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brandEXPANSION Hot Press

Franchise & Business Opportunity News

What is Franchising?

Written on October 7th, 2006 by Joseph in Franchise Industry.

As brandEXPANSION clearly states we are in the business of expanding your brand. One of the ways we can do so is through franchising. We enjoy working with companies that are in all stages of development from a concept idea, single unit operation or 1500 units in operation.

Today I came across a unique clothing shop owned by three entrepreneurs working very hard to manage and grow their business. Upon talking with them and viewing the establishment I could immediately see the franchise potential and introduced brandEXPANSION and the concept of franchising. They were very interested and like so many asked the following question.

What Is Franchising?Franchises are generally known to the public under well-promoted brand names like Kentucky Fried Chicken or Burger King not the names of the individual franchise owners. As a result, the general public may not realize that many businesses like the clothing shop that consumers utilize everyday are in fact franchises or have the potential to expand their business through franchising.

Definition
Historically a franchise is a business organization in which a company already has a successful product or service (the franchisor) enters into a continuing contractual relationship with other businesses (franchisees) operating under the franchisor’s trade name and usually with the franchisor’s guidance, in exchange for a fee. In more recent times it includes business arrangements known as franchises, licenses, dealerships and distributorships, to name a few.

Regulatory Definition
The Federal Trade Commission identifies three definitional prerequisites to coverage of a business-format or product franchise.
1. Trademark: The franchisor offers the right to distribute goods or services that bear the franchisor’s trademark, service mark, trade name, advertising or other commercial symbol.
2. Significant Control or Assistance: The franchisor exercises significant control over, or offers significant assistance in, the franchisee’s method of operation.
3. Required Payment: The franchisee is required to make any payment to the franchisor or an affiliate, or a commitment to make a payment, as a condition of obtaining the franchise or commencing operations. There is an exemption from coverage for required payments of less than $500 within six months of the commencement of the franchise.
If a business arrangement includes all 3 elements, it’s a franchise. It could be called a license, dealership, distributorship, or association but it’s still a franchise and must comply with the rules of the Federal Trade Commission and certain state regulatory authorities.

Business Definition
Franchising has been seen as:
A method of GROWTH;
A method of MARKETING;
A method of DISTRIBUTION;
A method of CAPITAL ACQUISITION;

And increasingly, franchising has become:

A method of EMPLOYMENT
For a company wishing to expand to multiple locations, franchising offers the opportunity to secure many locations operated by “dedicated” managers rather than company employees. A franchisee is dedicated because he or she has business ownership (operating under the franchisor’s name and guidelines) and have made a time and capital investment. A franchisee will sell more, service customers better, and control costs more tightly than a company employee because their name, resources and continued employment are on the bottom line.

What Franchising is NOT
1. Franchising is not a single industry. There is no such thing; over 300 different industries and 5000 concepts utilizing franchising to expand their brand.

2. Franchising is not a game. Franchising is not about selling some franchises. It’s about building a company - a serious business venture. A person who franchises his restaurant to others will still be in the restaurant business. They will have to develop new menu items, new promotional programs, new décor, and more to expand the concept.

We look forward to talking with anyone wishing to become involved in franchising at all levels. We will answer your questions and provide insight at brandEXPANSION Hot Press as we work with companies like the clothing shop and assisting the three entrepreneurs to expand their brand.

Until next time bE FOCUSED and Welcome to brandEXPANSION.