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A Quick, Comprehensive Guide To Franchising For Starters

By Expert Author: Clint Shaff


Franchising is a business strategy wherein a business owner (franchiser) gives a license (franchise) to a party or individual (franchisee). With this, the franchiser gives the franchisee access to the franchiser’s business and sell products under its name. The franchisee pays for initial startup and annual licensing fees for him or her to operate with the use of the franchiser's products, proprietary knowledge, processes, and trademarks.


Why Get Into Franchising?
Most people who wish to begin a business get into
lucrative franchising because it already has an established brand. It increases the chances of success due to proven marketing and business methods. Some franchises tend to be lower-cost, especially during recession. As franchisers want to build more capital or maintain stability during a recession, they offer discounts on their franchise fees. Furthermore, consumers prefer to go to familiar businesses during recession.


Some really large franchise businesses offer in-house lending and financial assistance for startups or operations. The franchise supports all of the business’ needs such as giving away promos and putting up advertisements. There is also a certain level of independence when you run a certain franchise. While you must comply with the agreement with the franchiser, running your own unit is almost all yours.


Costs
For starters, a franchisee must pay an initial franchise fee. This fee may amount to hundreds of thousands of dollars and may be non-refundable. This includes rent, construction, outlet, initial inventory, operating license fees, insurance fees, and “grand opening” fees.


As franchisees use the brand’s name, royalty fees must also be paid, which is based on the percentage of weekly or monthly gross income. Advertising fees may also be included in the agreement.


Selecting a Franchise
Despite an already proven business formula that comes from lucrative franchising, there are also risks. When selecting a franchise, one must consider the demand, competition, operating abilities, brand reputation, franchisor’s experience, training and support services, and growth.


A franchise broker or adviser will help the party choose the right franchise by reviewing the investment money and the franchising opportunities compatible to the party. To know more about getting a franchise, visit the website at business.ftc.gov.

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