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Guest post by: Sarah Snyder Become an Author

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The franchising of a business allows a company to purchase another’s successful business model. Instead of developing his own business, an entrepreneur gains a fast start up by using a proven trademark, and will be given instant access to the infrastructure and the tools of the established business.

Franchising works best when a business displays certain characteristics:

· Provides an unusual or unique idea

· Operates quite easily

· Duplicated easily

· Displays profitable track record

· Provides detailed procedures, operations and systems

· Appeals to broad geographic area

· Operates fairly inexpensively

Franchising, as we know it today, had its early start in Germany in the 1840’s when ale brewers granted rights to tavern owners to sell their ale. This licensing practice was adopted into the United States soon after, and developed into store chain operations. In the United States, the practice developed across the country as peddlers sold their products to the military posts and general stores they encountered in they travels. The first acknowledged franchisor was Albert Singer who, in the 1850’s and with the Singer Sewing machine Company, successfully franchised his sewing machine across a very wide distribution area in the country.

The development of such retail franchises was followed in the 1800’s and 1900’s by other types of franchising such as:

· Auto manufacturers

· Utility companies

· Taxi companies

· Oil refineries

· Restaurant chains

The benefits of franchising to the entrepreneur:

· Minimization of risk – while 90% of new businesses fail within three years of starting, a franchise reduces the learning curve.

· Proven business model and operating procedures and processes – the way is already paved for success since a proven model is being followed.

· Experience of a franchiser’s team provides good potential for success of the new franchise business. The team provides on the job training and other formal instruction.

· Established marketing methods contribute to the benefits an entrepreneur receives from the purchase of a franchise. Professional advertising campaigns may be prepared and paid for by the franchiser who may also provide coaching to develop successful and profitable marketing strategies.

· Financial assistance may be extended by the franchiser. The franchiser may make arrangements with lending institutions to benefit the entrepreneur. Since acquiring startup capital is often a stumbling block for business owners, this helps the inexperienced new business owner.

· Buying into a profitable economic niche that caters to a specialized need gives the new business a head start.

· Franchising gives a consistent, quality of service that consumers expect and also provides a tested and uniform operating system. The system is already cost-effective and efficient.

Examples of top franchises include:

· H&R Block - e-filing and tax preparation services

· Dunkin Donuts – suppliers of freshly baked goods

· Subway – salads and sandwich shops

· McDonalds – fast food products including hamburgers and French fries

· Great Clips Franchise – hair salon stores

· Hampton Inns & Suites – mid-priced hotels

· Servpro – cleaning, disaster restoration and insurance

· Jani-King – commercial cleaning services

Unfortunately, small businesses often face an uphill battle for survival during their initial years of operation. The franchise helps to level the playing field and the demand to buy franchises grows consistently each year. The U.S. Department of Commerce statistics revealed that one-third of all retail sales in 1998 were driven by franchised organizations.

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