What Is Franchising
You are an unsatisfied worker, toiling more than eleven hours a day, and noticing playing by the rules does not give you what you really wanted and it only made you tired and old.
Going entrepreneur came into your mind. But, with all those news about traditional firms failing left and right, the terror stop you from taking action.
But in the TV, internet, radio and newspapers there are news about companies offering franchising. You think that maybe franchising is for you, but you do not have any idea what franchising is.
What is franchising?
Franchising is the practice that a company allows another entity to use and capitalize on its already successful business model and/or existing brand awareness, most often called Goodwill, for a faster return of capital.
In return, franchisees expend two payments in general. First is a one time investment, called the franchise fee, and the other is royalty fee, which is a recurring payment, for the continuous usage of the business model, advertising and training costs. Royalty fee is usually 3-10% of gross sales.
Franchising is a network of business relationships that enables individuals to share brand recognition and awareness, a successful business model and a proven distribution system.
The phrase “I am buying my franchise” is actually not correct. You are not buying the business model, you are capitalizing on it. What you will own are the tangible assets need to run the franchise like the building or equipment.
A business is suitable for franchising if it has a good record of profitability and the system it employs is easily duplicable.
What are the advantages of franchising?
For the franchisor, the business will grow while lessening the risk and liability that comes with expansion. It is also an ideal way to gain more brand awareness.
For the franchisee, they are investing in an already proven business system and recognized brand. In fact, a franchising business is 90% proven to be successful. With a success rate like that, who can go wrong?
Alex is a franchise consultant and he focuses on micro franchising in the Philippines. To become a trusted franchise consultant like him, you can go to his website at Franchise Philippines and read his articles about franchising in the Philippines.
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