Young Rembrandts Business Opportunity
Fundamentals of Franchising
What is a franchise?
A franchise is the right or license granted by a company (franchisor) to an individual (franchisee) or group to market its products or services in a specific territory.
This can also include the complete method to conduct the business itself such as marketing plans and operation manuals.
What are some advantages to owning a franchise?
Owning a franchise allows you to go into business for yourself, but not by yourself. A franchise increases your chances of business success because you are associating with proven products and methods. According to the Small Business Administration, less than 5 percent of all franchise units fail each year, compared to a 30 to 35 percent failure rate among independent small businesses.
Who governs and oversees franchising?
Franchising is governed by federal and state laws that require
franchisors to provide prospective franchisees with information
that describes the franchisor-franchisee relationship.
A good relationship between the franchisor and franchisee is critical for the success of both parties. Since franchising establishes a business relationship for years to come, the foundation must be carefully built by having a clear understanding of the franchise program.
What is the Franchise Disclosure Document (FDD)?
The Franchises Disclosure Document, also known as the FDD, is a
legal document designed to give you some of the information you
need in order to make an informed decision about investing in a
In addition to the disclosure part of the document, the FDD includes the actual franchise agreement as well as other agreements the franchisee will be required to sign, along with the franchisor's financial statements.
What is the Franchise Agreement?
It includes information about the franchise system, such as:
- The use of trademarks and products
- Your proposed territory
- Your rights and obligations,
- System standards, procedures, and training
- The term of the franchise
- Outline of payments to be made by the franchisee to the franchisor
What are some advantages to buying a franchise?
- Reduced risk of failure over an independent business
- Proven methods and products
- On-going training and support
- Collective purchasing power
- Association and synergy with other franchisees
- Easier to obtain financing
Power of Drawing
"Find something you love to do and you'll never have to work a day in your life." - Harvey Mackay
How do I know what franchise is right for me?
Sometimes people start a business because they think they'll make a lot of money, only to find out that they do not enjoy the business. The adage, "know thyself" certainly applies here. You should start a business in an industry that you will enjoy for the next 10 to 15 years.
- What do you like to do? (interest and hobbies)
- What do you know how to do? (experience)
- What do you do well? (Special skills and talents)
- Which industry involves your interests and uses your skills and talents?
- Would you rather sell a product or service?
- What products or services would you like to sell the most?
The above information was excerpted from The IFA Educational Foundation - An Introduction to Franchising