One company that has a global presence because of its franchises is fast food giant McDonald`s. McDonald`s was founded in 1940 by the McDonald brothers in San Bernardino, California. However, ray Kroc opened the first official franchise for McDonald`s System, Inc. in 1955 in Des Plaines, Illinois (a suburb of Chicago) – a predecessor of McDonald`s Corp. There are more than 785,000 franchised facilities in the United States, contributing nearly $500 billion to the economy. In the food sector, franchises included well-known brands such as McDonald`s, Taco Bell, Dairy Queen, Denny`s, Jimmy John`s Gourmet Sandwiches and Dunkin` Donuts. Other popular franchises include Hampton by Hilton and Day`s Inn, as well as 7-Eleven and Anytime Fitness. Buying a franchise usually gives you a better opportunity to generate customers and grow your business immediately. If you stick the name McDonald`s, Ace Hardware or Jiffy Lube on your front door, you will immediately gain recognition in the market. You benefit from the brand awareness that the franchisor has acquired. Some franchisors offer initial support in choosing a business location, training your employees, and starting your business. If the company invests in marketing, you will benefit as well.
You can also save money by buying from franchise providers. A franchisee must follow the proven business model that already exists, as it helps to ensure a consistent state of operation across all businesses under the same brand. The franchisee is responsible for the growth of the franchise through the usual advertising and marketing means in its exclusive field of activity. A franchise is the extension of an existing brand, service or advertising approach to a new location through a business agreement between the existing owner of the trademark or service and a new person or group who wishes to use that brand or service to create a new business that expands the owner`s existing facility. A franchise agreement is created that establishes the relationship between the franchisor (the existing owner) and the franchisee (the new business partner). Often, the franchisee replicates the franchisor`s business model in a new location or sells goods or services that are also offered by the franchisor. In this way, the franchisee allows the franchisor to expand into a new market that it might not otherwise be able to reach, while the franchisor provides the franchisee with business-type advice and guidance that would not be available if the franchisee had simply started their own business from scratch. Ultimately, this means you`ll save a lot of work while significantly reducing the risk of getting your business off the ground and making it profitable.
For a new startup, it can take years before a new name, logo and concept becomes a brand in your customers` minds. Buying a franchise with an established brand means building your business on a solid foundation on which all the essential elements of a brand already exist: a franchise agreement is temporary, similar to renting or leasing a business. This is not the commercial property of the franchisee. Depending on the contract, franchise agreements typically last between five and 30 years, with heavy penalties if a franchisee violates the contract or terminates it prematurely. Franchising is a contractual relationship between a licensor (franchisor) and a licensee (franchisee) that allows the business owner to use the licensor`s trademark and business method to distribute products or services to consumers. While each franchise is a license, not all licenses are a franchise under the law. Sometimes it can be very confusing. The disadvantages are the high start-up costs as well as the ongoing license fees. To take the example of McDonald`s below, the total estimated cost to start a McDonald`s franchise ranges from $1 million to $2.2 million. By definition, franchises have ongoing fees that must be paid to the franchisor in the form of a percentage of sales or turnover.
This percentage can range from 4.6% to 12.5%, depending on the industry. In exchange for the franchisor`s advisory role, use of intellectual property, and experience, the franchisee typically pays an entry fee plus a continuous percentage of gross revenue to the franchisor. Franchise agreements are complex and vary from franchisor to franchisor. As a general rule, a franchise agreement includes three categories of payment to the franchisor. First, the franchisee must acquire the franchisor`s controlled rights or trademarks in the form of an upfront fee. Second, the franchisor often receives remuneration for providing training, equipment or advice to businesses. Finally, the franchisor receives ongoing royalties or a percentage of the company`s revenues. There are pros and cons to investing in an already successful business. As with any investment, you should carefully research your options before deciding to buy a franchise. Having a brand can definitely make the difference between failure and success! As an independent franchise business owner with one of the Home Franchise Concepts (HFC) brands – Budget Blinds®, Tailored Living®, Concrete Craft® and AdvantaClean® – you are immediately part of a network of years of quality products and services, customer service and reputation building that have made HFC one of the largest franchisors in North America. .
