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Franchising is a system for expanding a business and distributing goods and services. It is a marketing method which has been called by many business experts as the greatest marketing strategy ever created. It is a program to create amazing opportunities for business ownership and personal wealth.
Some Canadian franchise facts to consider:
Franchising has the ability to capture more of the market share. The increased market share is due to three main things comprising a franchise:
Sometimes franchising is referred to as an industry. It is not an industry but a complete marketing system. More than 80 industries use franchising to get their products, services and brand names to the consumer. Restaurants account for only about one third of the available opportunities. More than half of the franchises available have initial investment levels of below $100,000.
Consumers believe when they shop at a brand name store they are getting quality. Branding makes it easier to compete with the well-established, independent operators and also against other franchised chains. By following the franchise system, the franchisee’s chances of success increase. Many thousands of dollars can be saved by the trial and error and experience of the franchisor. The system is usually predictable. Follow it and you should achieve similar results of other franchisees
Although the cost of entrance into a franchise system includes a franchise fee, the franchisee will benefit from training, operations manuals, site selection, lease negotiation, store design, construction savings, reduced cost of equipment and other advantages in buying power. The franchisor will often save the franchisee many thousands of dollars by suggesting the most effective initial marketing plans and allowing them to use the technology developed to improve operating systems. Franchisees will have the franchisor as a successful, experienced partner of whom they can ask questions. The other franchisees are also helpful in supporting.
The franchisee will benefit from the system as they pay an ongoing royalty which will allow the franchisee to benefit from periodic training programs in the regional office, home office or at the franchisee’s location. Through the franchisor’s buying system, the franchisee will usually pay much less than their unaffiliated competitors do.
Franchisees benefit from the purchasing power that comes from joining with others. They benefit from professionally designed point-of-sale marketing material, advertising, grand opening programs and other marketing materials that unaffiliated businesses can never afford. Franchise systems are on the forefront of research and development. They have access to the latest techniques, strategies, test markets, new products and operating systems.
Each franchisee’s spending power is combined with the spending power of all the other franchisees in the local market and the rest of the system. This combined spending power, on advertising for example, often enables franchises not only to dominate local markets and established unaffiliated businesses but to also compete effectively against large, established chains.
One of the main disadvantages of a franchise is a partial loss of independence. If a franchisee can’t live with the franchise agreement, another business should be considered.
The growth of franchising is inevitable. Franchising clearly offers aspiring, new business owners the best possible chance of succeeding with the least amount of risk. Within the next several years, franchising will comprise over 50% of the retail economy, will continue to employ millions of people, and will enable hundreds of thousands of people to realize their dream of successful business ownership.
As the Canadian and world economies grow with the ever increasing populations, and the move toward free market economies, new franchise concepts will come on the scene and the solid, well managed existing franchise companies will continue to grow.
There is a move toward better protection of franchisee rights and over time this will push more franchisors towards structuring their relationships with their franchisees in a totally win/win manner. Franchising is evolving, it's getting better conceptually and in reality. There are greater opportunities for wealth creation among both franchisees and franchisors today.