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Duplicate a Thriving Business: Franchise!

Duplicate a Thriving Business: Franchise!

Savvy entrepreneurs can attest to the vigor of today's franchising system. A study from the International Franchise Association indicates these types of businesses will grow at rates exceeding all industries located near franchise clusters nationwide. In fact, the 1.6 percent growth forecast for 2017 will boost the total number of U.S. franchises to 744,437.

Essentially, a franchise is an agreement allowing a franchisee the right to market a trademarked business in exchange for payment of fees to and support from the franchisor. While the most recognized franchises today are in the retail and food service industries, nearly any proven business formula could work inside this concept.

The Best Potential Franchises

As an entrepreneur who’s thinking of growing the company via a franchise arrangement, do not move ahead until you ask yourself the key question: Is my company a good candidate for this mode of expansion?

Those firms that have successfully adopted this model typically share four traits:

Franchise Models

The three standard types of franchises are the product distribution arrangement, the business format model, and the management franchise.

The product distribution franchise is basically a supplier-dealer relationship and does not mandate a standard operating configuration across locations. Soft-drink distributors, automobile dealers and gas stations typically are product distribution franchises.

Besides using the franchisor's products, services and trademarks, business format franchises also follow corporate protocols, with common marketing plans and operation manuals. Members of this genre include some of the most popular franchise opportunities, such as fast food chains, retail and grocery stores, hotels and motels, and restaurants.

In a management franchise, the franchisee delivers expertise, as well as format/operational policies and procedures. Major hotel brands use this model.

Why – or Why Not – Franchise?

Franchising is a great way to grow a business for some entrepreneurs; for others, it may not be the right fit. Before deciding whether to go this route, consider the following:

Pros

Cons

The Legalities

Because of federal government regulation and individual state requirements, franchising a business involves considerable legal groundwork. This is critical, because following the letter of the law also lays the foundation for strong relationships between franchisors and franchisees.

There are two main documents pertinent to the franchise process. The first is the Franchise Disclosure Document, which is required by The Franchise Rule of the Federal Trade Commission. The second is the franchise agreement, which is the legal contract between the franchisor and the franchisee, and spells out the rights and obligations of the parties. Because of the complexity involved and the specific requirements of federal and state laws, experts advise hiring an attorney experienced in franchise law prior to starting any of this paperwork.

The specific details of the franchise process fluctuate from industry to industry and from business to business – but commonalities do exist. Here are a few basic steps in expanding your business through franchising:

Resources

International Franchise Association

Federal Trade Commission

Small Business Administration

Franchise Associations.org

The American Association of Franchisees and Dealers


The information included on this website is designed for informational purposes only. It is not legal, tax, financial, or any other sort of advice; nor is it a substitute for such advice. The information on this site may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate, in parts. It is the reader's responsibility to comply with any applicable local, state, or federal regulations, and to make their own decisions about how to operate their business. Nationwide Mutual Insurance Company, its affiliates, and their employees make no warranties about the information, no guarantee of results, and assume no liability in connection with the information provided.