and your employees more time to focus on running your own business and growing your profits. If you're interested in exploring any of these options, contact us today for more information.