FRANCHISING
The primary trade association for franchising issues, the International Franchise Association, 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 exchange for fees and royalties from the franchisee. In other words, franchising is the process of expanding a business whereby a company (franchisor) grants a license to an independent business owner (franchisee) to sell its products or render its services. A franchise, therefore, is a legal agreement permitting a business to furnish a product, name, trademark, or idea to an independent business owner. Each party of a franchise agreement gives up some legal rights to gain others. The franchisor increases its number of outlets and gains additional income. The franchisee opens an established business with strong potential for success. Franchising offers people a chance to own, manage, and direct their own business without having to take all the associated risks. This aspect has allowed many people to open businesses of their own who might never have done so otherwise.
Franchising plays a significant role in the U.S. economy. Franchise sales accounted for about over 50 percent of all retail sales in the United States in the late 1990s and U.S. franchises generated roughly $1 trillion in sales of goods and services annually in the United States during this period, according to the International Franchise Association (IFA). Approximately 1 out of 12, or 600,000, businesses are franchises, which supply jobs for over 8 million people, and there are about 3,000 franchisors in the United States.
According to the U.S. Small Business Administration, franchising is the fastest-growing kind of small business. Furthermore, each new franchise generates 8-14 new jobs and a new franchise opens an average of every eight minutes per business day. Overall, franchises create over 300,000 new jobs per year.
Franchising has opened the door of opportunity for women, families, and minorities. Women have discovered that operating franchises often allows them to spend more time with their families. Women wholly own about 10 percent and jointly own about 30 percent of U.S. franchise outlets, according to the Small Business Administration. In many cases, families pool their resources and time to operate outlets—and often use the profits to create their own mini-chain of stores. Minorities have benefited, too. They have been able to locate establishments in urban areas which at one time lacked minority ownership. Significantly, some franchisors such as Burger King and the Southland Corporation, owner of the 7-11 convenience stores, provide special financial programs for minority owners. They also work closely with organizations like the National Association for the Advancement of Colored People (NAACP) to recruit more minority owners. In this respect, franchises have been a boon for society.
No matter who owns a franchise outlet, the franchisee and the franchisor share the risks and the responsibilities, although not always equally. Since both parties have a financial investment at stake, the risk can be substantial.
Sources :
www.nytimes.com
BizTree.com
- www.accessmedia.com.au
www.polarkrush.co.uk
