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What Is Franchise Or Franchising?
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What is Franchise or Franchising?

Folks considering a business venture may or may not have the experience or knowledge to successfully operate a business. There are some unknowns in a business venture and an unsuccessful business brings financial loss and disappointment. After many hours, days, or weeks of hard work, everything can go down the drain. To avoid failure, some people think about purchasing a franchise. What is franchise or franchising?

It goes like this: a successful business decides to expand. It can beg, borrow or steal to get the financing for expansion or it can sell a franchise which allows the buyer to operate an identical business in a certain geographical area. That area may be one location or it might be a whole state with several locations.

In 1974 we moved to Ames, Iowa where I had taken a teaching position at the University. I noticed that there was no McDonald's. I was flat broke and didn't pursue obtaining a franchise. Then it was only $25,000.00 plus the start-up cost. (Current requirement is to have $250,000.00 in un-borrowed assets.) I was too educated in the wrong way to know how to handle such a situation. Another person came into town, went to the bank, arranged financing and bought the franchise and build two locations as I remember.

I mention this not to show you how dumb I am but to show you that you should not give up a new idea without taking advantage of all resources to achieve it. I became friends with the banker later and he told me what happened. I could have done the same thing. So what is franchise or franchising. It is taking advantage of someone else's business acumen.

When you buy a franchise, you are buying the exact knowledge that it takes to run a specific business. In fact, you will sign a contract that says that you agree to run the business exactly as you are told to do it. You may also be required to purchase equipment and supplies directly from the franchiser (you are the franchisee). You will be trained to operate the business along with your key employees while you are waiting for the construction of the facility (if one is required).

A franchise may be a service. Maybe it consists of a truck with carpet cleaning equipment. Maybe you are simply a salesman that helps businesses repair flat roofs so that they will not leak. I have a friend who wanted to own a Chuck E. Cheese. That was his dream. I don't know if he achieved his goal, but I assume that he did. He was a determined young engineer. But that is an interesting franchise that provides food and fun for the family.

Like with any business you need to find a business that feeds on your interest. The process of evaluating your location will be handled by your franchiser. He needs you to succeed so he will analyze the location, competition, and other such factor.

Their are plenty of bad franchises that will just bleed you dry. Pick one that is well-know, talk to at least five or six franchise owners in that specific business to see how they are doing, the problems they have had or are having, and how they found the business performed compared with their expectation. (Some of the businesses will be owned by the franchiser, so be aware of this.)

So, what is franchise or franchising? It is taking a risk that can make or break you. But with good planning, seeking advice from your local bankers and business people, not believing everything the franchiser is telling you but checking it out for yourself, you can become wealthy by franchising.

I have a friend that came to Iowa shortly after I did and he had purchased the Taco Time franchise for the whole state. It was fun watching him build one location and then another according to an exact schedule. When you remove the unknowns from a business, you have a good chance of success. The thing I notices was that all he really need to succeed was the start-up capital. Everything else was cook-booked.

You can operate a home business using the Internet. Perhaps you extend an existing business to the Internet. However, there are also internet franchise opportunities. Just be aware. There are many crooks on the Internet so don't make that your only source of information. Only deal with principles. I hope this introduction has helped you in your search for a home or other franchise business. So, it is test time: What is franchise or franchising?

Fly Old Glory!


Street Talk

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