Make More...In Franchising

What's always appealed to me about franchising - and may appeal to you - is the  opportunity to buy into a proven business system. Franchising is not really something you can do on the side while you keep your regular job. But if you are looking for a new career path, a second start in life, or a different approach to starting late and finishing rich, franchising is definitely something you should consider.

What Is Franchising?

Franchising is all about systems. When you buy a franchise, what you are buying is an existing system for branding and marketing a particular service or product. Think about McDonald's for a second. McDonald's has a system for selling burgers and fries that is now recognized all over the world. Obviously, the McDonald's brand is about more than just burgers and fries - it's about a restaurant that serves food quickly and with a smile (and sometimes it's even healthy food). The moment you see the McDonald's Golden Arches, whether you're in Tennessee or Timbuktu, you instantly know what to expect.

When a milk-shake-mixer salesman named Ray Kroc first came across the original McDonald's restaurant, it was nothing more than a popular burger joint run by two brothers. Kroc was struck by the fact that the McDonald brothers were so successful yet owned only one restaurant. Since they were adverse to expanding, he took it upon himself to make it happen. What Kroc did was figure out what made the original McDonald's so popular and then translate that into a detailed system that specified everything from how a McDonald's restaurant should look to how the food should be prepared to how the counter people should interact with customers. Kroc's real brilliance, however, wasn't in designing a popular restaurant. Rather, it was in realizing that instead of running around the country trying to open and manage branches himself, he could do much better licensing his system to independent entrepreneurs, who by following it (and Kroc made sure they did) would wind up with a McDonald's restaurant that looked, smelled, and felt exactly like every other one.

By the end of 2009, there were more than 32,478 McDonald's restaurants in 119 countries around the world, generating more than $23 billion a year in revenues.

How's That For A System!

So when you buy a franchise, you are buying a license to use a system that was created by someone else - a "franchisor." As the "franchisee," you do not own the system. You are merely paying for the right to use it. Most franchises pay an up-front fee for this right (known as the franchise fee) and then a royalty on all the sales their business generates (the licensing fee or royalty).

But becoming a franchisee is not only a matter of paying fees or royalties to the franchisor. You also have to commit to following the franchisor's system religiously. this means using their building plans, their price schedules, their menus and recipes, their suppliers, and on and on.

Their is a good reason for this. The main reason franchises work so well is that most consumers like to know in advance what they are going to get. If you drive into a strange town looking for somewhere to have lunch and you see two hamburger places - one, a local cafe called "Dave's Burgers," the other a McDonald's - chances are you'll head to the McDonald's. That's because even though you've never been in this town before, you know exactly what you're going to find there - what's on the menu, how much it will cost, how it will taste. This wouldn't be the case if McDonald's allowed its franchisees any leeway in how they operated their individual restaurants.

So, if you're looking for a business in which you can create new concepts on a whim, franchising probably isn't for you. On the other hand, if you're looking for something in which hard work can pay off big-time, keep reading.

You Name It, There's A Franchise For It

If you live anywhere in the developed world, the odds are almost certain that sometime this week - and quite possibly today - you did business with a franchise.

In the old days, people heard the word franchise and thought hamburgers. Today, the franchising industry is EVERYTHING. It's the real estate firm you used to buy your home, the accounting firm you used to do your tax returns, the salon where you got your hair cut, the store you ducked into to pick up some groceries, the gourmet coffee shop where you had that latte, the private post office you visited to send a package and pick up your mail, the tutoring academy your kid attends to boost his math grades.

According to the International Franchise Association, the franchise industry is now over a $1-trillion-a-year business. That's trillion with a "t".

In all, according to the IFA, franchise outlets account for over 40% of all retail sales in the United States - and employ more than 8 million people, or one out of every nine working Americans. Entrepreneur magazine states that there are more than 1,500 different kinds of franchised businesses operating more than 320,000 franchise units. That works out to about one out of every 12 retail establishments in the country.

To put it mildly, the growth of franchising has been truly mind-boggling. Yet how surprising is that? When you consider that a big part of the American dream is to own and run your own business, it's not surprising at all.$