Franchising is a contractual method of distributing goods and services. The franchiser owns a trademark and sells licenses to sell a product or service under the trademark.
Franchising can offer those who lack experience the chance to own and operate a business, which has been started and made into a viable business in at least one location. It represents a blend of operating independence with a proven system that includes a detailed plan for starting, managing and marketing the business.
It is not a foolproof investment that somehow guarantees the investor that they can achieve financial independence. You can lose your original investment plus any assets used to secure a loan. Also, franchisers usually maintain a high degree of control over the franchised operations. This is intended to ensure uniformity of quality, but it can be frustrating to the new business-owner.
The decision to purchase a franchise depends on a careful evaluation of the product/service and the market for the product or service. A potential franchisee should consider the business reputation and credit rating of the franchiser. Other items to consider are the initial fee, royalty payments, location decisions, territorial restrictions, training programs, advertising fees and the purchasing of supplies.
With roughly 3,000 franchisers and more than 600,000 outlets in the United States, franchising is responsible for over $800 billion in annual sales. A few familiar U.S. franchises are McDonald’s, Burger King, Holiday Inn, Weight Watchers, Century 21 and H&R Block. Franchise fees can range from $10,000 to $750,000, depending on the franchise.
A franchise system is only as good as you want to make it. In most cases, this involves working 60-plus hours per week until you can justify delegating some of the day-to-day responsibilities. It also requires being a team player within the system, not doing your own thing without regard for the system as a whole.
For additional help in deciding to purchase a franchise, contact the Small Business Devel-opment Center at the University of New Mexico-Valencia Campus by phoning 925-8980 for an appointment.
(Editor’s note: Roberta Scott is the director of the Small Business Development Center and writes a regular column about business-related subjects.)
The Valencia County News-Bulletin is a locally owned and operated community newspaper, dedicated to serving Valencia County since 1910 through the highest journalistic and professional business standards. The VCNB is published weekly on Thursdays, including holidays both in print and online.
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April 18, 2024
