What is a Franchise?
Most of you are probably already familiar with franchises. You may even patronize a variety of franchised businesses without realising that they are franchises. These businesses range from car servicing and financial services to yogurt and home repairs. According to the International Franchise Association(IFA) franchises employed nearly 9,000,000 Americans in 2015 and generated nearly $880 billion. Franchising is difficult to escape.
The technical definition falls fairly in line with what we all typically think a franchise is - “an authorization granted by a company to an individual or group enabling them to carry out specified commercial activities”. Basically they are businesses operated by an individual or a group (the franchisee(s)) that shares a common product and/or trade name to the parent company (the franchisor).
But, what you might not know is that there are actually two major types of franchises: product/trade name franchises and business format franchises. In product and trade name franchises the franchisee (operator of the individual business) has use of a product or trade name, but no supporting relationship with the franchisor (larger company). This means that the franchisee basically operates the business independently, but does benefit from the marketing and advertising efforts of the franchise system. You’ll typically see these types of franchises for products that are older and established with a proven customer base. Some of the most common if these businesses are auto dealerships, gas stations, and soft drink bottling companies. On the other hand business format franchises is a setup that is characterized by an on- going business relationship between franchisor and franchisee. The franchisee is not only offered a trademark and a logo, but also a complete system of doing business. This is the more well known and much faster growing form of franchising, with world famous companies like McDonald’s, Holiday Inn, Century 21, and Baskin-Robbins using this format. This is also the form of franchises that we’ll primarily talk about on FranchiseHelp.
In the best of all worlds, the business format franchise is mutually beneficial for franchisor and franchisee alike. The franchisee typically pays an initial fee and ongoing royalties, giving the franchise system a continuous supply of working capital to develop and expand the organization. In turn, the franchisee gets a business package which would take years to develop and refine, a strengthened ability, to compete through the established brand identity and marketing power of the system, and the cost benefits and clout associated with the franchisor’s collective purchasing power.
The Franchise Experience
Many of the franchisees we talked with had to make a decision first on whether they would open an independent business or a franchised one. A few of their stories follow.
Franchising and the Economy Infographic
In all the talk about deficits,unemployment, and the precarious state of our nation's economy, one of America's most powerful engines for recovery is often (and foolishly) excluded from the conversation -- a classic case of missing what's right under our nose. Developed and perfected right here in the U.S., the franchise business model represents the ideal blend of national heft and local business, accounting for hundreds of thousands of stores, millions of jobs, and billions in annual output.
4 Business Functions Changing to Reflect Social Networking and Learning
Consumer social networking sites are not only transforming how people live their daily lives, they are also influencing several business-related functions. More and more of these socially-enabled tools, platforms, and best practices are fundamentally changing the way companies handle data, manage customers, and perform market research. Businesses can harness the power of socially-enabled tools that promote collaboration and eliminate departmental boundaries that might inhibit innovation. We aren’t talking about the need for small business to have and manage their own social media accounts. At this point, such initiatives should be a given. The focus is on ways social sharing is altering business processes at a core level, transforming how people “work.”
