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What is a Franchise
Opportunity?
Today
franchising is an opportunity
for an individual to own his or
her own business, even if he or
she is inexperienced and
sometime includes those that are
without adequate capital.
Franchising has been expanding
rapidly in the last 2 decades,
and continually enters into new
areas of application. There are
grooming franchise
opportunities. The most recent
industry study estimates that
franchised businesses (all
types, not just grooming)
accounted for nearly $1 trillion
in annual sales in 2000. More
than 8 million people are
employed by franchise
establishments.
Franchising is
a form of licensing by which the
owner (the franchisor) of a
product, service or method
obtains distribution through
affiliated dealers (the
franchisees). The holder of the
right is often given exclusive
access to a defined geographical
area. The product, method or
service being marketed is
identified by a brand name, and
the franchisor maintains control
over the marketing methods
employed, or assists the
franchisee in the operation of
the business. In many cases, the
operation resembles that of a
large chain with trademarks,
uniform symbols, equipment,
storefronts and standardized
services or products.
The franchisor
maintains uniform practices as
outlined in the franchise
agreement. The International
Franchise Association, the major
trade association in the field,
defines franchising as "a
continuing relationship in which
the franchisor provides a
licensed privilege to do
business, plus assistance in
organizing, training,
merchandising and management, in
return for a consideration from
the franchisee."
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What are the Benefits of Buying
a Franchise?
The primary purpose of a
franchise is to minimize risk in
starting a new business. Studies
of franchising stand behind this
assessment. Starting up a new
business is risky. Most studies
show that over 90% fail within
three years. The primary reason
that the failure rate is so high
is because the owners have to go
through the learning curve of
operating that specific type
business. Unfortunately, the
market place is not very
tolerant of the inexperienced
neophyte trying to learn how to
operate a new business.
If
you can't compete in the market
place, your business performance
can hurt your personal and
business finances, even
severely. Franchising can reduce
this risk with its many
advantages.
Studies indicate that franchise
new business startups rarely
fail and when they do it is
typically because the franchisee
did not stick to the franchisers
systems. In all human endeavor
there is involved a learning
process . This learning process
requires going through a series
of trial and error encounters
wherein knowledge is gained by
trying and failing, trying and
failing again and again and
eventually trying and
succeeding.
This process is generally called
the learning curve. In the
context of franchising, the
franchiser has already gone
through the learning curve and
has learned the secrets of
success for the specific
business. In business format
franchising all that has been
learned by going through the
curve is transferred to the
franchisee. This is
fundamentally why you buy a
franchise, to minimize risk and
give yourself the best possible
chance to succeed.
With a new
business startup that is not a
franchise you may be operating
in the dark. This is why we have
recommended a formal
grooming business plan, yes
even for small grooming shops.
Franchisors often provide a lot
of information similar or much
the same as a business plan to
their franchisees, and that
allow the franchisee to research
their potential before they
invest heavily into their new
business. No matter how much
research you do it is very
difficult to get a handle on so
many aspects of the new
business. With a franchise the
franchisor is a wealth of
information about the business
from how to prepare a pro forma
to the best personality traits
for the business. But the most
important information comes from
the existing franchisees.
With a good systematic approach
you can get answers to nearly
all the really key questions.
You want to ask questions such
as, "Do you feel I am adequately
trained to groom and operate
this business?" "How long before
I can expect to break even, and
what is the annual return on
investment?" Think of a
franchise as the opportunity to
try on the business to make sure
it fits you. Study your
franchise and take advantage of
being able to ask the
experienced franchisor all of
your questions.
In summary the
primary reason you should buy a
franchise as opposed to starting
up a non-franchise new business,
is to minimize risk and enhance
your chances of success.
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