Investing in a Franchise 

Franchising is an agreement between an interested franchisee and the owner of a trademark, brand name or advertising symbol.  The franchisee must be prepared to relinquish their individual control or viewpoint of how the business should be run, agreeing to adopt systems, rules and regulations of the franchisor. 

“Don’t re-invent the wheel” is a common adage.  The franchisor offers a role model of a proven track record of success.  This is its greatest drawing point.  Nine out of ten franchises reported profit in 2002. 

In considering whether to invest in a franchise opportunity, research which type of franchise is most suitable for you and what type of capital investment you are prepared to make.  The 10 top franchises in 2005, according to Entrepreneur.com, were:

Subway, Curves, Quiznos Sub, Jackson Hewitt Tax, UPS Store, Sonic Drive, Jani-King, 7-Eleven, Inc., Dunkin’ Donuts and Remax, Inc. 

Nearly 400,000  franchises employ more than 9.8 million people, with a payroll of $230 billion.  There is a new franchise opening in United States every 8 minutes.   Approximately one out of every twelve retail outlets are franchises.  As many baby boomers today reach retirement, they are looking to franchises as an investment, along with people who have severance packages.  Other potential franchisees may be people who are downsizing, or simply dissatisfied with present conditions.

Franchises are turnkey systems of duplication, with proven track records of success. As an entrepreneur starts up a new business, it is beneficial to have a strong support team and training offered by franchises.  Franchisors often reassure the new franchisee by saying, “You are in business for yourself, but not by yourself.“

 High start-up costs of franchises may be some of the primary concerns of getting started.  However, financial institutions are more likely to lend money with the backing of franchisors.  A successful pattern is for the franchisee to successfully establish the first franchise, then quickly build a second and third within the same geographical location.  They are aided by reduced costs of goods from suppliers due to the volume of sales within the franchises.  Bulk purchasing results in savings to the franchisees.