Do you have a successful business? Want to expand your business to other markets and reach more people? Have others approached you about wanting to become a franchisee? Or, are looking to grow your business without having to directly manage 2, 10, 30, 100 locations? Franchising may be an option for you. Want to learn more?
First, just a little bit of historical background
There is much debate about when the concept of the franchising first began. Some say in the early 20th century. Resarch suggests that the concept of franchising dates back several decades earlier. According to a PBS reports, Matilda Harper established the first franchise in 1891. That was more than 100 year ago. The 1891 franchise model had the attributes of a modern franchise system. Each salons franchise bore duplicated services and products. Each salon was run by a woman trained in the regimented “Harper Method.” The franchise salon locations were marketed nationally. No matter what date you use, the concept of the franchising is not new. It a way doing business that goes a long way back. Let see where franchising is today.
Things have changed in the last century. Today in the United States, there are more than 700,000 franchise businesses. The International Franchise Association, IFA estimates in its The Franchise Business Economic Outlook that franchise businesses account for approximately 3% of US GDP, or over $400 billion. Franchise concepts can be found in almost every business sector: retail, food service, B2B, and direct consumer sales. Franchise businesses are traditional brick and mortar, virtual, home based and everything in between.
But, what exactly is franchising?
Franchising is a distribution model. Franchising is a path to business expansion. Franchising allows you to reach more people in more places. Franchising is all that. But, lets get to the nuts and bolts. And, let’s keep it simple. What is the definition of franchising? Franchising is the licensing of business name and concept in exchange for money. Let’s bring it down to personal level. A business owner such as you gives someone else the right to use your business name and business concept. You exchange you are paid initial and on-going franchise fees.
Warning! You are going to need the legal knowledge.
Franchising is a heavily regulated industry. There are laws that require you to prepare a set of 23 disclosures and there are state registrations. There are laws about how you can advertise for prospective franchisees. There are laws that govern when you give disclosures and when franchisees can enter into an agreement. There are franchise relationship laws about when you may not terminate or not to renew a franchise. There laws and regulations governing each phase of the franchise business relationship.