Franchising is a fast-developing form of business in the US. Take into consideration some facts about it: according to the International Franchise Association, there were more than 3,000 franchise brands with 901,093 franchise establishments in the USA at the beginning of 2010. These figures can be compared to the European Union, where, as per the data of the European Franchise Federation, there were more than 8400 franchise systems in 17 countries in 2008. For example, a year ago there were 1,234 franchise brands and more than 49,000 franchisees in France; 842 franchise systems and 34,800 franchisees †in Britain; 850 franchisors with 59,182 franchisees in Spain. Franchise statistics shows that this form of business provides the parties of a franchise contract with lots of benefits both franchisees (usually small firms that buy a small business franchise) and franchisors (they sell franchises to other companies-franchisees). But these benefits should be matched with disadvantages; this in turn can help potential franchisees buy the franchise suitable for their budget, skills and interests. When a small firm decides to purchase a small business franchise, it means that it has an opportunity to operate the successful business model of the experienced franchisor with brand name recognition, training and other services or assistance, with growth potential due to the expansion of the number of franchised and company-owned outlets in a franchise system. Buying a small business franchise and enjoy the support from the franchisor can cost some money. According to the specific franchise agreement, the fees can include the following: - initial fee and other costs to buy a franchise, to build or rent an outlet, and buy inventory and other expenses to start business; - royalty which should be periodically paid to the franchisor as a percentage of gross income to use the brand name; - advertising payments to a special fund to attract new franchisees and promote the brand name of a franchisor. One of the specific features of a franchised business is a franchisor’s control of its franchisees in terms of the approval of the place to locate an outlet, design standards, goods and services for sale, methods of operation (i.e. working hours, uniforms, signs, advertisement, accounting procedures, etc.), limiting sales area to a specific territory or the ability of franchisees to open additional outlets, and moreover, the franchisor checks the financial reports of the franchisees and can terminate the franchise relations if franchisees breach the agreement. If you would like to invest in a specific franchise, you should consider the amount of money to invest, your goals, abilities, skills, and investigate the chosen franchisor carefully.
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