A franchise is a right granted to an individual or group to sell, trade or market a company’s merchandise and services. There are many different types of companies which are franchised today. What comes first to people’s minds are fast food restaurants. Other franchises include pizza shops, health and fitness (gyms), automotive supplies, etc.. . In fact, there are more than 120 available franchise businesses on the market today.
Franchising began in the 1850′s when Isaac Singer invented the sewing machine. In order to introduce his invention to all parts of the country, Singer sold licenses to entrepreneurs around the country. Along with the product itself, the new franchisees also provided training to the customers. The most successful franchise story is that of McDonalds fast food restaurant. The first McDonalds was opened in 1937 in Monrovia California. Originally named “The Airdome”, due to its’ proximity to the Monrovia airport, the McDonald brothers, Richard and Maurice, moved the building 40 miles to the corner of 14th and E streets in San Bernadino. In 1954 Ray Kroc became the third partner and introduced the idea of franchising. The brothers had no intention of taking on the added burden of franchising and training new owners. Kroc obtained the right to open new restaurants from the brothers in 1954 and the rest is history.
Franchising is a way for an individual to go into business for himself, but not by himself. As with any purchase or investment, a thorough, diligent investigation is a must. You can expect a one time, up front franchise fee paid to the franchisor, in order to get the doors open. A continual “royalty fee” is also a typical component within the franchisor/franchisee relationship. Also within the relationship, the franchisee will be required to follow along with standards created by the franchisor which are unique to the company. Some examples are employee uniforms, menu/stock items, pricing, customer service philosophies amongst others. The reputation of the franchisor is arguably the single most important factor when considering investing in a franchise.
