Tag: United States

Most people are familiar with franchising. For the benefit of those who are not, according to http://wikipedia.com franchising is the system of doing business wherein a franchisor licenses trademarks of a product and tested methods of doing business to a franchisee to receive payment like a percentage from gross per sales or gross profits as well as the annual fees agreed upon, as compensation for the trade secrets shared as part of the franchising agreement. Sometimes legal contracts may vary as to the terms of franchise and may not fit the definition above. Sometimes, the methods on how to do the business may not be part of the franchise or other benefits that other franchising companies give may not be available to others.

The most common franchising companies known to the public would be chain of food stores like McDonald’s which nowadays offer some franchising strategies to reach a wider consumer market. McDonald’s has become a household name since it was able to reach a wider consumer market that is not only limited to the United States and the Americas but to the rest of the world. The success behind McDonald’s becoming a household name and the one of the most known trademarks around the world is due to the system of franchising. Aside from the buildings that McDonald’s rent to the franchisee, it also has a stake on the sales of the franchise and the cost of the supplies charged to the franchisee. To help out in the quality of products and services offered in each food chain, McDonald’s sends a member from the franchisee to their Hamburger University in Oak Brook, Illinois. This is one support benefit that the franchisee would get once they franchise a restaurant for McDonald’s.

Like any business, there are advantages and disadvantages that franchising offer to anyone who wish to venture into it.

Advantages

Popular labels are widely known and are likely to sell. Popular trademarks like McDonald’s are likely to sell than a new restaurant that has not reached a market such as McDonald’s. It is selling a well known product to a consumer market which knows the product being sold.

No need to develop a new product that has not been well researched. Venturing into franchising would allow the franchisee to have access to information that the franchisor have about an existing product and put up a business in a shorter period of time.

Trainings and seminars would be provided to the franchisee about the product. It would be easier to operate and manage the business since there are available trainings and other support methods for the franchisee.

Disadvantages

High standards held by the franchisor raise costs of maintenance in the franchise. Since the standards of the franchisor would definitely be high, sometimes the cost of maintaining a franchise can escalate. Unless the materials used would be second rate and low in cost.

Development of new products might still need to be passed for approval to the franchisor. If the franchisee would like to add a product which they think would be saleable in their market range, the new product has to be approved first by the franchisor and this may take time and it would likely be rejected if it does not meet standards of the trademark.

Profit is limited since the franchisor has stake, most of the time, on the profits of the franchise. Not only does the franchisee have little control of the franchise due to many stakes that the franchisor has on the franchise, the profit of the franchise would also be split between the two. Therefore, there is a limit to how much the franchise would earn.

Even if there are several disadvantages in franchising, still there are advantages. If you think you could handle this kind of business, all I can say is, business is gambling. In any industry there are players and you might be lucky that you would be on top once and sometimes at the bottom. Get to know the game play and start playing to win the game.

Franchising is known to be among the available options that businessmen and entrepreneurs can use as business opportunities without having to go through the usual motions of having to brainstorm and hypothesize on studies that most business tycoons would initially make. Franchising can be seen today in local food chain stores like McDonald’s, Burger King and Subway. They are practically seen in all countries of the world.

Mixed Origins of Franchising
Franchising does not really have a clear trace of its background. There has been various information as to where the franchising business originated. These include countries like China, England, and Europe and of course the United States. It is even traced as far as the Middle Ages where the business opportunity issues back then was more on the lack of transportation for the goods to be transferred from one place to another. Other considered franchising as well as a means of establishing stands, vendors and a better means of being able to offer goods towards customers in other places within the coverage area.

Franchising at a Glance
Franchising is not a new term for defining business opportunities. It extends as far as home business opportunities for people who would want to be their own boss and hold their own business hours. Franchises would usually depend on the location to which franchisees would want them to be located, ideally in populated and commercialized areas for maximum exposure. Depending on the product or service to which the franchise caters, people can even do business from their own footsteps at home. This way the expenses to be incurred such as rent or warehouse allocation expense can be avoided, an expense that is certainly something tough on the budget allocation constraints of franchise owners.

Think Big but Start Small
A franchising business does not have to start big. Just like any ordinary business, it can start from the simplest and smallest business. Like most business endeavors, as long as they are managed properly, business can grow at an instant at any time. Franchises are not different from conceptualized businesses and the varying factor would be the people who would run it and how they would view such a business at a glance.

Placement and Scope of Target Market
Placement of franchise establishments, just like any other product that most people would be interested in today would have to analyze and survey the market class to which they would want to serve. It is not merely a place and operate venture. It requires gathering strategies and putting minds into action, the usual backbone towards success in business ventures.

There will always be issues concerning the target market and identifying what product or service to serve. This has always been the issue that makes businesses different from others and unless it is properly defined, a franchise or business will falter eventually if franchising business owners are not careful.

The worldwide use of social networking media such as Facebook, Twitter, LinkedIn, MySpace and many others has grown by leaps and bounds in recent years, affecting the business world in radical, unforeseen ways. These online media phenomena are increasingly used by brand owners, their customers and their employees alike as what is now the topmost marketing tool. This article details some of the challenging issues and implications that have gone along with the use of such sites and the particular impact of such issues on global franchising.
We at FGS hope to provide some practical guidance on how social media usage should be managed and controlled in international franchise arrangements. Because of the relative infancy of most social media and their recent adoption by franchise systems, many of these issues have only recently been identified, and the bulk are still searching for a final resolution.
Social media is dramatically changing the fundamental forces of that economy: who pays attention to what, who influences such decisions, how that is tracked and measured, the speed of response, and how it’s monetized. Just as the average prospective customer will check the online reviews for a particular business, many potential franchisees these days are highly web-savvy, and will research a particular business on the web to get a sense of its franchisable status, by its social media presence.
The opportunities in this arena are enormous for franchisors. For a good number of consumers, online communication is now more likely through social media than through email. The commercial potential of this trend has long been surmised, and legitimate companies must take advantage of these opportunities.
The incredible rise of online networking has been driven by younger age groups, but social media are no longer the domain of this demographic only. Consumers from a broad range of demographics are now regular users of social media, although preferred sites will show some variation in their audience.
Social media represent a relatively inexpensive method of (franchise) marketing. However, not all campaigns achieve desired success, and many marketers are still struggling with these relatively new formats. Companies will be better served by listening to customer contributions on such sites as Google Places pages (the #1 source for business reviews online), Yelp, and other user review/ratings sites, rather than using social media as another channel to dictate established brand values. Google now counts the social media conversation regarding your company as the highest indicator of your worth as a business.

Classical Franchising Facts and the New Online “Marketology”

Franchising traces its roots back to ancient China. It is a system for expanding a business and distributing goods and services. It is a marketing method, which has been called by many business experts, the greatest marketing strategy ever created. It is a program that creates amazing opportunities for business ownership, brand awareness and success, and personal wealth.

In the United States, only 8% of retail businesses are franchised. Amazingly enough, these same 8% of franchised businesses do over 40% of the retail sales in the United States. Franchising has the ability to capture much more of the market share. The increased market share is due to three main attributes comprising a franchise:

1.A brand name. Even a newer brand name usually has an advantage over an unaffiliated business.
2.A successful business system. The proven system allows franchisees to follow a successful plan with a high success rate. The franchisee can also enjoy cost savings as a result of the buying power of the franchise.
3.A support system. The franchise will have the expertise of its successful franchisees and franchisor to help them succeed. They are not in business alone.

The Gallup Organization conducted a poll on franchisees’ ownership experience and attitudes. Here are some results:

More than 90% said that their expectations were met, or mostly met.
More than 90% said they considered their franchise to be successful.
More than 65% said that they would have not been as successful if they had tried to open the same business on their own.

Here are some eye-opening social media networking facts, gathered by EPM Communications Inc. (May 2010):

More than 140 million Americans log on to a social media site every month and that number continues to grow.
70% of adults have Facebook profiles.
One-third of social media users are 45 and older.
The majority of travelers visit social network sites to plan and share details of their trips.
Half of those who friend restaurants on social media want to be alerted to deals or receive coupons.

Imagine the number of those folks who are savvy entrepreneurs or business owners (or prospective business owners) who may “stumble upon” your franchise marketing material or companys social media conversation. It certainly spins the wheels of possibility, doesnt it?

Let FGS experienced team of advisors and marketing professionals guide the way toward your franchising success and high-level brand recognition. Call 480-223-1500 for a free consultation today!