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Franchising over the past few decades has proven to be the most successful way to start a small business. Franchising has shown a 92% success rate after 5 years, with a consistent 90% success rate through 10 years. Research has shown that over 50% of independent start-ups fail in the 1st year, with another 50% of those failing within the first 5 years. The RCF 50, a stock index of 50 publicly held Franchises has outperformed the Standard & Poor’s 500 for the past seven years by a cumulative rate of over 82%! The difference in a Franchise start-up is that the Franchisor has already eliminated most of the roadblocks that you would have encountered on your own. The Franchisor will train you in all aspects of the business and continue supporting you throughout the life of your agreement to ensure you are successful in your business venture. You also have the possible benefit of Brand Recognition which alone can drive customers to your establishment. |
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Types of FranchisingProduct DistributionThere are two basic types of Franchises. The first and oldest type of Franchising is Product Distribution. This is a license to market and sell a manufacturers product in a defined territory. The Franchisor grants the Franchisee the right to use its Logo and Trademarks but typically does not provide operational guidance. Ford Motor and Singer Sewing machines are credited as two of the oldest Distributorships in America. Manufacturers like Pepsi and Exxon are also considered Product Distribution Franchisors. Business Format FranchisingBusiness Format Franchising is the most common form of Franchising today and the area that Strategic Acquisitions specializes in advising its clients. Business Format Franchisors not only license their Franchisees to use their trademarks, logos, and products, they also support them by providing initial marketing and operational training, on-going support and marketing, and the benefit of a peer network of Franchisees to discuss best practices and experiences. Business Format Franchising provides the Franchisee with the benefit of Brand (name) recognition and a consistent customer experience that will attract clients to use its services and purchase its products. Franchising has proven to be a very effective way of reducing risk by utilizing a proven method for doing business. Franchises are offered across a vast array of industries and investment levels. Successful Franchises are available across the globe that meets your objectives for revenue, lifestyle, and personality. In 2001, there were 767,483 domestic franchise businesses operating with an approximate revenue of $625 billion and employed almost 10 million people. These businesses accounted for 56.3% of the total quick service restaurants, 18.2% of lodging, 14.2% of retail food, and 13.1% of full service restaurants. | |||||||||||||
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Franchise ArrangementsThere are two basic types of Franchise Arrangements, a single unit franchise and a multi-unit franchise Single Unit FranchiseA Single Unit franchise agreement is where the franchisor grants the rights to the Franchisee to open and operate one location. Multi-Unit FranchiseA Multi-Unit franchise agreement typically comes in two forms, an Area Development and a Master Franchise. | |||||||||||||
Franchise FinancingFinancial institutions recognize the success of Franchises and are therefore more willing to lend money for franchise ventures than they are for independent start-ups. Some Franchises even offer their own financing and we can also offer options for financing. Government Regulation of FranchisingThe Federal Trade Commission and many States regulate the Franchise industry to protect consumers from the unethical behavior’s that affected the industry back in the 70’s. Of course a good Franchise Attorney should always be integral in your evaluation of a franchise. Franchise Selection and Acquisition ConsultationTo start your search for the ideal Franchise to meet your objectives, contact us by going to the Franchise Consultation request form. | |||||||||||||
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