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Franchising

What Is Franchising? When was it established? How Many Franchise Systems are there?

Franchising is one of the most popular system for expanding a business in the United States today.

According to every government survey, franchising has experienced explosive growth since the mid-70s and is expected to be the leading method of doing business in the new century.

In the United States, there are over 3,000 franchise systems. These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses. This 3.2% of all businesses controls over 35% of all retail and service revenue in the U.S. economy Franchising is one of many business methods and or models a company or business may use in capturing market share. The others are company owned units or a combination of company owned and franchised units.

Franchising is a business model and or system for obtaining and retaining customers under a branded name and or mark. Franchising generally, is a proven marketing / advertising system for creating an image in the minds of current and future customers. It is a method for distributing products and services that satisfy customer needs.

Franchising is a network of interdependent business relationships that allows a number of people to share:

  • Brand identification
  • Successful method of doing business
  • Proven marketing and distribution system

Franchising is a strategic relationship between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, for example to obtain and keep more customers than their competitors.

In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support. You and everyone in the system are licensed to use the brand name and operating system.

The business relationship is a joint commitment by all franchisees to get and keep customers. Legally you are bound to get and keep them using the prescribed marketing and operating systems of the franchisor.

To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system to get and keep customers.

The Strength of Franchising

Franchising is the most popular system for growing a business in the United States today. According to every government survey, franchising has experienced explosive growth since the mid-70s and is expected to be the leading method of doing business in the new century.

In the United States, there are over 2,500 franchise systems. These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses. This 3.2% of all businesses controls over 35% of all retail and service revenue in the U.S. economy.

Franchising advantages over going into business for yourself include; opening quicker, experiencing success sooner, developing a customer base faster, having less risk and being more profitable. Success as a franchisee is, in most cases generally based on the success of the franchisor to operate company unit(s) and, upon the success of existing franchisees. Generally it should be able to show that the business can be successful in various markets and in different conditions.

In general franchise systems use precise methods to service and satisfy the customers.

By documenting these practices, the franchisor institutionalises the buying experience.

In general customers don't like surprises, this then ensures a consistent operation, and therefore builds customer loyalty and brand recognition.

Franchising in general is successful, because we are people of habit and are brand-driven.

When we purchase goods and services - we trust brands that we see everywhere, every day.

We tend to be loyal to a product or service delivered to us the same way all the time.