Franchises - What Are They?

Several years before, if one wanted to start his own business, his natural course of action would be to do it on his own, depending largely on his business instincts, limited know-how, and observation of the market. The advent of franchising, however, brought a big change in business. Many have since become rich because of franchising. Franchising has indeed many advantages.

Modern franchising came to prominence with the rise of franchise-based food service establishments. This trend started as early as 1919 with quick service restaurants such as A&W Root Beer. In 1935, Howard Deering Johnson teamed up with Reginald Sprague to establish the first modern restaurant franchise. The idea was to let independent operators use the same name, food, supplies, logo and even building design in exchange for a fee.

The growth in franchises picked up steam in the 1930s when such chains as Howard Johnson's started franchising motels. The 1950s saw a boom of franchise chains in conjunction with the development of America's Interstate Highway System. Fast food restaurants, diners and motel chains exploded. In regards to contemporary franchise chains, McDonalds is arguably the most successful worldwide with more restaurant units than any other franchise network.

Some of the advantages to owning a franchise can be:

You Own the Business - A franchise is a duplicate of a successful business concept. The franchisee owns the outlet, therefore, he hires his own employees and oversees the management its day-to-day operations. He has high stakes in the business because his money is involved.

Ready Market - When one buys a franchise, he is buying an established concept that has a good record of accomplishment. The franchisee is allowed the use of the company's trademark and brand name. Because of this, the company is, in effect, giving the franchisee a license to market its products carrying a brand that is already familiar with the consumers. Many popular franchises have instant brand-name recognition and have created a loyal following among consumers. Therefore, the franchisee is getting into a business that already has a ready market.

Continuous Support from Franchiser - Although running his own business, the franchisee can tap the services of the parent company anytime he needs assistance. The services of the head office organization are available to him, too, whenever he needs help. Furthermore, many companies have field operations personnel whom the franchiser can call on to help him deal with any problem he may encounter in the operation of the business.

Most franchises being offered nowadays are turnkey operations. Upon the signing of the franchise agreement and payment of the franchise fee, the franchisee receives the equipment and supplies required in running the business. Furthermore, the franchiser provides assistance in identifying a good business location for the new outlet. The company assists the franchisee in negotiating his lease, preparing plans for outlet layout, shop fitting, and furnishing his store. It also provides assistance in determining the appropriate stock inventory for the opening of the business. This kind of support and the other benefits under the franchise agreement is what sets franchising apart.